Get Social

daily deal sites: acquisition tool or profit stealer?

Posted on: February 17, 2011

Not four days into managing a twitter page for a client, and I’m inundated with @ mentions  from Groupon, Living Social, and Gilt City (Buy with Me and Eversave, where’re ya hiding?) saying they’d love to feature my client. I politely ask for an email, and it’s interesting to see who brings out the professional guns and who doesn’t. With a background in group buying sales myself, I’m wary of claims of x-thousand followers, and the “higher profile” clientele on a certain company’s list.

While pleased these companies recognize my client and want to feature the business, I’ve taken a step back to consider both sides of the argument pro- and anti-group buying as a marketing strategy. So, in one corner:

What’s good:

  • “free” advertising: this is a 24-hour(sometimes longer), exclusive offer sent to the inboxes of anywhere from 90,000- 1,000,000 individuals. For the offer period, the company you’ve selected tweets the deal, posts to Facebook, and the like. It’s free for you as in you don’t pay the company to run the offer, but they take a cut of your profit to earn their take.
  • reach to new customers. Fans of the company follow the offers. They may not already be your fans. They may become your fans as a result of this offer.
  • inspires more brand loyalty: your existing customers may look favorably upon this offer. The owner of Central Square’s Four Burgers once told me he ran an offer as a reward to his customers. If I see a business at which I’m a regular show up with a deal in my inbox, I’m 100% likely to buy it. And I’m pleased that this spot opted to run a sweet deal to drum up some buzz
  • no major loss: if you’re smart (or have an honest, non-scumbag sales rep), you’ll be able to negotiate a deal that doesn’t really cost you. I loved the Chutney‘s CoupMe offer of $4 for $8 worth of food, but I bought it intending to snag a filling lunch alone, so I paid $4 ($2 of that went to the restaurant) and walked out with nearly $8 worth of eats. To avoid that kind of loss, a restaurant like Yak and Yeti in Somerville ran an offer of $10 for $25 worth of food. More of a dining destination serving sit-down meals, I brought a friend to dinner, and the bill for 2 of us came close to $45. So, Y and Y made likely $5 upfront and then another $20, so $25 to feed us $40 worth of food. Make sense?
  • you’re in control: building on the last point, as the business owner, you can set limitations. Cap your maximum at 100, 500, 1000…whatever makes sense for your business. Set an expiration time (usually 6 months or a year, but more difficult scheduling things like a hotel stay can be more flexible) that works for you. Black out services as needed upfront. If the company you’re working with is any good, they’ll honor all your limits and make the deal irresistible.

What’s Bad:

  • I’ve spoken to businesses fearing “brand tarnish.” Eastern Standard Kitchen, for example, does not discount their food. Period. Okay, I get it. There are very few (or no) businesses I’d be “embarassed” or disgusted to see feature a deal, however. I called Eastern Standard because I’ve wanted to go for years but haven’t had the right chance– and a discounted voucher would force me to go.
  • “coupon whore” syndrome (or, buzzword, “deal fatigue”): run with one deal site? Great! Run with two? Okay. Run every month: desperate! Sure, each company markets to a new audience, but that “one time exclusive offer” pitch just flew right out the window. Have some respect for your biz!
  • your offer isn’t profitable: read: you lose too much money. You get overwhelmed with interest. Does this article ring a bell?
  • you don’t need any new customers: I find this one hard to believe, but then I think of a shop like my South End Hair Studio, Revive. Through some savvy client retention and the gospel of Yelp, those ladies are booked weeks in advance. There’s truthfully no time in the day for them to accommodate a promotion.

The verdict? In my mind, proceed with caution. Getting your feet wet with a deal site isn’t the worst thing for your brand. It’s kind of like Christmas morning, waking up and seeing your offer in bright colors on a website for the world to see.

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