Using daily deal sites (such as Wowcher, Amazon Local or Groupon for small business) can be a tempting prospect when you’re a business owner: getting your name in front of thousands of potential local customers and (hopefully) then getting them through your door seems like an opportunity too good to miss.
However, it’s important to proceed with caution when it comes to using these sites, as it’s all too easy to end up losing money. This handy guide will give you all the information you need to know about how to advertise on Groupon and other daily deal sites.
How daily deal sites work
Put simply, daily deal sites offer you a platform upon which to market your business through offering deals to potential customers. You give sites like Groupon the details of your offer, and they’ll promote it to their thousands of users signed up in your local area. Then you get a cheque in the post. Sounds great, right?
In theory, it is a great proposition: you’re busy running a small business and don’t necessarily have the time, resources or skill to market any offers you’re running, neither are you likely to have access to the same huge local customer database that daily deal sites have.
In practice, however, there are a great many things to consider. The daily deal site that you go with – whether it be Groupon, Wowcher, or any other site offering this type of service – isn’t going to offer their services for free. While they’ll say there are no up-front charges, their sales team will negotiate a revenue share (i.e. they’ll take a percentage of everything you make through the offer, usually around 50 per cent).
Add this to the fact that you’ll already have discounted your product or service for the deal itself, and you may find your takings aren’t particularly substantial. Worse, or you could even lose money – we’ve all heard horror stories like the cupcake baker whose business was swamped with 8,500 orders because of a Groupon deal.
Pros and Cons
When deciding on whether to offer deals via daily deal sites, it’s important to be aware of the repercussions it will have on your business, both good and bad. For every deal site, there are heaps of both success and disaster stories. Here are some of the major pros and cons of using daily deal sites:
– It gets your business in front of a lot of local consumers. Chances are you’ll never have a database of potential local customers that can match those of major daily deal sites. Add to that the levels of trust associated with brands like Groupon or Amazon, and you have a powerful way of reaching a lot of potential customers who are engaged and open to being marketed to.
– It raises awareness of your business. If you choose to advertise on Groupon or another daily deal site, getting your name in front of thousands of people can also increase overall brand recognition, alerting people who weren’t aware of your brand to its existence.
– It helps shift stock that you want to get rid of. Using Groupon can help you get rid of slow-moving stock, or stock that’s out of season.
– It’s usually not particularly profitable. As mentioned previously, there are a lot of costs involved in offering a deal on a daily deal site. Firstly, the provider will usually take around 50 per cent of your revenue. You’ll also have to offer a discount in the first place. There are then other costs to consider, such as hiring extra staff to deal with any increase in business.
– Deals often just attract bargain hunters. Many people use daily deal sites to search for a quick bargain, not because they want to become a lifelong customer. There’s no saying that those customers who come through your door with a voucher will ever return as a full-paying customer (and indeed, studies have shown low conversion rate for repeat custom when using sites like Groupon).
– It can harm your brand reputation. Offering deals can make customers more price-sensitive. Retail psychology suggests that once someone has paid a lower amount for a product or service, they’ll be less inclined to pay full price later – offering steep discounts tells everyone that you’re willing to be extremely flexible on price.
– It can annoy your existing customers. Additionally, you may harm your relationship with existing full-paying customers. Loyal customers are hard to come by, and a sure-fire way to irritate them is to offer the product or service they’ve been repeatedly paying full price for to others for half the price.
What to consider when you’re using daily deal sites
Daily deal sites are not right for every business. Here are some key things to consider when you’re deciding whether to use one:
– Does my product or service offering match the demographics of the daily deal site I’m using?
Groupon’s customer base is typically young, (often) female, and has money to play with. Other daily deal sites will have different target demographics: when you’re choosing which to go with, consider whether your offering will appeal to the site’s users. If it doesn’t, it’s time to look at other options.
– Have I thought about the maths?
It’s crucial that you do not sign off on a deal that will ultimately lose you money. Look at the options available: are you able to limit the amount of vouchers that you can give away (in order to avoid a cupcake disaster)? Have you considered all the costs involved? It’s often best to overestimate the cost of the deal to your business.
– Are there any hidden implications of offering a deal?
Offering a deal can impact your business in ways you might not have considered. For example, it may well increase your staff workload; if you haven’t planned extra cover, it may also lower their morale (particularly if your workers are paid commission and are earning less from voucher-wielding customers).
Here are some tips that Roy Blanga, International Vice President for Northern Europe at Groupon, gave Small Business Heroes:
Be honest about your business
The key to any successful partnership is honesty. As a manager or owner, the onus is on you to explain to your chosen partner you’re considering using a daily deal site, exactly what it is you want to achieve, any particular issues your business is facing and your business goals for the next financial year. It’s only by ensuring they fully understand your business that they can make the deal a success. You may want to invite one of their consultants down so they can see how things are run and get under the skin of your business.
Make sure you understand the deal and crunch the numbers
Your daily deal company should talk you through how your deal will work, when it will be online, how long it will run for, the limits on how many deals you can sell and how to ensure you fulfil them. If any of this isn’t clear, make sure you ask them before committing to anything to ensure there’s no confusion.
Be realistic about what you can manage
It’s better to start small and ensure the deal is a success than to overpromise and under-deliver. If you run a restaurant, you don’t want to get a rush of diners booking their tables during the same hour on the same evening if your kitchen can’t handle it or you don’t have enough front of house staff to take orders. To ensure this doesn’t happen we have a quality assurance department who run a capacity calculation on each deal using information from the business owner (such as number of staff, volume of existing business, opening hours, time taken to prepare product/service) to evaluate how much custom they can handle. This figure is the maximum number of deals we will sell on the site for them; they can aim lower but never over.
Don’t be afraid to ask for help
The word to focus on in all of this is partner, as that is exactly what this is: a partnership to provide an amazing experience for both you and your customers. A good daily deal partner will be there to support you through any issues. Remember that they only profit if you profit, so it’s in their best interest to make sure the deal is a success. Some provide additional support, so make sure you ask what else is on offer. We’ve developed various free online tools to help our merchant partners better manage their deals and incorporate them into their day-to-day operations. Groupon Scheduler is an online booking system that lets merchants accept and schedule discount deals booked directly, and also keep track of redemptions. We developed this when we found out that lots of small businesses were struggling to manage their admin tasks, but didn’t have spare money to hire an admin assistant to do it for them.
What should success look like?
Success will depend on what your business does and what your specific needs are. I’ve seen businesses use daily deals to sell excess stock, fill quiet periods in their restaurant or salon and generate local awareness of an entirely new business, amongst others. The most successful daily deal partnerships are ones that:
– Build the relationship into their wider marketing strategy
– Develop specific deals to keep both new and existing customers coming in
– Maximise profits by up-selling to their discount deal customers
– Collect contact details from all their new customers so they can market to them again and reward them for their loyalty
– Treat their discount deal customers like VIPs. A good deal will get them in the door, but fantastic customer service will keep them coming back again and again
What if things don’t go as planned?
If your deal hasn’t proved popular, don’t be disheartened:
– Ask your consultant what deals sold well that week…maybe there was a heat-wave and everyone bought the ice-cream deal instead of the wool jumpers you were offering.
– Ask your existing customers what would encourage them to come back in or would interest their friends who’ve not been in before.
– If you have multiple sites, consider whether offering the deal in another location with better transport links would be more popular.
– Think about what’s popular and how your business can tap into these trends. For example, if you’re a hairdresser, dip-dying is all the rage – so perhaps offer a deal around that.