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Five Questions to Ask Yourself Before Running a Daily Deal
- 21st July
- Morris Bryant 1
Whether the most innovative marketing channel since social media or a fast trend, there’s no ignoring daily deals and their potential for driving new business.
Daily deals certainly aren’t a viable channel for all businesses, however, and even when they are, they should be handled delicately. Below are the top five things you need to ask yourself before running a deal.
1. Does it suit your business?
There’s no point getting started in daily deals If you have a poor customer return rate already, or if you don’t have a process in place to track customer retention or sales trends: you might only burn a hole in your pocket or, worse yet; you won’t even know it.Online retailers are best suited to daily deals as product costs are fixed, margins are generally higher, customers are easily tracked and there’s a minimal labour cost to the merchant if sales increase.
2. Can you handle it?
Several Australian retailers got some fairly nasty TV coverage on Today Tonight earlier this month for refusing to honour coupons or make bookings for coupon customers – most likely because they couldn’t handle the business, or the loss in revenue. One of the businesses, a Greek restaurant in Melbourne, has clocked up dozens of negative reviews about the coupon experience on Urbanspoon and other review portals. The social media backlash is likely to be even greater – particularly as the average deal customer is, it’s fair to assume, fairly tech-savvy – so I won’t add their link here and further it.
Of course, this is where the potential lies also: happy customers will review and share great experiences too; just be confident that you can provide that before running a deal. Plan for extra staff, stock, and anything else you require to service a large influx of customers.
3. Do you need to?
If you can handle the new business and won’t lose money on the initial vouchers (which is unlikely for many running deals), then there’s no reason you shouldn’t give group buying a trial. Otherwise, you should first work out the cost of a customer through other online channels (pay per click, affiliate marketing, etc) and make an estimate as to what a repeat group buying customer will cost you. Can you be confident it’s going to be cheaper than your other marketing efforts? Research from Rice University in the US says that only 20% of your group buying customers will return to make a full price purchase. Ask one of the daily deals sites how many vouchers they expect to sell, multiply 20% of that figure with your average sale value and you should be able to estimate a very basic, initial return on your deal; as well as what it costs to get those customers.
4. Have you found the right partner?
There are literally dozens of daily deals sites in Australia right now, more launching all the time and many more perpetually ‘coming soon’. If you’re concerned about the increased business, there’s no need to over-extend yourself initially – even if the whole model is about numbers.
Dip your toes. Run a deal with one of the smaller websites: they’ll sell fewer vouchers, but you’ve minimised your risk and there’s no reason you can’t run another deal later with one of the major operators. You can also consider a niche site. Again, they’re likely to sell a lower number of vouchers but might offer you a greater conversion rate of voucher customer to repeat customer as they’ve already acquired a relevant audience and demand for your business (whereas the general deals sites create demand from non-specific audiences). There are niche sites for restaurants, wine, beauty products/services, fashion, mothers and many more.
5. How will you capture customers?
You need to capture your coupon customers and begin further dialogue to get the full benefit from a deal. It’s easy enough if you’re online – push your social media properties and allow customers to opt-in to your database. For offline businesses, hand out cards with a link to your site and social media profiles or even just collect business cards. In some instances you can even request the customer data from the voucher operator if you’ve negotiated it beforehand.
Besides sales the initial exposure and site traffic you’ll receive from running a daily deal is also substantial – particularly as many daily deal aggregate sites now amplify the reach of your deal and, sometimes, your link. So the cost of running a deal also comes with the bonus of free traffic – which is highly valuable if your site is optimised to convert leads. Put priority on your signup form and social media links so that, even if they don’t purchase a voucher, you can begin a dialogue and perhaps win a new customer.
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Fair points Morris. There are 3 questions business owners need to ask themselves: 1) Are you happy with ZERO profit margin? 2) How much business can you handle without being crushed to death? 3) How will you make a profit? (like you said, you need to try and lock in the customer).