We’ve all been there. We’ve got an item in our ecommerce shopping cart and are ready to check out, but before clicking the submit button, we notice an empty field. “Promo code.” It’s staring at us. Daring us to get the same item for a lower price. Obsessive compulsive, and competitive, A-types that we all are when it comes to money, we trudge off into the wasteland of Online Couponland in search of that elusive golden ticket.
If only it were as easy as a simple Web search. The reality is that even when we find what we’re looking for, more than 76 percent of the millions of coupons available for download at any minute are expired or invalid for one reason or another. At least so says internal research by couponing startup ZenDeals. Although its difficult to verify this stat externally, anecdotal experience suggests its in the ballpark. The company has been working for a year and a half to solve this maddening problem that pits consumers, against couponing sites, against retailers in a lose, lose, lose battle royale.
ZenDeals has developed a patented algorithm to programmatically check the validity of coupons before offering them to consumers. It was this tool that it used to arrive at the above “bad coupons” statistic. The company has tested more than 5 million coupons since launch and continues to tests another several hundred thousand each day, with a focus on the largest national brands, like Victoria’s Secret, Gap, Target, Macy’s, Best Buy, and Amazon, that drive the disproportionate volume of ecommerce. At launch, the platform is able to verify coupons not only in English, but Chinese, Portuguese, and Italian – why not Spanish, I have no idea.
ZenDeals aggregates and then scrubs coupons from across 20 different channels such as affiliate programs and retailer newsletters. Brilliantly, the site actually lists all the coupons it tests and simply highlights those which are valid to illustrate the power of its service.
For example a consumer might see 171 coupons listed for Target, but only 12 validated. The implication? This is the nonsense you’d encounter when browsing with those “other” sites. With the bad coupons removed from its inventory, ZenDeals promises to be the most hassle-free place for finding valid coupons.
It’s one thing to do this for a few dozen coupons or retailers. It’s another to do it at scale, across many categories and countries with vastly disparate rules and conventions. It takes complex cloud computing and machine learning to execute. Which is one reason why this problem hasn’t been solved previously.
Another is that the incentives behind couponing sites have not been properly aligned with either consumers or retailers. For a long time, coupons have been commoditized. As a result, most aggregators operate on a model of quantity over quality, simply assuming that those who come looking for one thing, are likely to find something else that interests them.
You would think that the worst offending sites would fear a negative reaction from consumers, but their actions would indicate that this doesn’t factor into their strategy. Like ZenDeals, the other aggregators take a percentage commission – paid by the publisher or retailer – for each valid coupon redeemed. It’s shocking then, that for reasons of driving more redemptions alone, more companies are not taking the verified-coupon approach.
The problem for consumers is obvious. But retailers have reason to be equally dissatisfied. When a coupon doesn’t work and a customer is dissatisfied, who do you think they call? The coupon site? More likely, it’s the retailer. According to Co-founder Christopher Couhault, the retailers they’ve spoken to recognize it as a costly problem, in terms of direct overhead expense, lost sales, in lost brand equity. One study from 2009 found that more than 48 percent of consumers who enter an invalid coupon code end up abandoning the transaction altogether. To add insult to injury, customer service departments often end up accepting the legitimately expired coupons simply to appease disgruntled customers — double pain in the ass.
As with most great startups, ZenDeals was formed to solve the problems of one of its founders. Couhault was sitting around with some friends when his wife asked him to order diapers online. In order to expedite the process and get back to socializing, the friends all pitched in and each searched different coupons portals to try to find the best valid deal. After sufficient frustration, the idea for ZenDeals was born.
ZenDeals quietly raised a low seven figure seed funding round in February from Google Executive Chairman Eric Schmitd’s Innovation Endeavors, with participation from unnamed “Facebook and Zynga executives.”
There’s little question, given the fact that 88 million Americans use online coupons, that ZenDeals is addressing a real problem. The biggest challenge facing the company would appear to be gathering consumer awareness in an incredibly crowded space. With a powerful solution not yet available elsewhere, it’s likely that once consumers find ZenDeals they’re likely to return. But attracting them in the first place is no small problem.