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Death of Groupon? Why Card Linked Offers May be the Next Big Thing

Oct. 2, 2012
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On September 13th, edo, a card-linked offer company based in Nashville, announced it raised $15 million in Series C financing. An obscure financial company raises large sums of money from other obscure financial venture firms – why does it matter to the world of discounts?

Card-linked offers (CLOs) are fast becoming the new trend. Startups, venture firms, banks and airlines all love the simple idea – load coupons straight to consumer’s debit and credit cards. “CLO programs deliver rewards tied to the credit or debit card already used. There are no awkward coupons; no slow down in the point-of-sale; consumer[s] buy like they always do and they’re rewarded for their purchase and loyalty” says Peter Vogel, co-founder and CEO of Plink, an online-to-offline loyalty program.

Here’s a breakdown of why the card-linked offer is good for all involved:

Pros for You

Pros for Bank or Loyalty Program

Pros for Merchant

No need to print and cut coupons Increase customer engagement Drive more sales
No need for mail-in rebates Drive new revenue Target select consumers based on purchase history
No more confusion about how to stack coupons Multiple marketing channels Easy to implement
Rewards as a percentage of your purchase Increase card usage Easy to track performance of offers


“Everything’s going digital,” says Tom Burgess, CEO of Linkable Networks, a card-linked offer company based in Boston. Burgess notes that an obvious laggard is the paper coupon, but he points out that card-linked offers from Linkable Networks are just like paper coupons in the types of discounts available.

According to Burgess, 70% of paper coupons currently issued are for product level, or SKU-level offers, mostly used for supermarket purchases. Linkable Networks can link enable product-level coupons to consumers’ cards, updating the paper coupon through technology but keeping the same SKU-level functionality that shoppers know and love. “Card-linked offer capability is disruption, evolution of [the] age-old industry of couponing,” Burgess says.

Other card-linked marketing companies besides edo have also gotten serious funding recently:

  • Cartera Commerce: $43M raised in Venture funding
  • Cardlytics: $51M raised
  • FreeMonee: $11M raised
  • Linkable Networks: $13M raised
  • Plink: $3M raised

Note: The above listed companies are all in different venture funding cycles. While the numbers above are accurate as of 10/1/12, these figures are not to be taken as comprehensive financial profiles.

Why People like Card-Linked Offers Better than Groupon

  • Less hassle for merchants. Merchants don’t have to do anything different at the register. With card-linked offers, everything happens behind the scenes – eliminating the awkward Groupon moments when loyal, full-price paying customers see new ones getting 50% off.
  • Less cost to retailers. Card-linked offers allow the merchant to retain higher margins. Groupon and LivingSocial typically take a 30% share of a transaction, whereas card-linked solution companies generally take 5 – 15%.
  • Targeted ads. Card-linked offer companies collect non-personally identifiable information on spending habits. This allows merchants to make offers to consumers who shop at competitors and avoid offering discounts to regular shoppers. This helps merchants draw new customers, which many merchants complain never happened with Groupon, a service commonly used by one-time deal seekers.
  • No need to buy or print coupons. With the card-linked offer, your credit card does all the heavy lifting for you.

Groupon’s Downward Spiral

Merchants seem to like the daily deal in theory, but dislike the end results. While some research has found that many Groupon merchants are repeat customers, the evidence is starting to stack up against Groupon, leading investors to start abandoning the company.

Groupon shares slid Sept. 17th to close at $4.75 – a -9.87% daily drop. That’s less than a year after the company priced its IPO at $20 a share on Nov. 4th, 2011. What prompted the steep decline?

A new study released Sept. 17th found that a third of Groupon merchants were “unsatisfied” or “very unsatisfied” with their experience, and 39% of merchants also noted they’re not likely to run another Groupon deal in the next few years. That, combined with previous evidence that small businesses hate the company, meant a tough day for the Chicago-based enterprise.

Ultimately, the numbers don’t lie. Groupon stock has fallen fast since its IPO, and card-linked solutions companies are raking in venture funding. People in the industry seem to have realized the benefits of card-linked offers, and the market is punishing Groupon.

What Groupon Taught the Card-Linked Offer Industry

The rise of the daily deal provided valuable insights in post-recession years. “[The daily deal] woke up the merchandizing and promotional industry in realizing that the consumer, especially the U.S. consumer, is very much interested in discounts and savings,” says Burgess.

But the continuing problems of Groupon have also cautioned the card-linked offer industry. For the industry to be ultimately successful, the card-linked offer must succeed where Groupon appears to be failing – making new customers into repeat customers for retailers. “A more strategic challenge is successfully moving from a discount model to a loyalty model. That migration isn’t as easy as it might look, and many programs are finding it difficult,” remarks Ron Stack, COO of Zavee, a card-linked company focused on local offers.

Where is the Card-Linked Offer Poised to Grow?

While the card-linked offer originated in the banking world, the real room for growth in the industry is in advertising dollars, according to Burgess. “It’s all based on reach and frequency- how big an audience can I reach and how frequently can I reach them. Advertisers are driving this evolution off bank or out into the wild,” he says.

As the media world reinvents the card-linked offer as an engagement platform, rather than simply a discounting tool, card-linked offers will gain widespread acceptance. The functionality will become commonplace. “Linking an offer to your card is just going to be secondhand – or old hand, if you will,” notes Burgess.

Vogel agrees with this take on how advertising and marketing will change the face of the card-linked offer. “We’re seeing strong success in more and more advertisers shifting to offline performance based marketing channels, especially with the coming mobile wallet, which will translate into a shift in advertising dollars,” he says.

With the mobile wallet, as Vogel points out, consumers will raise their expectations of integrated functionality in their shopping lives. The card-linked offer will neatly fit into consumers’ anticipations and desires.

Social media will likewise allow the card-linked offer to fit more seamlessly into daily routine. “Social media can be a game changer for merchants, especially smaller retailers. It’s an inexpensive way for merchants to increase the reach of their marketing communications, and it’s an effective way for merchants to engage more fully with their customers,” comments Stack.

Stack’s point draws attention to the growing arsenal of tools for small retailers. As the card-linked offer gains acceptance, leveraging an established platform such as social media not only expands reach but allows merchants to cut marketing costs, allowing smaller merchants to become more competitive with their more funded rivals.

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