Remember when you couldn't get enough of "group buying"? As a consumer, you were saving HUGE amounts of money by taking advantage of daily deals from
I'll admit—I bought them and in very select instances still do.
But as an advisor to businesses, I cannot think of too many instances where I suggest to the owners that they use daily deals to gain customers. Are there times when they make sense? Sure. However, more often than not, you, the business owner, have not been well advised on the downside to offering daily deals. If you're considering signing up with a daily deal site, consider these items when you are making your decision:
1. Understand what's at stake. Say you offer $100 worth of product or services for $50. After the daily deal company's take, you're most likely going to "net" $25. Can your business afford that deep of a discount? You can usually negotiate a lower cut for them, but not always, and I guarantee that they will not offer that information to you willingly.
2. You must, must, must view this transaction as marketing dollars. If you think this is going to be a brilliant sales-generating move, you're going to be disappointed. Running a daily deal should be viewed as a way to gain exposure to your business—very similar to running an ad in the paper.
3. Realize that, chances are, you're NOT going to win new, loyal customers. People who will buy your daily deal will largely fall into two categories. Those who are already your customers and want to get what they're already buying from you cheap, and those who will come buy from you the one time. If you're lucky, you may win a few new regulars, but most likely not.
4. It is much easier to offer a service as a daily deal than a product. The only thing you're putting out there are man hours. If it's a product, refer back to point #1 and ask yourself—can you really afford to let that $100 widget go for $25 and not be in the red? If the answer is no, then don't do it.
5. If you are a service provider or food and beverage outlet, you could be unpopular with your staff. If your staff relies heavily on tips that are based on the final total, they're not going to be pleased being tipped on a $50 bill that really should be $100. If the person redeeming the daily deal is a regular, your staff has a better chance at not getting stiffed than if the user is the one-time guest. I've even heard of waitstaff who've gone to the extreme measure of noting on the bills what the amount to be tipped on should be. I'm not saying it's right or wrong, but if that's happening, they're losing money. And if your staff is losing money, you now have an entirely different problem on your hands.
6. Know the fine details. When will you be paid? If you're not getting your money within 30 days, you're providing the services or selling the goods upfront with no payment. You still have to pay your staff, your bills, etc. Can you put a cap on the number of deals sold? I've seen a few instances where there was no cap, and it was nothing short of catastrophic.
Don't get me wrong. I'm not entirely anti-daily deals. In some instances, they are very good for businesses just starting out or needing an influx of customers. Just be very sure you know what is at stake, and read the fine print.
Have you used a daily deal for your business? What were your results?
