Consumers have gotten savvier about finding good bargains, so businesses have to work harder to build customer loyalty. Offering them one-time deals doesn't work anymore.
Popular daily-deal sites LivingSocial and Groupon have exploded, but clients of Welcomemat Services, a direct-mail marketing company, say those customers are only as loyal as the coupon's expiration date.
This can make short-term deals the wrong strategy for local businesses that need more than a temporary boost in sales to survive.
Started in 2003, Welcomemat targets people moving into a new home with a packet of coupons for free services from local businesses. And while home buying is still down, the increase in renting is keeping business booming.
Whether it’s finding a place to get a haircut, wash the car, or dry clean a shirt, new residents still need these services—even in a bad economy.
"New movers are this gem for local businesses," said President and founder of Welcomemat Services Brian Mattingly.
Rich Chey, the owner of Chinese and Italian restaurants in Atlanta and Charlotte, N.C., said looking at the low rate of repeat customers from daily-deal services convinced him that offering a free entrée through the Welcomemat model was the way to go.
"I looked at the data for those deal services and wasn’t impressed," said Chey. "Offering something for free seems like more of a risk, but if we can get people in the restaurant, we usually do a pretty good job of getting them to come back a second time."
The difference isn’t just that the services are free and targeted to new movers. A special bar code on the coupon allows Welcomemat to know when a customer has redeemed a coupon. Customers then get a thank-you note in the mail from the local business, often with further discounts.
"We still go to some of the places we found," said Mary Petermann, who moved into a house in the Atlanta area in 2008 when she got married and got a coupon packet from Welcomemat. “It made it an easy decision, because you want to find all these things. It’s the little things you don’t necessarily think about, like 'Where do I get my hair done?'"
She said the daily-deal coupons don't necessarily make her a loyal customer.
"You get coupons in the mail all the time, so you might go somewhere and then try a different place the next time," she said.
Welcomemat reports back to the local business on what types of customers have redeemed coupons—including income level, where they live and their gender.
"The more savvy businesses understand that they need tools to market themselves during the recession," said Mattingly, whose local business clients report the data have given them a better picture of their target audience, and even in some cases, emboldened them to expand into areas where they are now confident they can appeal to the residents.
And the pool of new movers isn’t likely to shrink anytime soon, even if the housing market remains weak.
And the nation's ever-changing demographic shifts will continue to fuel the business of marketing to new movers regardless of housing trends.
The increasing Hispanic population is more likely to rent and tends to move more often, research from marketing services firm Epsilon shows. The Hispanic population grew 37.4 percent from 2000 to 2010, while the total population grew only 9.1 percent, according to 2010 U.S. Census data.
Mattingly said Welcomemat doesn’t target residents based on any factor other than their recent move to the community, but Hinman expects targeted marketing services will take a closer look at how to appeal to Hispanics once the boost in new movers from foreclosures wears off.
"Regardless of whether they’re renting or owning, there’s a lot of discussion about how you reach out to them," said Hinman. “Marketers just have to get smart about using the data they have."
Foreclosures are also expected to peak this year as the final wave of five-year adjustable-rate mortgages comes due. Epsilon expects an estimated 1.5 million foreclosures to be the main driving force behind new moving this year.
"People are still moving," said Don Hinman, a senior vice president at Epsilon. "The difference is they were moving up—now they’re moving down a bit."