As a business owner you may have heard about daily deal sites like Groupon and Living Social. They help you use deep discounts to attract new customers in droves. Let’s take a look at how daily deal sites work, one of their biggest benefits, and some of the risks involved in running a deal of your own.
How Daily Deal Sites Work
You offer a significant deal on a product or service (like 50-90% off). The site promotes your offer via email or social media outlets. People buy the deal vouchers. The daily deal site takes their cut. You get the rest. Word spreads and you see more new customers (and hopefully higher profits). Even if you eat a loss on a huge discount, the hope is that you can convert those deal-seekers into regular customers paying your normal prices.
Daily Deal Sites and Small Businesses: The Local Appeal
Small businesses targeting local markets don’t always embrace e-commerce or social media. It can feel too risky to invest time and money into building an online presence or email marketing list. Partnering with daily deal sites eliminates some of this risk because you get access to their existing audience in your local market (people who have subscribed to receive deals like yours).
Risks of Daily Deal Sites
Instant access to a well-targeted local market is a great benefit of daily deal sites. But there are also risks in offering these deep discounts.
- You might underestimate the interest in your daily deal. That can lead to disappointed customers if you over-promise or under-deliver (and more time needed to address customer service issues locally).
- You might not be able to get these discount-hungry customers to come back after the initial promotion.
- A recent analysis from Cornell University showed that running a daily deal can lead to more negative online reviews — reviews which may influence buying decisions of other potential customers. Ratings from reviewers using daily deals were an average of 10% lower.
Are daily deals right for your small business?
That depends on a lot of things, from your current customer base to your confidence in your ability to turn one-time deal-seekers into repeat customers.
If you have experience running daily deals in your local market, we’d love to hear your story. Leave a comment below to tell us which daily deal site you used and what results you experienced.