Archive for May, 2011

What’s the Deal with Daily Deals?

Posted by

It’s the latest craze in social media-based marketing. Through “daily deal” sites like Groupon and Living Social, businesses low-ball their prices by offering limited time promotions of 50% off or more.

You’re probably wondering how your business could possibly make money on these deals – especially when the site usually takes a cut of up to 50% off the already low sale price. The truth is that you likely wouldn’t make money – at least not on the promotion itself. But you can still get a lot out of these promotions with the proper planning and follow up.

Consider the Goal
If your goal is a quick revenue boost, daily deals can provide it, but it will be at the expense of a profit. A better goal is to boost your customer list for future marketing. It’s the age-old concept of loss-leader pricing. A business offers a product or service at an insanely low price with a single purpose – to get customers. Revenue from sales of the deal itself may not even cover the cost of goods sold, but every person who purchases the deal becomes a new customer to market to in the future. Everyone knows that it’s less expensive to market to existing customers than to prospect for new ones.

Another valid goal is education. Thousands of people may be subscribing to your local Groupon or Living Social site and see daily deals each day. If you offer unique products or services that many people may not have heard about, daily deals can be a great way to get the word out to a large group of potential customers.

Consider the Promotion
When you are planning your promotion, of course you have to think about what is going to entice your target audience to purchase your product or service now. A potentially less obvious consideration is: what offer might lead to increased average ticket sales through commonly bundled items? If you sell tennis shoes, for example, you could increase the average sale by getting customers to purchase socks or other work-out accessories at full price. Think about what you should offer for a discount that will provide room for upselling at the point of transaction or for ongoing customer retention opportunities.

Have a Follow-Up Plan
The key to getting the most out of your promotion is to have a plan – to collect customer information when offers are redeemed and to reach out to your new customers later. Before you send out your promotion, put processes or strategies in place to ask for customer email and mailing addresses. Then, plan out your promotions for the rest of the year to directly market to your newly expanded list.

Think about When to Send
With the growing popularity of daily deals, businesses are lined up to participate, so know that it can take several weeks to get rolling. Other than that, you should consider when to send out your promotion so that it is most beneficial for your business. Want a revenue boost during a tough season or want to get rid of some of that extra inventory at the end of the year? Make sure you consider whether you have the staff and inventory to handle a big boost in demand!

Could daily deals help your business boom? Plan it right and follow through, and you just might see what the hype is all about.

Case Study: A Pool of New Customers

Posted by

Love to Swim and Tumble School provides swim lessons, tumble lessons and parties with one established location in San Antonio and a newer location in Schertz. The goal of this initiative was to drive new enrollment at their Schertz location.

Challenge: Develop a Selling Idea 
For this deal to be the most effective, buyers needed to get hooked with the deal and then be converted into year-round enrolled students. One lesson might have done the trick, but Love to Swim and Tumble School felt confident that after a full month of lessons, buyers would love the program and remain enrolled. The offer was crafted for one month of swim lessons at half price, with a waived registration fee. To prevent a crash in revenue due to regular customers cashing in on the offer, the deal was limited to new customers and was only valid at the Schertz location. We didn’t want the regulars to feel excluded, so the deal included an offer to benefit them as well. They were able to purchase the deal as a gift and receive referral bucks.

Keep The New Customers Coming Back
Once the Groupons were purchased, it was time for the real work to begin. These deal customers weren’t just any customers – they were new prospective year-round customers that needed to be tracked as sales leads. With over 1,200 students in and out the door each week, tracking them would be no easy feat. The school set up their software to alert staff when a Groupon customer checked in for their last lesson and to prompt them to ask about the customer’s experience and whether or not they wanted to remain enrolled in swim lessons. In less than 2 steps and 1 minute, the customer’s enrollment was continued.

Results
Love to Swim and Tumble School sold a total of 295 Groupons, and has had approximately 141 redemptions so far. “Groupon was a great way to reach a large audience and to get new people through the door. Now it’s our job to impress these people and get them to remain enrolled after the one-month deal is over”, said Carra Millikien, General Manager of the Schertz Location. It looks like they’re off to a great start! Of the new customers obtained through Groupon, 94 have already completed their free month and 60 of these have decided to remain enrolled.