Will Discount Deal Lovers Pay Extra to be Groupon VIPs?


Active Groupon (GRPN) users now have a way to sweeten their relationships with the daily deals leader -- but it's going to cost them.

Groupon is rolling out Groupon VIP, a program where deal chasers pay $29.99 a year for enhanced benefits on the site. The flash-sale giant is only offering the program by invitation right now, but it won't be long before it opens up the perks package.

What will $29.99 a year get you?

  • VIP members will have access to deals 12 hours before the regular buyers. This may not seem like such a big perk, but Groupon addicts checking the site at midnight for the latest deals will now be able to go to bed earlier. They can also get a head start on making any required reservations.

  • Don't you hate it when you forgot to buy a deal you wanted before time or availability ran out? The VIP plan provides exclusive access to a Deal Vault for previously closed and sold-out offerings.

  • VIP members will also be able to receive refunds in Groupon Bucks at any time on eligible daily deals -- even after they expire.

You're No VIP If...

The VIP program won't be for everybody. Folks that subscribe to Groupon's daily emails but rarely if ever actually buy one of the discounted prepaid vouchers -- and there are a lot of people like that, as Groupon revealed when it went public late last year -- won't see the value of Groupon VIP.

Even many frequent customers will balk at the deal. Those who don't have a problem using their purchased vouchers in time or regret the ones that got away won't warm up to paying money to save money, even with the three-month free trial that Groupon is currently offering.

However, those who do decide to pay up will probably find that they will grow even more loyal to Groupon and become more regular shoppers.

Leading by Example

Groupon is the undisputed top dog in this fast-growing niche. The company closed out last year with 33 million active customers across 47 countries. Despite receiving two rounds of funding from online giant Amazon.com (AMZN), LivingSocial remains a distant second in this space.

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Money isn't the only reason why companies introduce premium services. Amazon.com has millions of customers paying $79 a month to receive free two-day shipping through its Amazon Prime program. The revenue is welcome. It offsets the costs of the program. However, the real driver here is that Amazon knows that Prime members will lean on Amazon.com first when they need something.

In its latest conference call, leading car-sharing service Zipcar (ZIP) addressed a recent move by its closest rival to do away with annual fees. Zipcar actually raised its annual membership fee last year.

However, there was a time when Zipcar tried to give away annual memberships, relying solely on the revenue from hourly auto rentals. It didn't work.

"Free users don't engage," the company explains.

Maybe Groupon is seeing that with its growing list of registered users who never click the "buy" button. The Groupon VIP program will increase the frequency of purchases in the same way Amazon Prime does. The move will keep many of the industry's most active deal seekers close.

It's all about engagement. The $30 cover charge is immaterial.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article, except for Zipcar. The Motley Fool owns shares of Zipcar and Amazon.com. Motley Fool newsletter services have recommended buying shares of Zipcar and Amazon.com.

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