“Daily Deals” – a recent term brought to us by a multitude of internet companies all looking to capitalise on the economic downturn and take advantage of our tighter wallets. E.g. Groupon, GrabOne, Spreets, LivingSocial etc.
We all know how it works. Businesses sign up to sell one of their products or services, at a much cheapened price for a limited time period. The Daily Deal company take a percentage of this price. The businesses then (hopefully) receive lots of new clients and/or shift a large amount of their product.
I recently experienced Daily Deals from both sides of the equation – as a business and as a consumer. And it brought a fair few interesting thoughts to light.
Firstly, certain businesses simply cannot gain much from Daily Deals. If your profit margins are already low then the sums may not work for you. Most sites demand a significant price reduction, e.g. 50%, and then they take their own commission after this. If you are not at least breaking even there is usually no point in considering going further.
However, putting a product or service on something like GroupOn isn’t necessarily about making money in the short term. Most businesses believe that the advantage will come in the long term. But in order to gage the most potential from your promotion you must think carefully.
Firstly – what do you want to sell or promote? Ideally you need to find a product or service that is part of your core business, AND at least one of the following:
- something that people will want to come back and have again, or
- can be easy to up-sell (i.e. easy to encourage the customer to add on extra full price items), or
- something that involves a number of people, where the profit per person is exponential – e.g. a tour company selling a group tour can boost numbers and still profit if they combine discounted customers with full fare ones.
Once you have chosen your product, and have figured out you can afford to sell it at a considerable discount, then you need to decide on the maximum amount of new clients you can take. Sometimes businesses can suddenly find 100s of coupons bought and no time to fit them all in.
You also have to be wary that your discounted customers may fill places of full-paying ones. If you do the maths and set an appropriate maximum then this shouldn’t happen. Be firm with the deals site because they may push you for more than you can offer.
Another more obvious but still important piece of advice is to chose the right deals company. Is it relevant to your business and will it reach the right type of consumer? Also important – do their T&Cs fit in with your ideals?
Be aware that when the deal is released, you will probably receive an increased amount of enquiries. Have your staff briefed and be prepared to answer more calls and emails than you would normally!
After the deal has finished, then it is just as important to stay smart. There is no point accepting all those discounted customers if you don’t excel in their expectations and impress them enough to either a) encourage good word of mouth and b) get return custom. Ideas around this include:
- Offering them further encouragement to stay loyal (e.g. loyalty card),
- Making it easy for them to tell their friends (e.g. referral cards/offers),
- Collecting their email addresses (although don’t make it compulsory) so that you have them on your mailing list for the future.
And remember, the type of people that have bought a Daily Deals voucher are the type who are looking for a deal. Some may never want to pay – or even expect to pay – full price.
Still not sure whether it is for you? Consider contacting another company (preferably not a competitor) who you know have already experienced it and ask them for their opinion!
(September 2011 Articles)