Daily deals sites such as Groupon and Living Socials have been getting lots of bad reps lately. You probably heard horror stories from local businesses that actually lost money from running daily deals. Although there’s no disputing that these things did occur, running daily deals doesn’t have to turn out that way. The keys to success are planning and managing your expectations.
In this post, I will go over 5 things that businesses should invest their time and effort in to maximize their chance of success when running daily deals.
1) New customers vs. Profits
Running daily deals should not be focus purely on the profits, but rather new customer acquisition. One of the highest cost for most businesses is acquiring new customers. Daily deals sites provide business owners a great opportunity to attract new customers and the opportunity to entice them to coming back in the future. Since the very nature of running any types of deals involve significant costs to the business, focusing on the margins alone is not a good idea.
Businesses should put the efforts into customer royalty program and up selling people that redeem deals on additional products and services. They should also place emphasis on capturing contact information so that can market to them in the future.
2) Be sure you can handle the increase traffic
A common issue for many businesses is that they overlook is the ability to handle increase traffic from the deal. The surge of traffic can put a lot of stress on businesses that haven’t invested the time to plan ahead. It can also lead to disruption to other business functions.
According to research figures from research site Yipit, on average 25% of daily deals redeemed during the 1st and last month of the offer. Its a good idea to contact the deal provider to find out the volume of traffic that can be expected based on similar deals that was offered in the past. Employees should also be trained to handle the deal redemption process and still maintain great quality service to everyone.
3) Know your margins
Daily deals are usually offered at 50% discount off regular price. 50% of that amount are usually allocated to the deal site. Therefore your cost should not be over 25% of the retail price to break even. Make sure you take this into consideration before running your deal to ensure that you are not losing money from the start. Remember that they goal of running daily deals shouldn’t be the profits, but rather acquiring new customers so that they will come back in the future. By breaking even, you essentially attracted a surge of new customers at “no cost”.
4) Trained Your Employees
Your employees should be trained to provide positive experience for each and every customer that redeems the deal. If customers feel like they weren’t well serviced or are mistreated in anyways, they will most likely not be back. It might also lead to negative reviews about your business. In addition, your employee should be trained on how to convert these people from bargain hunters to repeat customers.
5) Other deals providers
Aside from Groupon and Living Socials, there are many other deal providers that merchants can look into. In fact as of this writing, there are well over 200 deal providers that merchants can choose from. Among the most notable are Google Offers and Facebook Deals. Google for instance is the 800 lbs gorilla that has the resource to offer benefits to merchants that Groupon can’t compete with. Google offers are still not as widely available yet, but that should change very shortly.
Smaller deal sites such as KGB Deals can also be used to run multiple deals at the same time. The important thing is that you prepared your business to handle the spike in volume and be ready to handle the issues from running multiple deals at the same time.
Daily deals should be viewed as long term strategy. When done right, daily deals provide your business a “free” way to acquire new customers. Many of the negative issues of daily deal site can be greatly reduced of businesses invest the time and effort in the planning and research. As daily deals provider to continues evolve, it would be in their best interest for them to invest in ways to increase the merchants chance of success.