5 Downsides to Deal-of-the-Day Websites

Deal-of-the-day websites can attract hordes of customers with snappy, humorous copy and deep discounts on products and services. But will offering an online bargain through a third-party promoter ultimately help or hurt your small business?

For most, daily-deal websites do appear to drive business. A study by Rice University [PDF] showed that 55 to 61 percent of participating businesses ultimately make money on these promotions. Web-based discounts also can be a great way for recent startups to introduce themselves to customers (who may then spread the word to others in town).

However, sites like Groupon, LivingSocial, and SweetJack have a few pitfalls, too. Before you submit your next deal request, consider these five frequent merchant complaints.

  1. Too much at once — Many small businesses start out slowly, with some seasons busier than others. A daily deal can bring in a large volume of customers at once, often before a business is equipped to handle the influx. A small cupcake shop that can usually operate with two or three employees, for instance, may find that it lacks not only the staff to handle long lines, but also the equipment and supplies necessary to meet the sudden increase in demand.
  2. One-time customers — One of the biggest complaints about deal-of-the-day sites is that they don’t attract repeat business. Not only do customers use the coupon once and never return, but they also buy only the items or amount of service necessary to take advantage of the deal.
  3. Small tips — With daily-deal sites, customers receive a discount on products or services, often resulting in a drastically reduced final bill. Although sites like Groupon encourage users to tip on the total due before the discount and restaurants urge this as well, people often don’t oblige. Business owners complain that their workers get grossly under-tipped.
  4. Tedious coupon tracking — The responsibility for keeping up with which deals have been used falls on the business. Because some small businesses have no mechanism in place for keeping up with hundreds (or even thousands) of coupons, in some cases customers get away with using a deal multiple times.
  5. Lack of guidance — Although daily-deal sites have proliferated over the past couple of years, they are relatively new to the business world. Growing pains are still common. Businesses gripe that they are often given scant information about what to expect when a deal “goes live” or tips for how to prepare for a daily deal experience.

However, if used properly, daily-deal sites can be effective. Remember that this is your big chance to wow these customers, so provide friendly, quality service, and consider offering an additional, smaller coupon that might bring deal-chasing customers back a second time. Follow these tips to maximize your chances of retaining customers.

About Stephanie Faris

Stephanie is a freelance writer and young adult/middle grade novelist, who also works in information systems. Her first book, 30 Days of No Gossip, will be released by Simon and Schuster in spring 2014. She lives in Nashville with her husband.
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9 comments
andrewmazer13
andrewmazer13

It's very nice article for small business beginners..

MetroDeal
MetroDeal

These downsides can also be seen as a way to see where it needs to improve on their marketing on their deals, and some of the daily deal sites has come up with the solution to lessen the problem in marketing of their deals.

skystebnicki
skystebnicki

This is a great article. When we started investigating the viability of the the daily deal business for www.givacause.com we found small businesses all over were losing interest in deal of the day websites for many, or even all of the reasons you mentioned above.

Daily Deals
Daily Deals

Many small businesses just neglect to do their homework properly. Daily deals are most certainly a valid marketing channel, but please not the only one. There are so many smaller deal sites in the US which could be used as a first stepping stone into the industry. www.dailydealgame.com provides and overview of over 500 daily deal sites in the US alone - more than enough to choose from.

melvinrajiv
melvinrajiv

Fast growing eCommerce business trend in every country. start cloning groupon websites and following the same business strategies to money. Now days inst ant websites also available in the market for Daily Deal script.  

SupplyChainCowboy
SupplyChainCowboy

Another daily deal trend are sites that sell products for temporarily reduced prices. Although this is a great way to boost sales, many of your other retail channels may dislike you offering your product for such a reduced price. This has strained some of my company's customer relationships and should be carefully considered before selling your product as a daily deal.