The deals culture is shifting from customer acquisition to customer loyalty by necessity. Why? Deals have begun losing high-income women. That’s the view of Next Jump CEO Charlie Kim, a featured speaker at ILM East in Boston March 26-28.

“Daily deals had an initial surge then quickly lost flavor on a key customer segment — higher income women with jobs,” Kim said in an email exchange with us. “This segment is the most profitable to most merchants. Acquiring them as a loyal repeat customer is worth quite a bit over any other customer segment.

Are deals really losing these women? Kim said the explosion of daily deals has led directly to lower conversion rates. “Daily emailing of 50 percent discount offers quickly turned from value to fatigue users,” he said. “ Email response rates and all conversion rates took downward dips across almost every vertical. That’s echoed by all the e-commerce merchants we have talked to.”

Loyalty programs such as those run by Next Jump, however, have begun to reverse the downward course “Towards the second half of 2011, we managed to climb conversion back up. This was not done via targeting, but through loyalty. The growth of loyal repeat visitors increased conversion rates at every level 50-150 percent higher, category by category.”

Kim said loyalty is mostly measured as a byproduct of points and rewards. “From 2010 to 2011, as the points platform got stronger, we saw metrics increase as follows: 100 percent increase in first-time visitors converting into a transactor. 300 percent increase in single-transactor converting into a repeat loyal transactor.”

Kim adds that the big trend on the horizon will be ease of purchase — convenience. “Make it easy for me to find and buy what I need,” said Kim. “Earn my trust as a consumer, and even at good prices [not best], you will have my wallet share. This is how you earn loyal customers.”

Charlie Kim is a featured speaker at ILM East, which takes places March 26-28 in Boston. Other loyalty-related speakers include Jim Douglass, SVP, Cartera, and John Valentine, VP, SCVNGR/LevelUp. You can register here.

We’re seeing more vertical players trying to leverage their brands with deal offerings and advertising. The latest one is Blue Cross and Blue Shield. Twenty-two Blue Cross state organizations around the U.S. are working with Analog Analytics to launch Blue365, a deal program offering health and fitness discounts, as well as adjacencies like tax prep.

SnapFitness, eDiets.com, Reebok, H&R Block and others are charter deal providers for Blue Cross. The launch will be supported via a media campaign launching in late spring. “Health and fitness is the quintessential loyalty program,” says Analog CEO Ken Kalb. He notes that consumers are making more of their own health decisions, so a health marketplace makes more sense in this climate.

Besides health, Analog has made a move into travel, working with Travelsavers Partner Services, a mega-booker working with more than 17,000 hotels and representing 20 percent of all travel bookings. Kalb says the biggest problem with travel as a deals vertical is sourcing new deals all the time. While destination deal sites such as Groupon and LivingSocial are scoring very well with travel, smaller sites do well to hook up with a one-stop such as Travelsavers. ‘They have 1,000 people trying to find travel deals,” he says.

LivingSocial, in a battle with Groupon and other deal providers to gain (and keep) market share, lost an eye popping $558 million beyond its $245 million in net earnings, according to a regulatory filing by Amazon.com, which owns 31 percent of the company. The filing was written about in today’s Washington Post.

The Post article notes that LivingSocial has 4,900 employees and claims more than 60 million members worldwide in 647 markets across 25 countries. Its vouchers grossed $750 million.

Here are the accounting details. Its vouchers grossed $750 million, giving LivingSocial net earnings of $245 million. It had operating expenses of $686 million. It also had other expenses associated with various acquisitions and stock compensation of $117 million, resulting in the $558 million loss.

In our view, companies such as LivingSocial (and Zynga and Groupon et al) aren’t really tied to earning immediate profits. The gamble is whether their massive spending leads to building a solid foundation for growth — and profits — going forward.

Gilt Groupe confirmed today that it is eliminating 10 percent of its staff, including Gilt City chief Nathan Richardson and Park and Bond CEO John Auerbach.

The luxury-but-discounted goods provider will close several Gilt Groupe offices, including Atlanta, Seattle and Dallas, and several Gilt City offices inherited from last fall’s BuyWithMe acquisition, including San Diego, Houston and Philadelphia — a purchase that occurred after BuyWithMe ran out of money.

Gilt Groupe CEO Kevin Ryan implied in an interview with AllThingsD that Richardson and Auerbach were more oriented toward “start up” modes, suggesting that development will continue. We would expect the separate companies to consolidate under one roof. 

Speaking at ILM East last year in Boston, Richardson said the site had strongly differentiated itself from other deals providers, leveraging Gilt Groupe’s upscale list of 5 million members. He also noted that Gilt City’s flash sales approach — which put items on sales until inventory was depleted — provided higher average dollar values and better email open rates.

ILM East is coming back to Boston March 26-28 with a lineup of doers and innovators who are transforming and redefining the local space. Highlights include a featured keynote from industry legend Ted Leonsis (Groupon vice chair/AmEx board member/sports team owner/AOL mastermind), along with keynotes/interviews from Jason Calacanis, Leslie Berland, Jay Herratti, Michael Zimbalist and Michael Silberman.

Other highlights of the two-day event includes a preconference rundown on local search run by Andrew Shotland of Local SEO Guide; a full plate of top BIA/Kelsey research and forecasts; a special venture capital panel; and innovator panels on social, mobile, deals, video and hyperlocal (the latter co-moderated by Merrill Brown).

KEYNOTES/KEYNOTE DISCUSSIONS
� Ted Leonsis: Owner, Monumental Sports (Washington Capitals, Washington Wizards); Vice Chair of Groupon; board member of AmEx, former vice chair of AOL; author, “The Business of Happiness”
� Jason Calacanis: CEO, Mahalo; investor. Calacanis’ career has been at the cutting edge of local and social media and reflects all the big trends, from his development of The Silicon Alley Reporter to Weblogs (AOL), Mahalo and the creation of TechCrunch50 and Launch.
� Leslie Berland, vice president, social strategy, American Express. Berland’s a major deal maker deeply involved in AmEx’ss mega Foursquare and Facebook deals.
� Jay Herratti, CEO, CityGrid Media. Herratti always gets top rankings at our events. He runs IAC’s super quad of the CityGrid Media Network, Citysearch, Urbanspoon and Insider Pages.
� Michael Zimbalist, VP, research operations, New York Times Co. Zimbalist leads the NYT’s 12 person-research unit. He’s deeply immersed in cutting-edge social, mobile, tablet and video efforts.
� Michael Silberman, GM, New York Magazine Silberman is the mastermind of NYMag’s development of a super set of verticals catering to the “New York state of mind.”

FEATURED SPEAKERS
� Bill Bice, CEO, SpaBoom
� Merrill Brown, Cofounder, MSNBC.com, Court TV
� Jim Douglass, EVP, Cartera Commerce
� Jere Doyle, CEO, EverSave
� Walt Doyle, CEO, Where
� Adam Japko, CEO, Digital Sherpa
� Maria Kermath, Director, New Tech & Sales Apps, AT&T Advertising Sales
� Mark Josephson, SVP, AOL Local
� Charlie Kim, CEO, Next Jump
� John McIntyre, CEO, Pixelfish
� Randa Minkarah, SVP, Revenue, Fisher Communications
� Randy Parker, President, SMB Apps
� Mark Schmulen, GM, Social Media, Constant Contact
� Andy Slater, VP, Digital Agency Sales, Katz 360
� Andrew Shotland, Publisher, Local SEO Guide
� Christopher Tippie, CEO, FindNSave
� Darren Waddell, EVP, Product and Corporate Marketing, Reply.com

Join hundreds of senior level local executives at ILM East for the local community’s best networking and insights. You can register here for earlier bird rates.

Internet Pioneer Ted Leonsis

Local Corp. has branched out in several directions in an effort to leverage its local platform. It has recently acquired Krillion (retail and product search) and Rovion (rich media platform and integration). Another major effort is its development of Spreebird, a deals company being built on top of its acquisition of Southern California’s Screamin’ Deals.

Spreebird has been mostly differentiated in the deals space by its profit share with local schools or charities. Users can designate which school or charity they want to designate 10 percent of the deal’s net proceeds for. To date, $650,000 has been donated, or 10 percent of its net profits.

The site, after roughly six months, has now unveiled a new look that gives it a stronger visual ID that is more feminine (more than 80 percent of its users are female). The site has also revealed a new tagline: “Shop Smarter. Make a Difference.”

Senior VP Malcolm Lewis tells us that the site is really focused on providing a better shopping experience, and isn’t limiting itself to typical deals entitles such as restaurant and spa deals. A recent deal, for instance, sold several hundred sets of bath towels and bedding, he noted.

Deals are being highly targeted based on a number of algorithms for location, purchaser history and the popularity of the deals category. The algorithm will recognize buying patterns, he said.

Spreebird is also set to move beyond deals, which is just one of six promotional categories that he envisions (but won’t reveal). The site is also very mobile-centric, with a “significant percentage” looking up deals via daily alert emails and mobile browser, although the percentage actually buying from mobile is much smaller.

In all, Lewis envisions that Spreebird isn’t trying to be a generic deals site. He thinks the site could compete as a strong premium niche, “like Volvo.”

More vertical deals are being introduced, as vertical publishers with specific audiences seek to tie deals to existing content, and prove to have better conversion than watered down, one-size-fits-all approaches.

A few weeks ago, we wrote about Local Offer Network’s B2B efforts with Cardinal Health. Now, NimbleCommerce has been pushing on the vertical space, and announced today deals built around golf (GolfNow), kids (8moms by Kidville) and dining (Restaurant.com and Restoboom). GolfNow, for instance, will offer discount tee times and deals on golf-oriented travel, lessons and equipment.

The new offerings also anticipate building multi-merchant experiences, such as “stay and play” golf weekends with restaurant deals included. The additions make up for Nimble’s loss of OpenTable, which has dropped its deals offering.

“For vertical publishers, NimbleCommerce provides a number of advantages, including the ability to integrate deals tightly with content offerings,” notes a Nimble press release. “Publishers can offer the convenience of single sign-on, tie in to existing merchant portals and publisher content, and seamlessly deliver experiences and deals to mobile devices.”

Dan Hess, CEO of deals aggregator and research company Local Offer Network, played mythbuster at ILM West, using data to set the record straight on where the market is moving…and where it isn’t.

Hess is convinced that there is still ample room for “specialization” across geography, demography and interests…rather than the doomsday consolidation/roll-up  scenarios forecast by many. As a result, “the money is still there,” meaning that margin compression hasn’t undercut the business models of many deals providers as expected.

This reinforces BIA/Kelsey forecasts, which project the U.S. deals market to reach $4.2 billion by 2015.

Rather than the initial conception of the buyer as a pure deal hunter, LON’s data suggest that shoppers are moving up-market in their purchase behavior, using deals for “higher-consideration items” such as clothing and accessories, health/medical/dental, and travel/hospitality. The average deal voucher has jumped to $76.33. Shoppers also have far more time to consider these pricier purchases, as average deal duration is nearly five days (up from 1.7 in Q3 2010).

Hess’ lasting words: “If all else fails, get a laser.” Data shows that laser hair removal deals are big winners.

How many small businesses have done a deal at this point? Twelve percent, according to a new survey of 2,500 SMBs by MerchantCircle. That’s about a third higher than MerchantCircle’s June survey.

The survey also found a lot of Facebook ad usage. About 23 percent of local merchants report having tried Facebook Ads to date, which is 5 percent higher than in June. Sixty-two percent said they would use Facebook Ads again, citing ease of use (again, 62 percent) and the ability to start and stop campaigns (55 percent). Those that won’t do it again say it didn’t do much for customer acquisition (66 percent) and the ads were too expensive (41 percent).

Despite the Internet horror stories of bagel stores and cupcake stores going under because they oversold on Groupon and other deals sites, deals generally work well for SMBs. About 75 percent of respondents say they would offer another deal in the future. Sixty-one percent cited customer acquisition as the best thing about deals. Thirty-seven percent also said that deal profitability was a major reason to do another deal, up from 24 percent in June.

It is not all rosy in MerchantCircle’s survey, however. Twenty-five percent of SMBs that have done a deal said they wouldn’t do it again. Of those, 42 percent said it was not effective for customer acquisition, 36 percent said it was too costly, and 34 percent said they lost money on the deal.

When choosing a deals publisher, 64 percent of the SMBs cite costs (i.e., commissions) as their top consideration. Local targeting was cited by 57 percent, and local reach was cited by 52 percent.

What is especially surprising in the survey is how many deal-using SMBs report having tried Google Offers, which just launched this summer and is now past 30 markets. Nineteen percent of deal-using merchants have already tried Google Offers, compared with 26 percent for Groupon and 21 percent for LivingSocial. Forty-three percent have tried other deal providers. We know from experience that many SMBs don’t actually know what vendors they use for different things, so we’d suggest some room for margin of error here.

Companies are beginning to focus on loyalty programs for existing customers, rather than simply using deal a day to acquire new customers. Closely and WildFire App are both pursuing loyalty programs.

A loyalty start-up we like is Punchcard, which launches today. The brainchild of MerchEngines founder Andy Steuer, Punchcard is a smartphone app that provides a virtual facsimile of the loyalty cards that customers are familiar with from their favorite coffee or ice cream shop (get 10 purchase stamps or punches, get one free).

Punchcard has gotten $1 million in seed funding from IdeaLab, and has hired five people, including local business development executive Dawn Padungian (Local.com, Charter Cable.)

Consumers sign up for Punchcard on a store-by-store basis, and receive a virtual punch after snapping a photo of their receipt. They can sign in via Facebook Connect. The service is currently available for iPhone users, and an Android version will launch in January.

Steuer tells us the card’s virtual nature gives it real flexibility in terms of incentives, or what he terms “offer triggers.” After their 10th purchase, for instance, customers can get cash or credit. The amount would be based on their average spending. That’s the standard offer. Since it is all electronic, however, merchants could opt to provide rewards after a certain number of purchases in a given month, or after a certain amount is spent, etc.

The company will also be in a good position to leverage behavioral data, and make nearby recommendations. It doesn’t have to worry about email fatigue issues since all its communications are via the app, rather than email, notes Steuer.

To rev up the market, Punchcard is seeding the market in Southern California with a prepopulated list of 147,000 merchants. During the trial period, it will pay the credit for the merchant’s 11th sale (up to $30.). The company’s actual revenue model, however, is based on monthly fees ranging from $29 to $129. At launch, 40 companies are already paying.

If Punchcard is successful in winning 5 percent more local users, research from The Center for Retail Management shows that can translate to 60 percent to 100 percent gains in revenues, adds Steuer.