The latest trend sweeping the nation are daily deal sites such as Groupon, Dealfind and Living Social. The premise of these websites is to offer a daily “deal” at a heavily discounted price to a rabid fan base of subscribers for a price to local businesses. In essence, the site allows consumers to purchase “coupons” that will enable them to receive heavily discounted prices and has become incredibly popular as of late and helped to drive a lot of traffic to local businesses. However, there are a few major considerations to take into account before offering up your services on one of these sites.
Know your costs.
Simply offering a deal without knowing exactly how much each coupon is going to cost you can hurt you BIG TIME. For example, a local detailer in my city offered up a coupon for a full detail + engine shampoo that they normally charge $184 for a discounted price of $35. 399 of the coupon were sold (399 x $35 = $13965) minus the cut the website takes (usually 50%) which would leave the detailer with $6982.50 or $17.50 per job. At my shop a proper full detail starts at about 4 hours average time per car. At 4 hours the shop would essentially be getting paid approximately $4.38 an hour assuming they are doing what the “deal” actually promised. Not exactly what I would consider much of a “deal” for that business owner considering minimum wage here is $10.25 + employment costs + overhead. KNOW YOUR COSTS before you negotiate any deal you might choose to offer.
Examine the fine print.
There is a lot more to offering a deal on one of these sites than simply the deal itself. You need to carefully consider what percentage of the sales go to the website as a commission first and foremost (Groupon is usually 50% for example). The term within which the deal can be used is equally important. You certainly wouldn’t want to burden yourself with a load of heavily discounted deals during your busiest season would you? Lastly, how and when you are paid should be understood when signing the deal. Sites will usually spread payment for all the deals sold over several payments up to 2 months from the time of the initial sale. Make sure you understand the ins and outs of all the terms of the deal BEFORE you commit to doing anything.
Consider the consequences.
Remember the good old days when all the automakers used to offer 0% financing on cars? Customers got used to those offers and it was extremely difficult for the automakers to break that expectation once it became obvious it was an unsustainable way of doing business. The same may be true if you use a discount or coupon to get people in the door. If the deal is too good, they may expect it all the time because they expect full value for the lower price. Selling too many of these deals can also strain your ability to handle the workload while still maintaining the level of quality and customer service you pride yourself on offering. Lastly, loyal and long-term customers may be offended that you now offer massive discounts that they have not been offered in the past. Take a look at both the potential short and long-term gains and losses before you decide whether this form of marketing is a good idea. Also take a look at how that strategy works with your long-term strategies.
These deal sites have been getting a lot of press but that doesn’t mean it’s right for your business. If you are considering incorporating one of these deals into your marketing strategy, it may be helpful to talk to other businesses that have used it to get insights into what worked and what didn’t.
Author: Scott Perkin
Owner: Scotty’s Shine Shop in London, Ontario.