So, I was tasked with writing a submission for WJ’s Blog. I had never written a blog before, where to start? I went to check my email as a great mindless distraction and was inundated with the flash of new unread emails in my inbox. No, I was not that popular that day but I do subscribe to a ridiculous number of deal sites. Groupon, Livingsocial, Teambuy, Sweetjack, Yipit, Gilt…you name it, I’m a member! Anybody who knows me can attest to my love of deals. A deal will convert any moment of weak hesitation to one of urgency. I must buy that deal before it is no longer available or sold out! It’s quite ridiculous if you consider the number of deals bought over the last couple of years and the number of deals forgotten or expired. I know I can still use the purchase value of the deal after the offer has expired but who really does that? Like the weird cat lady down the street, I hoard deals for a rainy day; hide them in the deep recesses of my inbox until they are forgotten.
The prevalence of these deal sites is relatively new. A few years ago, I saw one of the founders of a deal sites appear on Dragon’s Den. Two young guys with a vision pitched the idea to the Dragons who immediately saw the value in their idea. Within a few short months, new deal sites began popping up everywhere. Copycat sites began appearing and soon after, disappearing after hawking their deals to businesses and customers alike. I began to wonder how effective deals were in promoting a business? As a customer, I was a sucker for the deals but as a marketer, I was much more cynical. The prevalence of deals quickly became overwhelming with multiple sites offering the same deal from the same supplier or retailer. Big sites such as Groupon and Livingsocial were buying out their small competitors and essentially, buying their membership base.
Deals are released daily, some even hourly. Hundreds of subscribers purchase the deal and these small business owners are suddenly flooded with customers. This is a pivotal moment for a business owner. The moment where the first impression may be the only impression. Deal buyers are often fickle, following the deals to another new restaurant or retailer. They are demanding, seeking out true value, service, and quality all with a scrutinizing eye. Studies have shown that restaurants are frequently rated 10% lower after the release of a deal than before. The new deal seekers change the way the business operates. Business owners are sometimes unprepared for the sudden influx of business, leaving their new customers with the wrong impression of what the “normal” service or product quality is at the business. Regular customers are unable to secure reservations or are neglected by regular staff, left waiting for their food or for customer service. To top it off, the deals are at times a losing proposition for the business. With some deal sites taking up to 50% of the already discounted rate, deals are putting some businesses out of business. Would these people come back again after buying a deal? Some studies note just 35% of deal users spent beyond the deal’s face value, and only 20% returned to purchase again at full price. Did these deals attract the right kind of customer? Did they produce a sustainable lift in business over time? One had to ask, “Do deals help or hurt a business?”
This all sounds like a bad news story for businesses participating in the deals. So why participate in a deal? Sites such as Groupon have an enormous database of members that will be introduced to your product or business. These members have already signed up to receive the offers; they are already a captive audience. Timing of the launch of the deal is critical. Like any seasonal period, you have to get your team prepared for the sudden onslaught of business. You’re not pedaling the latest iPhone or cabbage patch dolls of yester year, but it can sure feel that way to you. Deals need to have a limited time availability and must dictate the start time to ensure you have all your eggs in a row before the deals come rolling in. This is the time to make an impression and convert a trial customer to a loyal customer. The structure and quantity of deals available is important too. Limited availability not only drives up the sense of urgency and impression of exclusivity, but it also helps to control the number of deals that will be redeemed. You’ve already gained the exposure through Groupon’s database, now you just need to win over that customer.
For this customer, I’ve tried to put aside my online shopping habit and am more critical when buying a deal. I always check to see if I can get a reservation into the restaurant or can book an appointment before buying the deal and only buy when I know I can use the deal in the near future. Or at least that’s what I tell myself!