How to make the most of using daily deal sites
Last week, Groupon.com took their company public and made yet another billionaire story in the tech world. It could make a big statement on how daily deal sites are a new gold mine and the push for bigger players like Facebook and Google to try their hand in it speaks volumes.
Unfortunately, there has been a darker side of the daily deal sites that's starting to pop up on blogs like TechCrunch. While consumers are lavishing in a large choice of discounted meals, fitness classes, and merchandise, more stories about the businesses not faring well in these daily deals are making some speculate if the daily deal will die as fast as it started.
I was originally going to basically state my findings and concerns, but solutions are a better ideology. I still think daily deal sites can be a boost to businesses if done correctly, and thus I've come up with some ideas on how to make the most of that daily deal, so you get more bang for your buck.
Understand the consumer
First and foremost is to understand the consumer mentality when it comes to these sites. Many business owners who testify to their problems with daily deal sites state how many customers simply came in, used the deal, and then never came back. They wondered if they gave bad customer service, or even if their product/service just wasn't very good.
The reality is many of the people who use daily deal sites are simply looking for deals. When I talked about these sites before, I mentioned how most of their main use is to bring in new faces, and hope they'll become repeat customers. That idea is still the main reason why a business should contemplate trying a daily deal, but the business owner should keep in mind that the economy is terrible and thus many out there are only interested in you if you're offering a deal. They might think your business is great, but not worth full-price when there's a plethora of spots out there offering discounted items.
Why use a daily deal site?
So you then might wonder what the point is if you won't see these people ever again. The point is you need to get other value out of that discount.
From my experiences on the business side; coupons, discounts, loyalty cards, and sales are used to serve different purposes. You hold a sale for instance because you might want to get rid of old merchandise or a large inventory of items you want to clear out. Car and truck part companies will do this when they have let's say a warehouse full of alternators that are getting older and thus they want to get rid of them before they become obsolete.
Another reason to give any kind of a sale or discount is to build exposure. Your store is empty every weekend while similar businesses in the area are filled. You think if people only knew about you better then you would make them loyal customers. You hold a sale or print and distribute coupons in an effort to get people to come in for the discount and see what you're all about. So the boutique that girls thought was for old ladies ends up surprising them and now they're shopping your boutique every week.
Some businesses like Gap and I believe Bed Bath & Beyond use coupons as a partial reward for customers and as a psychological means to get you into the store. So that 20% off coupon for Bed Bath & Beyond makes you think you are going to get a deal, but the blender you just bought for $40 ($50 normally) could be the same blender you can get anywhere else for $40 normally. The store simply raised the prices not only to make you believe it's "better", but to also use coupons to literally make the same sale the other stores do without coupons. It might seem ridiculous, but those coupons are the lure to get people in.
Best Buy is a notorious one for this thinking, as they'll price their computers and TVs at the minimum so they can push overpriced accessories and other services on you. They get a kickback for every person they sign up on Netflix or for Comcast internet service, hence why their salespeople hit you first with some drastically cheap item, but try to sway you into getting more with it.
The last reason to give a discount of some sort is market research. All those "reward cards" you get for free from the store, like the card that gives you discounts at the grocery store. Many tin foil hat wearing folk cry and complain how "big brother" is watching how they shop. They're right, but it's not some idea of turning consumers of into slaves. It's about trying to understand the consumer. If they see a discount on one item, will they buy it? Will they buy said item if the discount is only 5%, or does it have to be 10% or more? Will consumers fill out a form giving us their names, addresses, phone numbers, and emails in exchange for a 25% off coupon?
What you need to do
When you're contemplating using a daily deal site, first sit and really do the math. Talk to their salespeople and get hard numbers, not empty promises. Find out and figure out different scenarios of how these coupons can be used. Determine how much of a hit your business will take, and whether or not you can afford it. Do not let yourself get swayed or be tricked by loads of "success stories". Remember how many new businesses fail compared to succeed. It's the same here.
Don't get into the idea thinking someone will pay $15 for $30 worth of food, and end up spending $100 that day. People are inherently cheap, and will more or less just use what they paid for and nothing more. I've seen many stories of restaurants offering a Groupon deal and ended up with customers asking if they could divide up the deal over a few meals and/or would get their money's worth but not even leave a tip. It's important to think about how this deal will be used, and make the rules clear so you don't get screwed over by the consumer.
Think about everything else you can get out of this daily deal other than sales. This daily deal site isn't about trying to make you money, but get you customers. I've done some daily deals where I came in, got my deal, and could have walked away without the business getting anything. Not good. Like you see the reasons for sales, do the same logic.
Use them when you know you'll have dead periods in the year, or if you have old stock you want to get rid of. I know many restaurants see a down period from January through March. That's the time you should use these sites. What's worse? A bunch of discounted customers or an empty restaurant?
Use them to collect information, and even get pushy if you have to. So if you run a gym and offer a free Pilates class, get every person to fill out an information form. If they refuse, say it's for insurance purposes and they can't take the class without it. Who cares if they storm away angry? It's obviously a customer you don't need. The end result is you add loads of people to your mailing list and thus can try to market to them beyond that one day.
I also think it's a good idea to have a secondary "reward" in store for the customer. Say you run a café and offer $12 for five lattes that are generally $3 each. People come in, use them, but on the fifth one you maybe give them a coupon for a free muffin that can only be used on their next visit. Some might just come back and get the muffin; others might order coffee with that muffin. You might even make repeat customers out of them.
Make the consumer experience memorable. This is key even if you aren't giving any kind of discount. If your customers get a deal, come in, and are treated as "less important" than the people who aren't getting a deal, they won't even fathom coming back. Some of the hyper-sensitive ones will even post bad reviews on Yelp, which will hurt you more. You want those people being given a red carpet treatment and thus you'll have better chances at keeping them. Even the fitness class example. Rather than make it a special class, gear it more towards showing they'll get better health rewards if they sign up or a membership or come back and pay for classes. Some just might jump on it if they felt the trainer was that good.
In a meeting with a new client, I pointed out how daily deal sites can be helpful, but from looking at his current customer base it might not be ideal. Sometimes you don't need to set something up on Groupon or LivingSocial, but try other avenues. If your neighborhood has a lot of senior citizens, try an ad in the local church newsletter. If you're near a college, offer a discount only to those students if they show their IDs. Location-based social media is another great idea if you want to drum up numbers and you're in a high traffic area.
They key thing I want you to take away from this discussion is the rationale and reason why you give a discount or hold a sale. It's never about trying to make more money off discounted items, but about getting heads through the door and possibly collecting some sort of information out of your consumers. You need to be smart and think through any possible deal you're willing to give so you don't end up going broke from it, but you also need to think longer-term than just the one day or week you'll see a spike in customers because of the deal. Have a plan in action, look and even talk to other businesses you know who tried said deals, and learn the ideal fit for your business and how you can get the most bang for your buck.
Have you had any success or failure stories with daily deal sites? What tips would you give to other businesses in using them?