Daily deal sites are gaining more and more traction with savvy customers looking for the most bang for their buck. With millions of consumers using sites like Groupon and Living Social, many businesses are taking the plunge into the deal-a-day world. While there are many advantages to this marketing tactic, a poorly planned discount can have adverse effects on your business. Take a look at the inherent benefits and disadvantages using a daily deal site can have for your business and determine whether or not this strategy works for your individual aims.
If used correctly, partnering with a daily deal site could mean huge profits for your company, as the advantages can be manipulated to further a company’s inventory movement, customer base, and demographic utilization.
If you have slow-moving items or unutilized services, offering them at a discounted price on daily deal sites can see a surge in profits. If your aim is to move product in this way, offer your product on daily deal sites only occasionally for specific reasons. This is especially true for a low-cost or fixed cost expenditure business, as you’ll gain income without putting out more money.
Expanded Customer Base
Groupon enables companies to expand their customer base and direct traffic to their business websites. Take Shari’s Berries, for example. This fruit and dessert company offers their product on Groupon with savings of up to 50 percent—an enticing bargain. About 80 percent of the daily deal clientele are first-time customers, meaning the company will see a higher amount of traffic on berries.com as these new consumers seek to cash in their deal purchases.
By and large, the daily deal demographics include younger, smarter purchasers. Sixty-eight percent of Groupon users are between the ages of 18 and 34, largely female, and almost 80 percent have a bachelor’s degree. Understanding the faces and wants behind the Groupon interface (and other similar daily deal sites) means better chances of capturing your target audience. If you are seeking to get your product and company name into the hands and minds of younger consumers, then a daily deal site could be the answer.
Bolstering Email Campaigns
Sites like these can help your company bolster email campaign efforts. CanvasPop was able to further their specified business aims through Groupon sales. The photo-to-canvas conversion company chose to capitalize on email captures during their time spent on the deal site. In order to redeem the voucher, customers were required to input their email, an ingenious way to quickly grab consumer information. These recorded email addresses could later be used for designated email campaigns to further encourage customer retention.
Choosing to offer your product on a daily deal site isn’t without its risks. Using a website like Groupon or Living Social can have negative consequences on your business aims.
If you do choose to offer your product at a discount on one of these sites, you’ll need to be sparing with your promotional efforts and the frequency at which you offer these lowered prices. Price promotions can inadvertently hurt your brand name and identity by associating your products and services with cheap offerings. It can also make these customers price sensitive, leaving them less inclined to pay full price for your other products.
Not Necessarily Profitable
Depending on the site you use, you’ll see a portion of your profits disappear. Groupon keeps 50 percent of the earnings from each deal, meaning you will have to gross margins in excess of 50 percent to make the promotion lucrative.
Low Conversion Rates
Groupon isn’t known for its conversion rates, and many customers that try your product might not be so inclined to return, whether because it was a one-time item purchase they don’t need again, or based on the fact that they refuse to buy your product full price without a coupon. Only an estimated 19 percent of voucher redeemers become repeat visitors.
Devaluing Existing Loyalty
If you are a small business and have built your business upon a foundation of personal relationships with loyal customers, then a Groupon could do you a disservice. When offering a discounted rate to new consumers, you’re devaluing the loyalty that has made you successful in the past.