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If you are considering posting a deal online, whether on your own website or using one of the deal sites including SlickDeals, Fatwallet, Groupon or Living Social, you MUST consider the “Vulture Effect”. The vulture effect is a term I use when a deal goes bad for the merchant. And it seems like the Vulture Effect is getting worse and worse over the past year or so.
What’s the “Vulture Effect“? It’s where a deal is posted without strict rules enforcement and so deal hunters will take advantage of the deal over and over and over until there is nothing left…just like a vulture does to a carcass. While this may not seem like a big deal for large companies (it is), it most certainly is for a small business. One deal gone wrong and it could mean not just some unhappy deal hunters, but negative reviews, negative social media press, etc.
We’ve seen the Vulture Effect a lot lately including big time with the Living Social deal with Amazon. The good news for merchants is that the big deal sites are getting smarter with how to deal with the Vulture Effect – a good example was Living Social’s deal with Whole Foods — they had much more strict requirements than with the Amazon deal. With the Amazon deal, the Vulture Effect came from deal hunters creating tons of email addresses and then using the deal-referrer scheme to get free deals and then pay for other deals. Some report walking away with over 100 deals but Living Social did work to remove a lot of the purchases that should not have been accepted.
This weekend I saw an amazing amount of Vulture Effect activity with a deal at Casual Male/Rochester Male. This deal was by far the worst level of Vulture Effect activity I have seen this year. On Thursday, someone posted a coupon for $75 off a $100 purchase at Casual Male and/or Rochester Male (same parent company) on SlickDeals. From what I could tell by looking at the coupon itself and the link, the coupon was apparently intended to be sent to some email subscribers as an incentive to get them to come back and shop at the store. I could be wrong but I am quite sure that the coupon was NOT intended to be released for public consumption. But because CM/RM didn’t consider the Vulture Effect, the coupon moved around the deal circuit very fast. You can see some of the deal sites that this coupon spread to in a Google search.
People on the deal boards were redeeming this coupon multiple times, both online and in-store (I used it only once). Eventually Casual Male turned the coupon off and began calling customers who ordered more than once and canceled some of the extra orders. Some deal hunters wondered which VP would be fired over this vulture effect.
How to prevent the Vulture Effect
Preventing the vulture effect on your deal takes time and effort. You need to make sure that the terms of the deal are strict enough that they alone will prevent mass redemption. In the case of the Casual Male deal, they gave out a 75% coupon on any goods which meant not only could their target of large and tall men use the coupon, but practically anyone could redeem for shoes. Had CM offered 50% off, their redemption level would have been more reasonable. Or a deal offering “spend $100, get $50 gift card in December” would have also limited redemptions but still provided excellent value.
If you plan to use a deal service like Groupon or Living Social, make sure you put pressure on your sales reps to provide ways to limit any excessive use on your deal. Both Groupon and LS can track deal purchases back to users which can help eliminate some of the excessive purchases.
At the end of the deal, there will always be vultures out there – your goal as a merchant is to make sure you limit the Vulture Effect while still offering a sexy deal that provides the return you are looking for.