While many of us have already weighed in with our thoughts as to the viability of the daily deals model for businesses, it seems that there are still some that are taking their time in having a closer look at the issues.
One such person, Joe Kukura, reporter for Allvoices, discusses the downside of daily deal sites like Groupon and LivingSocial but he also takes it one step further in providing some sound advice for merchants that do decide to run a promotion with these or any other daily deal provider.
First it’s important to understand that the daily deals model may be better suited for some businesses and best avoided by others. A study by Rice University earlier this year found that such promotions worked best for photographers, health and fitness services, tourism–related services, and doctors and dentists, while cleaning services, restaurants and bars, and retailers, oddly some of the very businesses that repeatedly run deals, have a much lower success rate.
One thing that businesses, as well as many writers seem to overlook is that daily deals were never intended to be profitable in terms of cash, at least not right away. When you consider that daily deals involve selling a service or product at a substantially reduced price and the deal provider’s fee will take a chunk from that, the chances of turning a profit from the actual deal could be pretty slim.
The main purpose of daily deals was and continues to be to help merchants gain new foot traffic, which in turn can be a priceless commodity if businesses are prepared to take advantage of the influx of new faces and work at turning them into long term customers.
Merchants need to also understand the importance of having a solid plan in place before entering into any deals promotion agreement and they need to have enough cash to handle any potential losses.
Once a merchant decides if a daily deal promotion and the possible expense is the right move for his business, there are a number of things he can do to ensure its success.
As Kukura points out when merchants do run a promotion, they will most likely never have access to the database of customers that signed up for the deal. If you’re one of those businesses, it may seem unfair, since they’re your customers and you paid for them but since the daily deals site doesn’t want to be cut out of the cash flow picture, they aren’t going to be giving you that list.
But merchants can create their own database by offering some sort of loyalty program and turning the voucher wielding masses into repeat customers. Incentives can include rewards cards, an additional discount good for a future visit, email signup for discounts and contests or surveys.
Kukura also says that merchants should avoid making deals available during peak business hours or during weekends and holidays when merchants would normally see a rush of traffic anyway.
One area where I tend to disagree with Kukura is when he says make the expiration dates on deals sooner rather than later and cash in on all those unredeemed vouchers.
I agree that there should be an expiration date on deals and that unredeemed vouches can be like found money, but at the same time it seems unethical to create a situation which essentially takes money that rightfully belongs to the consumer. And as many businesses have already found out that is one thing that will come back to bite you in the end.