Daily deal companies such as Amazon Local, Groupon and Living Social are popular and wide spread. Businesses that are considering offering daily deals need to carefully evaluate the potential benefits and how a daily deal offer can impact their business.
Drive New Business
Daily deals can increase your visibility in the marketplace and bring in substantial new business. Research from Foresee Daily Deal Commentary 2012 states that about three in ten people (29%) who redeemed a daily deal had never done business with that company before. In fact, 12% had never even heard of the company prior to their purchase.
One of my clients, a mold remediation company, found that their Amazon Local daily deal offer served as a great lead generator. They offered a discounted rate for a mold inspection service and a substantial credit toward mold remediation services, if needed. Within the first month of the offer, nearly 50 people had purchased the inspection deal from Amazon Local and many had contacted the mold remediation company to redeem it. The opportunity for the business to sell mold remediation services, if needed, was where the company could make its profit.
Repeat business can be achieved through deals too. More than 70% of deals are sold to existing customers (Foresee Daily Deal Commentary 2012), since they are more likely to be loyal to businesses and brands they already know. Existing customers may speak highly of your products/services and refer the daily deal to others.
Turn Deal Seekers into Ongoing Business
Although there are many positives to offering daily deals, some may argue that small businesses should not get tangled up in such a scene. One of the main drawbacks is that a deal will not necessarily help your business turn a quick profit. Many deal agreements require businesses to split the income 50/50. Many vendors are sacrificing profits (or even taking a loss) on the redeemed deals for consumers who may never set foot in their store again.
For instance, salons that offer discounts on low margin services such as manicures won't make any profit on the deal itself. But if the goal is to bring in new prospects and the execution includes a plan for up selling additional services or offering incentives that entice people to come back, then the daily deal is a smart marketing tactic.
Customer dissatisfaction can occur when a daily deal creates a sudden rush in demand that businesses are not capable of serving. It's critical for businesses to achieve outstanding first-time customer satisfaction in order gain repeat customers and grow their bottom line.
Business should carefully consider whether or not the daily deal business model can be productive and profitable long term.
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