What’s the Deal with Daily Deals?

May 19, 2011

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.

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