Earlier this morning, we read an article on The Wall regarding daily deal site Groupon and the fact that their shares have fallen in price. Groupon reported second quarter revenues of $568.3m. Wall Street had expected $573m, according to Thomson Reuters – and this, along with a number of other contributing financial factors, is perhaps the reason that the stock is down by more than 70% from the IPO price.

Groupon is one of the many daily deals websites that businesses can now use to market their products and services.

As a marketing agency, our clients often ask us if we think that they should run offers on these daily deal sites, and having read the Groupon article this morning, we wanted to share our opinion on businesses using daily deals sites as part of their overall marketing activity.

As we said, this is our opinion – in actual fact, some of us here at Love & Humphries do use daily deals sites quite regularly, BUT our focus here isn’t on the value to customers of these sites, it’s on the value to businesses wishing to use these sites as a marketing tool.

So – our question is: Daily Deal Sites, are they good for your business and should they be part of your marketing activity? Here are some of our key points:

• MONEY: Some of these daily deals sites take up to 50% of all voucher sales. If you’re already offering their customers your products or services at a huge discount (which you’ll probably need to, to get the sales,) this is a lot of revenue that you’re potentially giving away. The question you should ask yourself is; Can I make reasonable amounts of money on this AFTER all my costs and AFTER the site takes their share? You should also assess the other benefits, for example, perhaps if you’re a restaurant you might only make the voucher valid on nights that are usually very quiet, as you probably wouldn’t be getting the revenue otherwise, so it’s probably worth the cost to fill empty tables.
• RELATIONSHIPS: When a customer buys something from your shop, eats in your cafe, or gets a manicure at your salon, you have a direct relationship with them. They have come to you because they value your products or services. Can the same still happen when they have come to you via a daily deals voucher? Or does that customer have more of a relationship with the daily deal site? We wonder if by selling your products or services through a site like this, it’s more difficult to shout about what makes you unique, position your brand and properly target customers to build relationships. Can daily deal sites help you build relationships more than say, social media, e-mail marketing or other channels?
• VALUE: One of our team members here once purchased a voucher to get a gel manicure. She loved the treatment and thought the salon was excellent. She thought that the next special occasion she had, she’d return to the salon and pay full price. A few months later, the same daily deal, for the same salon came up – so she bought it again. She mentioned to the beauty therapist this was her second purchase. The therapist admitted that they found that because the gel manicure offer is always on one daily deal site or another, not just for that salon but for many, that people weren’t willing to pay full price for the treatment.  So here’s the thing – can daily deals be a bit of a dangerous circle? If you do it once, do you need to keep doing it? We wonder if it can damage the value of your products and services, perhaps people assume if they can get it so cheap all the time, that they are actually being charged overprice in the first place.
• REPEAT BUSINESS: Now it’s difficult to deny that because of the volume of audience you can get with these daily deal sites, that it’s not a good thing for a new business to try. But, how can you guarantee you’re getting repeat business? A recent survey said that 82% of Groupon Business users were unsatisfied with customer repeat business. However, Scottish daily deal brand itison say that 88% of their members have returned to places as a full paying customer. So it can be done, but perhaps it depends on your deal, your brand, and which site you use. It’s all very well getting a burst of revenue, but what next? We reckon, if you’re going to do these things, you need to get the customer when they are in, and claim them as your own by giving them a follow up deal – say half price off their next visit. This means not only that you’ve started to have a relationship directly with the customer, but that you’re encouraging repeat business.
• TARGETING: Most sites have a few deals a day, most of them are regionalised so you get the deals that are closest to you geographically. Here’s the problem though, the sites might be able to tell you that their customers like beauty treats, or horse riding, but they are sending that same email to thousands of other customers who might not. So, is there a great deal of wastage here? Yes, you might only be paying for those who purchase and not based on how many members of the site there are, but still, could you be using other more targeted marketing channels? Now, if these sites let their members pick which deals they received in different categories, we believe that would make it more effective and more targeted for businesses.
• REPUTATION: There have been some daily deal disasters in the past. People purchasing deals, never receiving products, the site claiming to have no record and not claiming responsibility. Also, often the sites sell too many vouchers, that the businesses simply cannot fulfill. Now, these issues might be the fault of the daily deal site, but if you have a problem, you risk the reputation of your own business too. It’s something to consider, make sure you’re deal is realistic, that the price is fair, that you CAN fulfill it, and that the site is trusted – as otherwise your reputation is at risk.

So to conclude, using daily deals to promote your business can work for you. It’s all about careful planning, choosing the right deal and choosing the right site. Personally, we think it’s better if you’re already an established brand who does these deals occassionally as a ‘treat’ to customers, but if you’re a new company and you do it too soon and too often, there’s a risk you won’t get repeat business and it might have cost you more than it’s worth.

There’s no reason you can’t use daily deals as part of you’re overall marketing activity, but get your marketing team or marketing agency to have a think about what deal you use and how you maximise the opportunity so that you’re not getting one off customers. So for example, give them in-house only offers after they use their voucher, or perhaps a loyalty card, get their feedback while they are there, request that they sign up for your newsletter. So yes, use daily deals as part of your marketing activity, as a platform to get new customers and reward existing customers, BUT make sure you do the work to keep customers coming back, and don’t do so many offers that you affect the value of your products and services.

We hope that you found this helpful and though provoking. We’d love to know if you’re a business who has used daily deals sites, or what your opinion is as a user of these sites. Comments, feedback and questions are always welcome on the Love & Humphries blog!