We all know what a great deal Groupon is for consumers. They are growing by leaps and bounds, plus for small business owners it’s a great way to get new business, right? Maybe.
I have no problem with business owners doing their own marketing, frankly many small businesses have no choice. A limited budget combined with the intimidation factor that comes with hiring a marketing professional makes you, the business owner, take things into your own hands, which is fine, however are you asking the right questions? Are you making the best choice for your business? Remember, these deal a day companies can be a great tool, but they are not a charity. They exist to make a profit for themselves, therefore you have to look out for you.
The way Groupon, Tipper and the dozens of other deal a day sites work is that you decide on an item or service that you will offer at a deep discount (usually 50% off the regular retail price). Then, the deal a day site will take a percentage of anything they sell – they are after all doing the legwork for you.
Let’s say you are a day spa owner. You normally charge $100 for a massage, which you will discount to $50 on a deal a day site to garner new clients. The site will then keep half, so you are now only making $25 on this service. Factor in your overhead, the masseuse, and ask yourself can you afford this deal? What happens if you sell 1,000 of these? Do you have the manpower to answer the phone? To book the massages? Remember, the redemption rate depending on the offer can vary from 50 -90% (closer to 90% on spa offers).
But what about the exposure you ask? The exposure is great, only if the numbers work for you, otherwise the only exposure that will remain in people’s minds (including yours) is that of angry customers that could not redeem their coupon in a timely basis and overburdened employees that could not offer the high level of service they normally would.
To minimize these factors, call around. Nowadays most large cities have dozens of deal a day sites. Chicago has Eversave, Tipper, KGB deals, Groupon, You’ve Gotta Get It, LivingSocial and those are just the ones that come to mind. Google deal a day sites and take your pick, but do your research.
- Some companies allow you to set a cap on your offer – greatly helpful for small businesses.
- Deal a day sites offer different rates for their services, some charge 50%, others charge only 30%.
The quick revenue is nice, but the real goal for you, the business owner, is to gain new clients, so what can you do to get these clients to return? Keep in mind that a good percentage of the people that shop through these sites are only loyal to their budgets, but there are some that you can convert, but how?
Remember, they came in on a deep discount, so ease them back up to full price. To keep with the same analogy:
- The consumer came to your spa because they received a massage, normally priced at $100 for $50. Remember, you only received $25.
- Step them up, offer them a special available “only to clients that came in on the discount” (exclusivity is a nice touch). Don’t shock them with full price, but even if you offer them the same rate they paid to get there ($50) , you have doubled your profit from this client because this time you don’t have to split the revenue with anyone.
In conclusion, deal a day sites are in fact a very low cost way to gain exposure and new clients, but please business owners, compare companies, ask questions, do the math, sleep on it, and then you can make a decision that’s right for you.