“LivingSocial Plus”: A Monthly Subscription Model That Could Improve Deal Site Retention

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In an effort to get customers buying pre-paid deals more regularly, LivingSocial has launched a new subscription service called “LivingSocial Plus”. For $20 a month, members get $25 in “Deal Bucks” credits that are automatically applied to their next purchase as well as access to closed deals. LivingSocial is cleverly pitching buyers on Plus with a checkout graphic that shows the price of the currently viewed deal instantly reduced by the $5 in bonus Deal Bucks. Subscription services like this could solve a fundamental problem of deal providers where users only stop by to purchase especially lucrative or relevant deals. If these program gain traction, providers could establish a consistent revenue stream, get users buying more frequently, and score free cash if credits are never redeemed. Expect rampant copying if competitors see the subscription model working.

LivingSocial Plus is only in beta now, so its URL redirects to the general site if you’re not in the test base. A Help center article confirms its existence. though. The pre-paid deal provider started offering membership to deal buyers around Black Friday. Previously the only way to earn Deal Bucks was to invite friends to the service. The deal provider has been aggressively innovating in search of new models that could save it from the decline impacting Groupon. It just launched LivingSocial Instant and Room Service last month that lets people get discounted food delivered on demand.

While the $20 that buyers actually paid for with Plus are good for 5 years, the $5 in bonus bucks expire at the end of each monthly billing period. This create a sense of urgency where members rush to buy deals just to get that extra $5 off. The whole daily deals model is built on this notion of perceived value exceeding what users have to pay, even if they’re paying for things they don’t need. Meanwhile, it’s really the deal providers that could win since most purchases net them far more than $5.

In this way, the subscription model fits perfectly with LivingSocial and any other deal provider’s business. By clustering lower quality, higher margin deals at the end of the billing period when users are desperate to spend their fleeting bonus credits, providers could coerce members into buying deals that make them more money. Access to closed deals is a great addition to the subscription package, since buyers may be willing to pay for it but it doesn’t cost providers anything. LivingSocial may have figured out the next big thing in daily deals. Now it just has to watch out for copy cats offering even bigger bonuses.