In the interest of proving that we’re genuinely interested in providing social media education even if it doesn’t involve Gremln, I thought I’d spend some time addressing something that has absolutely swarmed the social media space over the last couple of years, the phenomenon of The Daily Deal. Led with considerable force by Groupon, the daily deal business model is now being used by literally hundreds of companies, including LivingSocial, Google, The New York Times, and Amazon. And why not? It’s a relatively cheap model to implement, the deal sites’ profit margins are high, and consumers love it. But is the daily discount a boon or a bane for your business?
We all know the basic idea behind daily deal sites: A company leverages a deal site’s popularity and reach to offer a coupon for a huge discount on its products or services for one day, and the deal site takes a percentage of the revenue made on the purchase of that coupon.
The group discount wagon may be ripe for the jumping, if it works with your business model. In an endeavor to help you decide if The Daily Deal is right for you, here are some pros and cons to consider:
Pros: Daily deal sites can expose a very substantial number of new potential customers to your product. Groupon alone has over fifty million email addresses worldwide, a good portion of which belongs to people residing in and around a metropolitan area near you. Daily deal subscribers unfamiliar with or uncertain about your product have few excuses not to try it out when they see a heavy discount. If your company’s motto is “If you try us, you’ll like us,” daily deals are a chance to reinforce (or, worst case scenario, test) that idea. Once your new customers come through the door, you’ll have the chance to try to get them back for more. Plus, most daily deal sites allow you to set a minimum number of respondents before the deal is valid, ensuring that you’re getting at least some sort of ROI before committing yourself to the discount offer.
Cons: Unless you spend time setting up a data-gathering system for daily deal purchasers on your end, the wide exposure might not do you a whole lot of good. Deal sites use consumers’ email addresses with the promise that they won’t sell or trade them to any businesses, and some deal sites, like Groupon, don’t even require a full name to be associated with the purchase if it’s bought as a gift for a friend. There’s virtually no chance of beefing up your eblast list without figuring out a way to get the purchasers to give you their information when they redeem their coupons. But when you think about it, contact information for deal purchasers might not be too helpful anyway, since everyone on the list bought your product at a hefty discount. Would they come back at full price, knowing you’ve done major discounts in the past and are likely to try another one in the future? Or will they wait to see if/when you launch the next 50% off campaign? You truly do have to rely on your product to be satisfactory enough to encourage the customers to come back on their own.
Offering a discount through a daily deal site is not a way to make money. In fact, in most cases, it’s a way to lose money, at least in the short-term. It’s a business model that focuses on buyer benefits, not seller benefits. But if you can utilize daily deals to successfully spread word about your product and grow your customer base, and if you’re confident that your “if you try us, you’ll stick with us” maxim is tried and true, then a daily deal might be a good option for you. Just be sure to weigh the pros and cons before making a decision one way or the other.
But tell me what you think! Have daily deals worked for you? Has a Groupon ever turned you into a brand-loyal customer? Share your comments below!