Will Daily Deal Coupon Sites Help or Hurt your Business?

Posted on October 4, 2010
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Living SocialCoupons are nothing new for businesses in bringing in new customers. However, today  more and more consumers are looking to the internet and social media sites to grab the latest deals and specials. Daily deal coupon sites like Groupon and LivingSocial are taking advantage of the situation and making it work. Mostly due to a down economy and an ever growing population of belt tightening consumers, online coupon use is on the rise. According to businesswire.com Consumers Saved More Than $7.9 Million Using Online and Printable Coupons in March 2010. So is it a wise choice for you to get on board with the online coupon craze?

There are two main competitors in the online coupon world, Groupon and LivingSocial. Both are very similar in that they send out a daily email to subscribers offering discounted coupons for 50% or more off services, products and meals.

Groupon was started in November 2008 and already has over 17 million subscribers in over 29 countries and 230 markets. Recently named “the fastest-growing company ever,” by Forbes Magazine, there is no question that the demand is out there for coupon sites like Groupon. The way Groupon works is a daily email is sent out to the over 17 million subscribers with the daily deal. This deal will have a “tipping point” where a certain number of coupons must be purchased in order for anyone to take advantage of the deal, otherwise it just goes away. This “tipping point” is set by Groupon and the business giving out the deal.  Groupon typically will split the profits from coupon sales 50/50 with the business.

LivingSocial on the other hand is operates a little differently.  Originally launched in 2007, and beginning their deal system in 2008 LivingSocial usually keeps only 30% of profits as payment for the service. LivingSocial will send out daily emails giving subscribers 24 hours to participate. When they do they have the option to share the deal with their friends using a custom link. If a subscriber can get three of their friends to take advantage of the deal the subscriber will get the deal for free. This system helps to motivate the consumer to participate and spread the word via social networks and email. This concept is a marketers dream as it is very hard to get consumers to share your products and services with their circle of friends.

It may seem like a dream come true for many businesses especially those who have seasonal lows they need to fill. But there is a such thing as too much of a good thing. If a company is not prepared for the influx of new customers they may not have the resources to take care of the rush. It can not only be overwhelming but can take a toll on the bottom line. It is important that a company who is considering using a coupon service look at the cost of the overall campaign. They may even want to think about setting limits to their coupons so they only sell what they can handle.  Groupon chief executive Andrew Masonsaid that Groupon allows merchants to set caps on the number of coupons sold, though Mason said businesses often prefer not to limit sales (source).  A business should consider the money lost on a coupon deal and make sure their base cost are covered but also they need to make sure that service and quality do not suffer because of a sudden increase in customers. You want to make sure you impress the new customers so they become repeat customers.

So what can restaurants and other businesses do to benefit even more from daily deal sites like Groupon and LivingSocial? To start you need to understand that marketing efforts do not end at the sale of a coupon. You have to be sure to sell your restaurant and the food by offering awesome service and great food so customers are likely to have a good experience and come back. Many restaurants are sending managers and owners out to the tables to check on coupon holders and make sure their experience was good and invite them to come back. A simple gesture like that is bound to get you some repeat business. Restaurants and participating businesses should also make an effort to get email address of coupon users and follow up for comments on their experience or invite them to sign up for Facebook or twitter since these users are more likely to share with friends through social means. These types of customers can turn out to be some of the best and most vocal you will serve. But keep in mind they can be vocal in a negative way as well that is why follow up is key. It is also important to note that companies should not take advantage of daily coupon advertising too often. Make sure to use discounting in moderation. When you discount too much, customers perceive your product as a lower value. If you offer too many discounts, they will no longer be willing to pay full price (source).

As with all other forms of marketing it is all about how to use it and what you do with the customers once you have them. Coupon sites like Groupon and LivingSocial will take you so far but you need to be ready for the resulting traffic. Plan ahead, make sure you have the resources, restrict your coupon if needed and follow up, follow up, follow up. Make those new customers raving fans and returning customers and you will have a recipe for success!

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FSW Staff FSW Staff (139 Posts)

The writing team at FoodServiceWarehouse is dedicated to bringing you the freshest tips, tricks and trends for your professional or home kitchen.

9 Replies to "Will Daily Deal Coupon Sites Help or Hurt your Business?"

  • Tweets that mention Will Daily Deal Coupon Sites Help or Hurt your Business? | The FSW Blog Network -- Topsy.com
    October 4, 2010 (11:08 am)

    […] This post was mentioned on Twitter by Kelly Noble, Chase LeBlanc and Foodservicewarehouse, Jon. Jon said: Will Daily Deal Coupon Sites Help or Hurt your Business? | The FSW …: To start you need to understand that marke… http://bit.ly/ayFrrw […]

  • Nora
    October 4, 2010 (7:19 pm)

    I think it’s easiest to see the benefits for the consumer when it comes to Groupon, LivingSocial, and other group-buying or daily deal sites. Consumers can grab huge discounts on everyday products and services they need by taking advantage of these sites.

    A great site for consumers is http://www.dailydealpool.com. They’ll email you daily with a list of all the best deals and sales in your area, ensuring you don’t miss out on something great in your area.

  • Elaine H.
    October 6, 2010 (8:23 am)

    From Facebook: Groupon has helped my business.

    • Admin
      October 6, 2010 (8:24 am)

      Thanks Elaine. What advice would you give businesses that are thinking about using a social coupon site?

  • Elaine H.
    October 6, 2010 (8:24 am)

    From Facebook: Before you commit watch the responses to similar offers in your city so you will have an idea of the type of response that you may get. (number sold) Think about the time frame that your voucher will be valid. I opted for 3 months because my deal is very specific and not available on my regular menu. Make sure you that if you set specific guidelines that you do not make exceptions. ie only valid during certain hours or lead time required to fulfill an order. I know that we want happy customers however those who try to take advantage of your offer will probably not be returning customers any way.

  • Justin D.
    October 6, 2010 (8:29 am)

    From Facebook: Hurt! Don’t devalue your products unless your McDonalds! Then who cares :-)

  • joan
    October 26, 2010 (7:52 am)

    Thanks for the wonderful insights you have posted about coupon sites. Also check out http://www.GroupBuyUnited.com wherein you can find GroupOn, LivingSocial, and other related sites!

  • Business Owner Tips: Daily Deal Website Solutions | Your Online Success Network
    June 14, 2011 (12:06 pm)

    […] Will Daily Deal Coupon Sites Help or Hurt your Business? (foodservicewarehouse.com) […]

  • Daily Deals in Denver
    February 15, 2013 (11:58 am)

    Daily deal marketing is a simple idea that can be used to accomplish complex goals. A business that is featured as a merchant on a popular daily deals website can count on having a lot of eyes on their deal. They key is strategy. What do you want to accomplish with your daily deal? This is a simple guide to different ways to use daily deal marketing as a merchant.

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