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Going beyond Groupon

Posted 8/20/12

When Groupon first hit the scene it put the spotlight on a massive new market and inspired countless copycats. But many local businesses lost money with the Groupon deals model, which often requires losing money on the initial offer in hopes of making it up on additional sales and return visits.

Now a new deals model is emerging based more on the concept of “yield management.” Yield management (YM) is a fancy term that basically means using tactics and strategies to maximize profit in a given circumstance. The idea here is to improve the deals model so local businesses can realize a profit immediately – not at some distant point in the future.

The deals-delivery app LeLoca (www.leloca.com) and popular online travel community Air B&B (www.airbnb.com) are two examples of services that use the YM approach. Both help merchants realize more profit from their goods and services by connecting consumers to them via mobile devices and other technology.

The airline industry is a perfect example of how yield management works. Owning and flying planes is expensive. Once a flight is scheduled, the airline incurs the costs no matter what. This is partly why airlines charge so many different prices for the same seat.

The new generation of deals services tries to do the same thing for local businesses by using technology to connect people with goods and services that are already available (like empty airline seats) and might otherwise be wasted.

• Air B&B (www.airbnb.com) is a fast-growing business that connects travelers seeking accommodations with places that have an open room, apartment or home. Air B&B provides hosts with the opportunity to earn money on an otherwise open space and provides travelers a chance to stay in unique places for less money than a hotel.

• ScoreBig Daily (which can be found online at www.scorebigdaily.com) – which uses a Priceline-style model – lets users view same-day tickets for various events and pick the price they want to pay. Once a ticket is sold and a purchase is shared on social media, ScoreBig Daily reserves seats nearby so friends who purchase tickets can sit together. The average ScoreBig Daily user saves 42 percent.

• Waze (www.waze.com) started as an app for real-time traffic updates but also offers real-time gas prices and discounts in the driver’s immediate area. Users can search for fuel in the area and compare prices, as well as get access to real-time deals being offered by gas companies who have partnered with the app. Waze also lets users post gas prices that they find so others can take advantage of them. •


Daniel Kehrer can be reached at editor@bizbest.com.

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