The initiative, called Groupon Rewards, will debut in Philadelphia next month and later roll out to other cities. The rewards program marks the company's first official loyalty program and helps address a common business concern : how to retain customers attracted by a daily deal.
Groupon has been criticized by some merchants who complain that daily deals generate losses because consumers rarely return to pay full price.
Jeff Holden, Groupon's senior vice president of product, said the rewards program completes a trio of merchant tools. Daily deals are meant for customer acquisition, while Groupon Now, a real-time service launched in May, helps local businesses manage demand during specific times of day.
The third component is "loyalty and retention," said Holden, a former Amazon.com executive who joined Groupon after his startup, Pelago, was acquired by the Chicago-based company earlier this year.
"This was the missing piece, and that's why we built it," Holden said.
A number of other young technology companies are using social media and mobile applications to put fresh spins on loyalty programs. But Groupon says it has the advantages of brand awareness, existing merchant relationships and a system that is easy for consumers and businesses to use.
With Groupon Rewards, a customer who spends a certain amount of money at a merchant across any number of visits unlocks a Groupon that can be spent at that business. The merchant sets the spending goal and the value of the voucher. Consumers participate in the program by opting in once and putting a debit or credit card on file with Groupon. An automated system tracks spending on that card and unlocks the reward voucher when the goal is hit.
The program is free for merchants and consumers. Groupon takes a commission from the reward vouchers.
Groupon does not require a merchant to run a regular daily deal in order to participate in the loyalty program .
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