LivingSocial launches its own Visa reward credit card

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Posted 01 May 2012 16:32pm by Patricio Robles with 1 comment

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While daily deals giant Groupon deals continues to struggle with being a publicly-traded company, its biggest competitor, Amazon-backed LivingSocial, continues to try to prove that the daily deal model is viable when done right.

One of the biggest challenges in doing that is getting daily deal customers to return to the merchants that lured them in with a bargain.

Indeed, much of the criticism that has emerged around the daily deal model is that many if not most daily deal customers hop from business to business in search of the best deal. In the worst cases, this leaves some merchants with losses they can ill-afford.

Last year, research firm Lightspeed Research suggested that customers of websites like Groupon and LivingSocial were "a solid target population for co-branded credit cards," and earlier this year, LivingSocial CFO John Bax revealed to Reuters that the company was working on a co-branded credit card with Chase. "We will use this as a platform to encourage people to come back to merchants," he stated.

Today, LivingSocial unveiled its co-branded Visa card, which gives cardholders 5 points for every $1 spent on LivingSocial purchases, 3 points for every $1 spent on dining and 1 point for every other dollar spent on purchases in other categories. Every 100 points earned becomes a LivingSocial Deal Buck, which is applied to a cardholder's next LivingSocial purchase.

"LivingSocial constantly strives to find new ways to energize the connection between our merchant partners and members, and the LivingSocial Rewards Visa Card is another example of how we are leading the industry in providing new and useful ways to promote these interactions," Bax stated in a press release.

But is that really the case? The problem with the LivingSocial Visa is that it primarily strengthens the relationship between LivingSocial and its customers; because points are earned for LivingSocial purchases, it appears to do little to offer customers a stronger incentive to frequent a business that they discovered through a LivingSocial deal.

As points earn Deal Bucks that are usable only on LivingSocial, one might even argue that it gives cardholders an even greater incentive to continue deal hopping.

At the end of the day, the fundamental problem thus far with initiatives involving credit cards and daily deals, of which there are more than a few, is that they're focused too much on the deal, and not on what happens after it.

What happens after a deal, of course, is really a merchant's opportunity and challenge, but helping merchants find a better way to turn discount seekers into loyal customers -- or to filter out the undesirables with no potential -- is a must for companies like LivingSocial if the daily deal is to survive long-term.