A recent NPR story highlighted an example of how Daily Deals are not ideal for all small businesses.

In short an owner of a massage therapy center worked with both Living Social and Groupon.  900 vouchers, 4,000 massages gone, the owner’s take she received the value of a quarter of the normal massage price.  The incoming cash was nice, but didn’t cover her expenses, to make ends meet the owner borrowed money from banks, friends and family.

The same NPR story highlighted a (somewhat) positive Daily Deal experience.  The upfront cash from selling 16,000 Groupons helped the owner of a pizza restaurant with a remodel project.  The bad, Groupon patrons rated his store lower on Yelp than regular customers.

Be it Groupon, Living Social, Deal Chicken or a radio station half price outlet, Daily Deals aren’t a deal for everyone and are not appropriate for every small business or entrepreneur.

Consider the following:

•  What is the profit margin on the product/service you are offering the deal on?  Can you sell it for 25% of the asking price (which is the net result of most Daily Deal programs)

• If you are a restaurant and your staff relies on tips, will your Daily Deal be un-popular with staff?  If the $100 meal is now $50 and patrons tip based on the $50, this can hurt income of wait and support staff.

• Customer loyalty-people who buy daily deals generally fall into one of two categories.  First, those who are already a customer and really like your product and like a good deal.  Second, those who have no loyalty to you, but like a good deal.  Only a small portion of the second group will convert and become regular customers.  Research and provide incentives to make sure a percentage of the second group become regular customers.

• Daily Deals should be considered a piece of your marketing plan.  The exposure opportunities, getting your brand and name in front of new eyes and ears is important.  Daily Deals won’t likely result in a larger net profit.

At Encompass Marketing we believe Daily Deals and similar programs have their place.  Realizing their role in your overall marketing strategy is an important first step to having a successful experience with them.  For more information or to discuss how Daily Deals may or may not help you, feel free to email will@encompassmarketing.com or call (207) 755-9445 ext. 101.