Minding The Fault In Daily Deal Sites – Prepare Yourselves

With the meteoric rise of Groupon since their launch in 2008 and the bevy of competitors that have sprouted up in an incredibly short amount of time, the very companies that can best utilize these forms of social marketing are still scratching their heads about how to use daily deals to their advantage. The thing is, there are so many options in this multi-billion dollar industry that we may have not yet seen the perfect solution – if one even exists.  But be assured, what works for some will not work for all – and it is not entirely the daily deal site’s fault.

When determining whether you want to include daily deals in your marketing mix, you need to set a strategy that works for your company.  Too often, companies utilize daily deals for awareness by providing huge discounts and then question the ROI.  Not to say that you can’t garner a strong ROI with daily deals, but you certainly can’t do so without a clear strategy or game plan.

After determining that your business would be best served by doing a daily deals program, here’s a few little tidbits you should consider:

1) THE PROGRAM
What are you looking to get from this marketing program?  Your specified end-goal should clearly define what type of program you should execute. Is it awareness, user-base, subscribers, samplers, or profit?  If its profit on the specific program you are looking for, you’re probably out of luck.  We’ll get into some basics of the participation later in the post, but figure that if 25% cannot cover the cost of your services plus a little profit, that end-goal is out of the question. 

If you are looking for awareness, user-base, subscribers or samplers, daily deals could be strong for you, but you need to make sure you can deliver and lead to repeat business.  Too often, the deals drive business for that one instance and, even if the consumer has a good time, there is no repeat visit.  Part of the solution to that is by coming up with a program that induces return visits or pass-along savings.

My wife is in the middle of a Living Social deal she bought with a friend for six classes to a new fitness program.  If she is ecstatic that she is halfway through and only has three classes left, I don’t think that’s what the business was looking for. She hasn’t felt strongly about the offering and, even at the discounted price, she’s wondering if the value is there.

Other deals we’ve bought – whether they are spa treatments or activities have rarely led to repeat visits. Had those experiences been unbelievable, we might have decided to return. So, no matter what the offer, you’ve only achieved part of your goal by getting them in the door.  Make sure the offer showcases what you do best to even have a chance of getting those return visits.

2) THE PARTNER
All deal sites are absolutely not created equally.  We’re not just talking about user-bases, we’re talking about type of user, its typical offerings and the general theme of the deal site. Depending on what type of business you are marketing, there might be specific genre sites that make more sense for you.  Even if it means that you’re reaching 1000 users instead of 100,000, that specific interested group could be a much stronger use of your money. Take the time to look at daily deal sites and compare what they offer, who they reach and what they charge. Also, weigh how they deal with maximums.  You don’t want to break your company by losing too much through the succesful sale of too many deals.

I always use the example of the bikini wax on Groupon.  I don’t need it, and even if I did, each company who offers it would hope that my sampling would turn to repeat business.  In addition to relativity of offerings, it leads to another point you should look at when determining which partner site you are going to run a deal on.  If a site runs so many deals like yours, you might end up getting people who just signed up for the latest deal.  Your chances of repeat business are slim because they might just wait for the next wax or massage – where they may be offered from.

Cost participation is another thing to consider. Figure that the general principle is that you’ll offer a service for half of the actual cost.  The site will most likely take half of that, leaving you with only 25% of the value placed on your product.  The model above is Groupon’s standard participation split.  You’ll probably find variances depending on how big, small, established or new a site is.  Ultimately, if your motivation is profit, you’ve got to set up for your offering to bring you a profit at a 75% reduction in cost.

Remember, the buzz site is not always the best return when it comes to your business, you need to be specific and stay in line with the strategy you originally set out.

3) THE PAYOFF
Perhaps too many businesses look to the deal as being the end all for the program.  If your goal is not just profit on the deal, then you’d better have a mechanic set in place to bring these consumers into your communications (through lists, groups, etc.) or find a way to convert them to subscribers or members.

I’ve redeemed far too many deals where the business never even asked if I wanted to be placed on their list for future news and specials.  That’s the easiest way to leverage the deals and a shocking few even choose to do that.

If you offer something that might be attempted only once, a solution could be to entice users of these deals to bring a friend with them later to receive another future discount.  The discount should be smaller than what the original deal, but think about it – you’re getting a new customer and even if you gave the same discount as the original deal, you’re making more money because there’s no participation.

There’s a number of different ways to leverage that sample or trial use that cost nothing more than the original outlay of the program. It’s up to you to play around to find what works best for your company and its newest clients.

When all is said and done, the product and services are key.  If you don’t have something you’re proud of, work it out BEFORE you do a daily deal.  Many of them provide a great opportunity to generate awareness and sampling, but you only get one chance to make that first impression.  It doesn’t matter how steep the discount, you won’t get them back again and you’ve totally lost.  As of yet, we’ve never seen a case study where a struggling company with sub-par offerings have been able to turn things around by offering a daily deal.

In most studies on daily deals, the business owners are quick to lay fault on the deal sites if their program does not work. Really, the fault is on business that go into this form of social marketing believing that everything they offer is going to provide returns.

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One response to “Minding The Fault In Daily Deal Sites – Prepare Yourselves

  1. Many cities have several websites on group deals and daily deals, I think this is where a daily deal on niche market type items can flourish better and be beneficial to all, but of course you will need a balance it all to not be rushed and end up giving poor service to all your potential new customers. You can look to see what is happening in your area by checking out our group deal and daily deal directory – http://www.dailydealsites.co. And if you do decide to go the daily deal route – get your site listed for free at our directory as well!

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