Would You Pay for a Discount?

NEW YORK (MainStreet) – Daily deal services are intended to help you save money, so does it make sense to pay for the privilege?

That’s exactly what the two biggest daily deal sites are hoping you’ll do. The Chicago Tribune reports today that Chicago-based daily deal giant Groupon has begun testing a subscription service that will allow users to purchase deals early or after they’ve expired, and will also give them the ability to immediately get a refund (in the form of site credit) if they decide they no longer want a deal. The service, Groupon VIP, will cost $30 a year after a three-month free trial period.

But Groupon isn’t the first to dream up a pay-to-save scheme. LivingSocial, Groupon’s biggest competitor, launched LivingSocial Plus in late fall 2011. The service costs $20 a month, but every month you get $25 in site credit that can be used toward any deal. If you don’t use the credit that month, $20 of it will roll over perpetually, meaning that you’ll always at least break even. Being a member also gives you early access to deals, as well as the ability to purchase expired deals.

Another deal site, Savored.com, has a slightly different business model: Rather than paying a discount price in advance for a meal or getting a voucher for a set discount, you pay $10 upfront and in return get “insider pricing” of 30% off your entire bill.

So do these services actually make sense for you? It all depends on how you use the sites. LivingSocial Plus definitely makes sense if you use the website on a regular basis: If you’re spending at least $25 on the site every month, then the program is essentially a frequent-fliers club that gives you $5 off a month. If you use the site sparingly it probably doesn’t make sense, though, because although the site credit will roll over month to month, if you stop using the site regularly you could wake up one day to find that you’ve purchased $100 in site credit that you don’t really want. (However, a company spokesperson says that it’s still in its testing phase and more features could be incorporated.)

As for Groupon VIP, the math here is a little more difficult to work out. While it’s a lot cheaper than LivingSocial Plus, you’re not getting any sort of site credit for your money. What you’re left with, then, is essentially an insurance policy – insurance against missing a deal and insurance against buyer’s remorse -  and early access to deals. We’ll wait and see what the final iteration of the program looks like, but for now it doesn’t seem like anything to write home about.

Savored probably makes the most sense among the pay-to-save schemes: Rather than a subscription, you only pay when you want to make a reservation, and as long as you spend $35 or more on the meal it pays for itself. And if you tend to be a big spender, it’s definitely worth the $10 upfront fee. Just take note that reservations are limited to off-peak times, so it might not be ideal for date night.

Paying to save money sounds silly on its face, but it makes sense as long as the math works out in your favor. So if you’re considering signing up for one of these programs, just make sure you consider your buying habits and do the math first.

Matt Brownell is a staff reporter for MainStreet. You can reach him by email at matthew.brownell@thestreet.com, or follow him on Twitter @Brownellorama.