The growing trend of daily deals is leaving some business owners wondering when the profits are coming.
The daily-deals trend has generated more interest from bigger companies. Google and Amazon are now offering local deals.
So why is there interest from the bigger companies, and how do businesses offer profit from this trend?
How Local Businesses Can Turn Daily Deal Offers Into Long-term Returns?
The Structure Of A Daily-deal For Local Business:
This trend began to get real attention with Groupon in around 2009-2010.
The concept is that local companies can generate more exposure and business by offering huge discounts on their products and services.
These discounts are only offered for a very short period, like 24 hours or a few days, and then the deal is gone.
This limited-time offering helps create urgency for customers to purchase the deal.
If the deal is good enough (many times, it’s a half-off deal), customers and potential customers share it with their friends and family, and viola, you have a somewhat viral offer to bring in even more local business.
This initial deal offer is often a loss leader, meaning the business offering the daily deal is not really making a lot of money on the single deal being offered.
The offers and coupons have to be obvious deals so customers don’t have to do much if any, research to determine if the deal is a good one.
Most consumers know a good deal when they see one, which often means halving the regular price of a service or product.
The key is to make the deal offered obvious.
The coupon has to be at an attractive price level for people to know it’s a good deal.
The business offering the coupon must also share some of the coupon sales with the promotional company (Groupon, LivingSocial, etc.).
Overall, the deal seems to be a win-win for everyone involved.
The customer gets a great deal, the local business has the potential to generate more customers, and the promotional company is compensated for its performance in getting exposure to the coupon or daily deals.
When a local business does this type of promotion, it expects to make up for the cost through two potential outcomes:
1) The new customers attracted by the deal are either going to spend more than the coupon on their initial visit or
2) The customer will like the service and return at a later time to purchase more of the same.
However, there is another much less profitable outcome: the customer/client uses only the value of the coupon deal and never returns.
Where Can Daily Deals Go Wrong For Local Businesses?
CNBC’s article “Beyond Groupon: Daily Deals Evolve, New Competitors Emerge” describes some of the limitations and new approaches to these types of reward offerings.
The article states that around 35% of the coupon customers spent more than the deal value, and around 20% of the customers returned for additional purchases.
Making the assumption that a coupon customer will purchase more either on the initial visit or on a return visit puts pressure on the business to provide that potential new customer with a great experience.
If the customer’s experience when utilizing the daily-deals coupon is average, then the additional revenue expected from the return visit may not occur anytime soon, if ever.
So, what is the solution to making these types of deals work for local businesses?
Daily Deal Long-term Profits: Three Steps Local Businesses Can Take
1) Offer Massive Value:
When in business, and this goes for any business in any market, you have to offer value to your potential customers and clients.
This value can be achieved through providing over-the-top customer service, a unique atmosphere, pricing discounts, or some other type of client-perceived value that is important to your particular customer base.
2) Know Your Customer’s Value To Your Business:
Another important item to have on your to-do list is to know the lifetime value of your customers.
How much (volume of purchase) does your average client buy?
How often (frequency) does your average client buy from you? And how long over time (duration) does your average client stick around and continue to buy from your company?
Knowing these questions can give you some amazing insights into your business and your clients.
When you have the answers to these questions, they can develop a realistic expectation of what the daily-deal coupon results should be for your business.
Knowing your average client numbers also has another benefit: it can reveal additional opportunities to affect your business’s revenue positively.
3) Capture Your Coupon User’s Information:
This step can bring ongoing, long-term profits in many different ways. This process is huge in making a coupon deal work for your business.
It simply involves setting up a lead capture system so you can follow up with your patrons using regular mail, email, or text message marketing.
The benefit of setting up a lead capture system as part of your coupon offer presentation is that you now have better control over the distribution of your future offers.
Instead of offering a one-day-deal coupon and hoping people will return to your establishment, you can incentivize them to return and spend more.
You’ll be able to send your coupons, specials, discounts, and sales offers directly to a responsive buying client for pennies.
This is the ultimate marketing leverage: a list of active buying consumers of your product or service.
This approach generates more revenue, creates a unique customer experience, and can increase the frequency and duration of customer interactions.
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Final Thoughts: Local Businesses Can Turn Daily Deal Offers Into Long-term Returns
Hopefully, you now have a better idea of why it is important to have a lead capture system set up for the offers your business presents.
Learn more about how you can take advantage of our simple but effective lead capture technology to improve your return on investment and grow your business’s customer base and profits.
