It’s still too early to say whether enough consumers will be willing to pay full price— a key factor that will determine whether LevelUp becomes a serious threat to Groupon or remains one of hundreds of wannabes.
Groupon created a new marketing phenomenon catering to people’s hunger for bargains. It offers the chance to purchase discounts targeted to a person’s city and preferences. For example, someone might pay $20 for a $40 gift certificate to a spa, restaurant, car wash or yoga studio.
The Chicago-based company’s upcoming initial public offering of stock is expected to be in high demand, even though it lost $413 million last year on revenue of $713 million.
The harsh reality of the online coupon business is that the concept of offering customers deep discounts is easy to replicate. All you need is a sales team to craft deals with merchants, and an email service for blasting those offers to people who sign up on a website.
But rivals have difficulty breaking through because market leader Groupon already has 83 million people subscribing to its daily offers by email, and second-place LivingSocial has 39 million. By contrast, LevelUp has just 100,000 subscribers.
Small businesses often prefer to partner with a service that can reach more potential customers, even though LevelUp is trying to sweeten the deal for merchants by taking no commission on the first of the three offers.
Others are trying to distinguish themselves by targeting niche audiences, such as nerds or moms, or people with specific interests, such as fitness or food.
Facebook is testing a deals program of its own in five U.S. cities, trying to rival Groupon by tapping Facebook’s base of 750 million users worldwide. Google has one, too, rolled out first in Portland, Ore.
LevelUp comes from the folks behind Scvngr (pronounced “scavenger’’), a mobile-gaming startup in Cambridge, Mass., created by 22-year-old Princeton dropout Seth Priebatsch.
