By: Rebecca Jones, bScene Marketing Solutions
With the explosion of daily deal sites such as Groupon, Living Social, Gilt City, Dealsaver and so many more it seems everyone has deal fever. With as many sites as there are, there is no shortage of companies jumping on the bandwagon to get their goods and services featured. Deals range from carpet cleaning, restaurant dining, resume writing, wine & art classes, and just about everything in between. So as a small business owner, how do you know if a local deal is a good fit as part of your marketing plans?
First let’s understand how local deals work.
As a business owner you solicit your goods and services on a deal site, such as Groupon, to be featured via their email, website, and mobile app marketing distribution lists. These lists are massive and can quickly get your company in front of thousands of prospective buyers. The buyers are enticed by your product because you are offering them at drastically reduced prices. The deal sites have strict guidelines of what percent the discount of your product must be in order to be featured. If the site does not believe your discount is enough to exceed minimum purchases, your deal and company will be rejected. Once minimum purchases have been met, the deal is live and the site collects the money on your behalf. As a business owner this ensures you will at least partially compensate for the drastic price reduction with volume. This safeguard is designed to make using daily deals less risky as a marketing tactic for small businesses. Once minimum purchases have been met the deal is live and the site collects the money on your behalf. It then pays business owners at prescheduled intervals minus the site’s commission, typically a hefty 50%.
Deciding if a Deal is Right for Your Business
Although the set-up of local deals is a very expensive proposition for small business owners, it can also be an effective marketing tool if budgeted and planned properly. So how can a small business owner know if a deal might be good for them? Each business owner must weigh the pro’s and con’s very carefully. Below are just a few items to consider.
- Great exposure particularly for new businesses or products
- Immediate uptick in traffic allowing for up sell opportunities
- Opportunity for large-scale word-of-mouth and consumer advertising
- Increased cash flow by pre-selling of deals
- Collecting unearned revenue from unredeemed deals
- Clearing slow or stagnant inventory from stock
- Low or no profits realized, particularly if deals are already low profit items
- Negative consumer experience if business is overwhelmed by demand
- Brand and product value erosion from deep discounts
- Nonconverting customers; purchasers may only be deal seekers and not become loyal, repeat customers
- Competition with similar products and services that may be offering better deals, reducing your deal’s success and further eroding your brand value
So with over 32% of business owners reporting unprofitable deal promotions and more than 40% stating they wouldn’t run another promotion*, it is important for any small business owner to consult a marketing professional prior to running a deal. With a bit of strategy and planning these promotions can be successful and profitable and fit into a business’ larger marketing plan.
If you’re considering offering a daily deal we encourage you contact bScene Marketing Solutions which has experience in planning their own daily deals as well as coordinating them as part of comprehensive marketing plans for clients.
bScene Marketing Solutions
*A study by Rice University’s Jesse H. Jones Graduate School of Business of 150 small to midsize businesses in 19 cities spanning 13 product categories.