Living Social – Customer Retention and Referral
LivingSocial, an online group coupon/discount site similar to Groupon, is one of many coupon sites that have popped up over the past few years. The total number of these sites is now in the dozens, but there are four major players that focus on general deals and merchandise, including Groupon, Amazon Local, and Google Offers. These sites have particular difficulties in the market because not only are they competing with each other for customers, they are competing to get local businesses to supply the deals that draw customers to their sites. In order to attract customers, particularly repeat customers, LivingSocial has instituted a unique referral program.
LivingSocial has a "buy three get one free" program for customer referrals. If a customer purchases a deal, shares with at least three other people who purchase the deal, then the person who originally purchased and shared the deal will get the deal for free. In a lot of ways this program capitalizes on the power of social media sharing and the importance of word of mouth marketing. While Living Social does not make money directly from a customer who finds three others to purchase a deal, they get far greater value through public sharing and word of mouth. As a user of LivingSocial, I have yet to use the referral benefits, so I am not sure about its effectiveness.
In terms of retention, LivingSocial offers deal bucks, their own site-specific currency, to keep customers coming back to their site. They also automatically sign customers up for a newsletter than goes to the email inbox of customers for whatever region they purchase the deal from.
Ultimately, LivingSocial’s program functions a lot like chain mail, with the potential to share and attract customers exponentially. In 2011, when their financials were leaked, the company had a $3 Billion valuation with $50 revenue per month.
While I do not think this referral program is the most effective, it is the best of the daily deal sites I have come across.