Deal site drawbacks spawn new startups

Filed under Innovation, Technology

By Ann Meyer

Chicago-based DealsGoRound offers users an opportunity to buy and resell daily deal vouchers

Kris Petersen launched DealsGoRound after losing money on expired Groupons. Photo courtesy of Petersen.

Count Chicago entrepreneur Kris Petersen among those who have lost money on Groupon and LivingSocial vouchers by not redeeming them before they expired.

The example that stands out, Petersen said, was his purchase of four Groupons for Segway tours that he planned to use with friends. “I threw $160 out the window by not going and letting them expire,” he said.

But instead of bemoaning his mistake, Petersen created a solution for himself and others when he launched DealsGoRound a year ago. The site allows users to buy and resell daily deals issued previously, with DealsGoRound taking a 10 percent commission fee on transactions.

DealsGoRound is one of several new technology companies cropping up to help companies manage daily deals. MobManager, an online dashboard designed to help businesses manage and measure their daily deal marketing efforts, is another startup tapping the rapidly growing deal-site space. And Dealmap is now working with Microsoft’s Bing mobile to put several daily deals at mobile users’ fingertips, according to news reports.

When entrepreneurs spot weaknesses in existing products and services, new business concepts often emerge, experts said. In fact, innovation often stems from mistakes. “It’s good to be stupid. If you have done stupid things, you have been innovative,” said Praveen Gupta, adjunct professor of business innovation at Illinois Institute of Technology, who spoke at an innovation seminar offered by DePaul University in December.

Innovative products or services generally occur when two concepts are combined to add a new twist to an existing product, said Gupta, who is the author of “Business Innovation in the 21st Century.”

“For every single innovation, you need a combination of two or more things,” Gupta said. “Start combining and you’ll create new products.”

DealsGoRound first required buyers and sellers of past deal vouchers to exchange the vouchers in person, Petersen said. But in January, the company launched a full-service platform on its website, which allows for secure online transactions. Users also can buy deals on the go using the company’s iPhone app, Petersen said.

Since then, volume has been climbing rapidly, he said. The company sold 100 deals last week, up from about 50 the prior week, he said. Sellers set their own prices for deals. In addition, buyers can post wanted ads on the site, requesting vouchers for deals they missed, Petersen said.

Like DealsGoRound, MobManager stemmed from an entrepreneur’s personal experience. When Dave Wachtendonk, founder of Murder Mystery Maniacs, used Groupon to promote his group mystery events last year, he wanted a way to track the deal’s performance. Groupon offered an Excel spreadsheet, but Wachtendonk found it unwieldy. Today, Groupon offers a mobile app solution, he noted, but only for its own deals.

Given that the market for daily deals is estimated at $5 billion to $6 billion and growing rapidly, Wachtendonk said he was surprised that no specialized tracking solution existed.  MobManager.com offers tools for processing coupon redemption and determining usage and return on investment for companies using multiple deal sites, he said. “Our goal is to give merchants the tools they need to better manage their deals,” Wachtendonk said. “Data is power.”

Using MobManager’s tools, businesses can determine whether a consumer is a “deal hopper,” who likely won’t return without a coupon,  or a loyal customer who will return and refer others to the business, Wachtendonk said.

Being able to quickly access information by voucher number or name will help businesses plan, he said. “You’ll be able to determine how much money you made above and beyond the deal,” Wachtendonk said. Businesses also can use the dashboard to determine whether users from one deal site buy more over the long term than those from another. The information will help businesses determine whether the deal site promotions are cost-effective for their businesses, he said.

Microsoft Corp. also is getting into the action by adding a deal-site link to its Bing mobile site that displays top offers from various deal sites, the Chicago Sun-Times reported last week. Bing mobile also has added options to help users find deals based on category or the phone’s current location, the story said. Microsoft is working with deal aggregator The Dealmap, the Sun-Times reported.

Post updated March 15.

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