The Pro’s & Con’s of Deal Sites

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A majority of business owners lose their shirt on deal site promotions.

And if not their shirt, then certainly a healthy chunk of their margins.

So why then, do soooo many businesses continue to pursue this strategy?

Don’t get me wrong. Deal sites work on many, many levels. A killer deal on Groupon, Livingsocial, etc. can increase your current customer base. Provide a quick influx of cash. Improve awareness for your company or brand.

However…

If you’re considering a deal site to advance your bottom line, please reconsider.

Rather than a way to generate outright profit, deal sites give you access to thousands of users who could be potential clients. But beware; many people who purchase offers on sites like Groupon are simply price-sensitive bargain hunters who WON’T buy from you again.

Here’s a quick example:

I had a client a few years ago who owned a wellness center. She did Groupon and put together a great package at a ridiculously fair price.

She sold 1,281 packages.

IN ONE DAY.

Her margin per package?

Three dollars.

Her conversions? (I.e. number of clients who returned for other full price services.)

Lower than I would EVER tell you.

According to a recent Rice University study, fewer than half of first-time daily deal promotions are actually profitable. The study found that daily deals were most successful for photographers, health and fitness services, tourism services and doctors and dentists. Similarly, daily deals were least successful for businesses like restaurants, retailers and cleaning services.

Are you finding it difficult to say NO to a deal site opportunity?

If so, here’s what you need to know BEFORE you take the leap:

  1. Use the deal to upsell or cross sell complimentary products/services. HINT: Know exactly what your sales funnel is before your deal runs. What is the one next step you want this customer to take after they redeem the deal? Is it to buy a product? Book another appointment?
  2. Build YOUR database. The daily deals website retains customer data (emails) rather than the company offering the deal. Make sure you have systems in place to capture your new customer’s contact info. You can run a contest, offer future discounts via e-mail, etc. This allows you to extend the relationship long past the deal.
  3. Set up the deal to work for YOU. Have well-structured expiration dates. Avoid making your deal available during peak business hours. Make the offer expire as soon as reasonably possible.

 

According to Daily Deal Media, the percentage of those not cashing in on Groupons they’d purchased rose from 18% to 22% between July and September 2011. Many buyers purchase deals that they NEVER redeem – which even at a discount is still $$$ in your pocket.

The bottom line?

Deal sites aren’t a perfect for every business. Don’t devote a significant chunk of your marketing budget to these sites…make it a part of your comprehensive strategy. (Along with other online and offline tactics.)

Been burned by a deal site? Have a great experience you’d like to brag about? Please leave your comments below…

Be a Legend!

Brook Kreder
Founder
Experts and Empires

P.S. Get your FREE Business Builder Double Pack with 21 Ways to Jumpstart Your Marketing, Win New Clients and Boost Your Bottom-Line here.

P.S.S. Need a quick marketing make-over? Click here for my 2 hour marketing plan.

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