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Daily Deals & Coupons: Who gets the best deal?
Groupon, Living Social, Quarter Off – you’ve heard the names of theses coupon and daily discount/deal websites. It sounds like a small business dream, right? You sign up, create specials or offers that their customers can access, and viola – you receive massive foot traffic and through-the-roof sales. Even better, this type of marketing is clearly measurable with codes, customers and promotional ROI. It’s got to be a marketers dream! Well, maybe and maybe not.
Some businesses might be allured into a false sense of security since there’s little up-front investment to join and set up an offer. But as any sound business person will tell you, do your homework! Do not let the idea of hundreds of millions of daily site subscribers cloud your sound business reasoning.
First, understand that it is expected you will be severely discounting your product/service (sometimes as much as 50%) in order to attract a vast amount of people from their database. So… your $100 service might now be priced at $50. Secondly, these daily offer sites are making money somewhere – guess where? You got it, they are taking a portion of the price which you are charging the customer. In essence, you are now splitting the $50 with them, and again, it could be as high as 50%, which leaves you with $25 gross, on a $100 service. That’s a 75% loss – are you sure you can handle that? Maybe once in a while, for very specific situation as a loss-leader, but could you sustain that, say for 1,000 customers?
This poor London baker couldn’t sustain it. She’s quoted as saying it was her “worst business decision ever,” and her story is neither unique nor uncommon.
Something else to consider – during this “promotion” who is responsible for collecting the fees? In the case of these daily deal sites, they collect. But be advised it could be as much as 60 days before you see your share of the daily deal revenue. So you’ve just severely discounted yourself on revenue, AND it could be 2 months before you see a dime of what you did make. Again, can you sustain that? Can you continue to operate without that income and not experience any lags in payments to your vendors?
One other point to think about. Let’s be clear here; what these sites are doing is promoting competition based on price. My feeling is you never ever compete on price. It’s a losing game, period. So, ask yourself this; if you’ve discounted a service you offer by as much as 50%, what is it about this service that will utterly delight the (hopefully new customer) into returning for a full-price service in the future? What can you do to make that experience residual so that it becomes a continual sales relationship? Be honest with yourself when you consider this – will you be spending more than normal to attract this customer and develop them into a repeat customer?
So maybe by now you’re thinking you want to avoid these daily deal sites altogether, but you still like the idea of couponing or creating specials. No problem! New up-and-coming discount websites are being developed, tested and launched to compete with the biggies. Here’s three more you may want to check out:
- Works together with Local Chamber of Commerce
- 10% goes to the Chamber
- 70% to local businesses
- Deals are live 1-3 days
- Strong Media partners that advertise your deal
- First deal you close, you earn 100% of the profits on the first $100 the merchant earns. After that, you get 30% of the profits.
- Browse for deals in your neighborhood by category
You’ve worked so hard to launch your business, to take that leap and go out on your own. Just use caution when being tempted to sign up for a daily deal website. In the long run, it could have the potential to close you down entirely if you’re not careful and run your numbers in advance of committing to anything. I urge you, do not give up profit in order to acquire new customers – you’ll be disappointed with the results. The best advice is to talk to other business folks in your area and get an idea who has and is using these sites, and what their experience has been like.
Guest Post by Georgia McCabe – As an author, speaker, trainer and social media and photography evangelist, her perspectives entitled “A Picture is Worth a Thousand Friends…or Enemies” appear in print in the book entitled The Relationship Age, with social media guru Mari Smith. Georgia is a frequent guest blogger for our professional photography lab.
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