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Can Direct-Mail Out-Coupon Groupon?



By Andrea Ludtke, Special to CNBC.com

NEW YORK (CNBC) -- Consumers have gotten savvier about finding good bargains, so businesses have to work harder to build customer loyalty. Offering them one-time deals doesn't work anymore.

Popular daily-deal sites LivingSocial and Groupon have exploded, but clients of Welcomemat Services, a direct-mail marketing company, say those customers are only as loyal as the coupon's expiration date.

This can make short-term deals the wrong strategy for local businesses that need more than a temporary boost in sales to survive.

Started in 2003, Welcomemat targets people moving into a new home with a packet of coupons for free services from local businesses. And while home buying is still down, the increase in renting is keeping business booming.

Whether it's finding a place to get a haircut, wash the car, or dry clean a shirt, new residents still need these services--even in a bad economy.

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"New movers are this gem for local businesses," said president and founder of Welcomemat Services, Brian Mattingly. Rich Chey, the owner of Chinese and Italian restaurants in Atlanta and Charlotte, N.C., said looking at the low rate of repeat customers from daily-deal services convinced him that offering a free entrée through the Welcomemat model was the way to go.

"I looked at the data for those deal services and wasn't impressed," said Chey. "Offering something for free seems like more of a risk, but if we can get people in the restaurant, we usually do a pretty good job of getting them to come back a second time."

The difference isn't just that the services are free and targeted to new movers. A special bar code on the coupon allows Welcomemat to know when a customer has redeemed a coupon. Customers then get a thank-you note in the mail from the local business, often with further discounts.

"We still go to some of the places we found," said Mary Petermann, who moved into a house in the Atlanta area in 2008 when she got married and got a coupon packet from Welcomemat. "It made it an easy decision, because you want to find all these things. It's the little things you don't necessarily think about, like 'Where do I get my hair done?'"

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