Understanding Groupon and other Deal-of-the-Day Sites

There's very few people out there who don't love a good bargain. While coupon clipping and hitting the sales have been staples of savvy shopping for years, "deal-of-the-day" sites have become incredbily popular in recent years and are chock full of great deals for purchasers. Here's a brief overview of how these sites work and a rundown of some of my favorites. Even if you're already familiar with sites like Groupon or Living Social, you may find something new that you'd love to try!

Deal-of-the-day sites leverage the value of "collective bargaining" to get consumers a discount. Companies such as Groupon work with vendors (very frequently small businesses, but sometimes larger businesses such as Amazon) to create deals for consumers. Consumers receive a deal and the small business anticipates an uptick in their business.

These deals work differently than typical coupons in a couple of ways:

1. Consumers usually need to "opt-in" to the deal by purchasing the coupon. Typically, the coupon is worth a value that is far less than the value of the coupon its self (e.g., $10 for a $25 dollar gift certificate / coupon to a restaurant).

2. Frequently, the coupon is only available when a certain number of users purchase the coupon in a given period of time (e.g., 100 per day).

Once a minimum number of users purchase a coupon, the deal is "activated," consumers are charged for their purchase and are emailed a coupon for the event. The coupon tends to have an expiration date for some period of time (e.g., 3-6 months) and can be used at any time.

There are several types of deal-of-the-day websites that exist:

• General sites, such as Groupon, LivingSocial, Google Offers, and Facebook Deals offer consumers a wide variety of coupons for a number of products and services. Some examples of what is offered are: spa giftcards, restaurant discounts, gift certificates to stores, and sports lessons. Many offers are for things to do that a consumer may not try without the coupon (I've seen trapeze flying and teeth whitening services, for example.) and are designed to bring more trial users to a business. Sites like these are great for finding a new restaurant or experimenting with something completely different, but I would recommend only working with a couple at a time as they each tend to send daily emails.

• Recently, niche sites have begun to offer deals in specific areas. For example, Savored (formerly Village Vines) offers members discounts on premiere restaurants. When purchasing a coupon to a restaurant, users make a reservation at the time of purchase, helping the restaurant guarantee seating. Deals on sites such as these may not be as inexpensive as on general sites, but can offer incredible bargains versus standard pricing.

• In addition to coupon websites, mobile app companies such as FourSquare offer instantaneous deals for users at nearby locations. Using the gps on smartphones, apps like FourSquare are able to identify what businesses are nearby. Often, businesses will have special "offers" if a customer checks in at a location. Free glasses of wine, discounts on deals, or specials during certain hours are great deals to take advantage of using the apps.

It's definitely worth a try to dabble in one of these sites. Who knows, maybe you'll find a great deal on something new!