Online Coupons Get Smarter

When Jennifer London cut a deal with Groupon Inc. to promote her smoothie shop in an email, she wasn’t sure how many people would show up for discounted drinks.

Thirsty New Yorkers bought more than 1,300 of her online coupons, and “it kind of blew my mind,” Ms. London said. People redeemed roughly 900 of the coupons over six months at her small Xoom NYC Inc. shop, including a crush in June, but she was disappointed that few became regular customers.

“Most of the people who came are not from this neighborhood—I most likely won’t see them again,” Ms. London said, adding she wished she had limited each person to three coupons rather than 10. Fortunately, she said, not all the coupons were redeemed. “I definitely would have lost money if everyone had shown up,” she said.

Groupon and its competitors, which build buzz by sending out a daily email alerting subscribers in a city to a local bargain, are listening to gripes like Ms. London’s and recasting their operations. Among the new approaches: computer programs to better target consumers with personalized deals and staff on the ground to help merchants.

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