Will Daily Deal Coupon Sites Help or Hurt your Business?
Posted on October 4, 2010
Coupons 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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