The Impact of Daily Deal Technology: 3 Businesses Weigh in on the Benefits (and perils)

 In Financing

Perhaps you’re one of many consumers whose inbox fills with a ‘daily deal’ email or three each morning? If you’re also a merchant, you might be wondering whether participating in a daily deal site would be beneficial for your bottom line. Sure, you can reach customers beyond your regulars and locals, but how can you figure out if a daily deal would not only be a fit, but also be profitable for your business?

We sat down with three business leaders who share why they began incorporating daily deal sites into their marketing regiment, what they’ve learned, and advice they’d give any merchant considering daily deals:

  • Erica Harriss – Founder, Saving Grace Beauty, an online retailer that thrives on introducing people to hair products that make their “things I can’t live without” list.
  • Jeremy Levi – Director of Marketing, MARS Med Supply, a manufacturer and seller of high-quality health, beauty, and medical supplies.
  • Mitch Goldstone – President and CEO, ScanMyPhotos.com, an e-commerce photo digitization service which has scanned 300 million photos.

 

What attracted you to doing a daily deal offer?

Erica: The daily deal offer was attractive because it was essentially a risk-free way to get our company name and products in front of millions of people. These visitors are coming to these sites with the intention of buying something. Our company doesn’t pay anything for this marketing, unless a product sells.

Jeremy: For us it’s about getting our brand and product in front of as large an audience as possible. We are constantly bringing on new, innovative products. When we want to jump-start sales and get real customer feedback, daily deal sites are a great way to move large volume quickly. We then gauge what moves well and what customers think about the product so we can tweak it and improve it.

Mitch: I liked the vast outreach, economics and credibility of being featured nationally by Groupon for new customers who are predominantly female and match our demographic customer base.

 

What did you learn from your first deal that you used to make your next deal better?

Erica: Your deal photos tell a story, and you need this story to be one that consumers want to be a part of—to create excitement. Don’t just simply show a photo of your product. If applicable, show how this product can make a purchaser’s life better. You want them stalking their mailbox every day waiting for your product to arrive to help solve their problems.

Jeremy: What you think is a great product at a great deal doesn’t necessarily translate into great sales. You need to put out a lot of deals and then you’ll start hitting some home runs. Individual deals are often hit or miss.

Mitch: The first deal was a bit confusing and I learned to simplify the offer by featuring only our most popular photo scanning service. The deal must be self-liquidating (profitable) and have a game-changing crazy low price. Return S/H must be included. I realized that reviews matter most, and our company scored 92% favorable reviews on the Groupon platform.

 

How much return business do you get from your daily deal customers?

Erica: We have a product which is a consumable, so we see high rates of repeat business from our daily deal customers. Most of our first time customers find us on a deal site (about 60%). Sometimes they repurchase through a deal site, and other times they come directly to our site. We do notice that these repeat deal customers tend to order multiple products when a product they have already tried (and presumably liked) hits a deal site again.

Jeremy: For us it’s not so much about the return customer as it is about the brand awareness. That being said, when you provide a quality product, it tends to stick out in consumers’ minds—especially today, where so many products online are cheap knockoffs of quality products.

Mitch: Nearly 60% of our customers from Groupon return. Our analytical tracking tools identify that the majority become our most loyal fans and best referral partners.

 

What advice would you give any service-related business curious about whether a daily deal site is right for them?

Erika: In the service industry, time is your most valuable resource. Make sure you aren’t under-selling yourself. The deal site does take a percentage of the sale, as well as expecting you to offer your service at a discount. As a company, we are still able to provide standout service while participating in deal sites. Nearly always, we’ve been able to put a handwritten “thanks” or other quick personal touch on invoices.

Jeremy: Make sure you’re set up to handle the logistics of running the deal. Are you really ready to ship and handle the customer service of selling 1,000 pieces of your product in three days when you normally only sell 20-30? There are some Groupon sellers who pretty much live at the office from November through Christmas, and these are veteran sellers.

Mitch: Every merchant must embrace, celebrate, and welcome daily deal customers. Dazzle them. Establish a concierge customer support team to help all and make sure every customer becomes a fan. Don’t lose money and try to make it up on volume. Make sure to over perform to win the customers back.

 

What questions should businesses ask of the daily deal sites they’re considering to ensure they’re getting the most exposure and “bang” for their advertising buck?

Erica: Here’s my list of questions every merchant should ask:

-What is the reach of the deal site? Meaning, how many emails go out each day to people.

-How can you have preferred placement on the deal site front page?

-What is the expectation for percentage off of your product or service?

-How much does the deal site collect?

-What are the payment terms? We’ve had everything from 48 hours to 90 days.

-What is the return policy? Does the site’s policy trump your company policy?

Jeremy: How will you be promoting my deal? Will you be selling a similar product at the same time and if so at what price? Getting listed on the deal sites is only half the battle; you still need to make sure you are getting top exposure from them via emails, alerts and top placement.

Mitch: Have the account manager help with structuring the deal. They know best from experience what works. Ask for help and recommendations on designing a game-changing, smart deal that’s a “win-win” for all.

 

What do these deal tech companies NOT tell you when you’re approached to do an offer on their site?

Erica: They don’t tell you the formula for getting preferential placement on the deal site page. Always ask.

As well, do your due diligence when you are considering working with a site. Are they reputable? We made a mistake of working with a deal site once that we had to send several emails to finally get paid for the deal. We misjudged the fact that they only seemed reputable. While we did get paid, our company didn’t want to be attached to those type of business practices, so we’ve discontinued our relationship.

Jeremy: How quickly you get paid. If you’re just starting out you may not realize that many of the big sites pay you net 60 or 90 days, and you’ll need cash flow to survive that. Speak to those with experience and ensure you know the terms of payment and everything else these companies put into the contract, as large companies know how to protect themselves in the event something goes wrong.

Mitch: They are up front with merchants and my years of experience with Groupon demonstrates they are working with you. Everything you need to know is available and often on their FAQ pages.

 

Strategic Funding provides needed operating funds to small businesses. Strategic Funding has helped business in hundreds of industries.  Industries served include: restaurants, personal services, construction, medical, manufacturing, agriculture, retail stores, automotive, and food stores.

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