Working with Groupon and “Daily Deal” Sites: Is It Worth It?

Last October, Mulberrys Garment Care in Minneapolis and St. Louis Park, Minn. offered a special deal: $15 for $30 worth of dry cleaning and laundry services. Some 500 customers signed up for the promotion, which was available for just one day through Crowd Cut, one of the many local daily deal sites that have become popular in the past year.

Led by Groupon, the most popular of the bunch, daily deal sites have become an attractive avenue for businesses large and small to reach a large audience and draw new customers.

In just a few years, Groupon has grown into an empire that has attracted more than 50 million subscribers. It’s now worked with more than 60,000 local businesses in 40 countries — and counting. And last month, it reportedly turned down Google’s $6 billion bid to acquire it.

In addition to Groupon, there’s Living Social, Bloomspot, Plum District, and dozens more. Some cater to different kinds of audiences; Plum District, for example, is aimed at moms.

But is working with a daily deal site a good strategy for your business? Here are five tips from small businesses that have tried it out themselves:

1) Run the numbers — Before Scott Clemente, president of Mulberrys Garment Care, signed up for Crowd Cut and Groupon he studied other dry cleaners that had offered similar deals. This helped him run the numbers so he could estimate how many customers and sales to expect.

If you sell more than one product, Corina Kellam, director of Life History Books, which offered a Groupon in December, recommends offering a steep discount on just one product. This encouraged customers to look at other items that her company offered — but at full price — and that they ended up purchasing different packages beyond just the cheap item.

She also made sure to bump as many low-cost add-ons into her package as possible to improve her margin after the discount.

2) Be prepared for a flood of customers — Early on, some small businesses became overwhelmed by the demand from these deals and have had difficulty accommodating all the new customers coming through the door with their coupons in hand.

Clemente says they considered the worst case scenario — if all the customers came in during the first week — and knew they couldn’t handle it. They concluded that as long as it was about 50 percent at most, it would be manageable. Fortunately it was: During the first week after the offer, 4 percent of the coupons were redeemed, with a steady flow in the following weeks.

3) Make it count — Remember that this is your opportunity to show your business off to new customers.

In the daily deal, take advantage of the opportunity to tell your business’ story. Kellam embedded a video that explained her company’s services. Arm the copywriters with as much information as possible so that they can compose a funny, thoughtful writeup about your business.

When new customers come through the door, be sure to welcome them. Remember the social side of sales doesn’t end with Groupon: A number of businesses have been hit with negative reviews on Yelp and other websites after the business treated them poorly when they showed up with a Groupon in hand.

4) Expect that some customers won’t return — Obviously, the goal is to bring in new customers and hope that they like the service so much after their first try that they’ll come back again (and again), coupon or no. But the reality is that some customers just like a good bargain and aren’t willing to pay full price.

Clemente imagined a worst case scenario here, too, that no one would come back. And he got comfortable with that possibility. Luckily that didn’t happen. So far, about one in three have returned, he says.

5) Negotiate the commission — The sites take a cut of the sales, about 20 to 40 percent. But that isn’t set in stone. Kellam says that she negotiated for five months before she signed up for Groupon.

About Ellen Lee

Ellen Lee is a business and technology freelance writer in San Francisco. Reach out to her at ellenleeonline@gmail.com.
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6 comments
johnyaeger85
johnyaeger85

As a consumer, I find daily deals us a great way to save lots of money and as a business owner I actually find this as a great supplemental strategy to get wider visibility.  So I think it is worth it though I would admit it was quite a challenge from the start.

deals
deals

Is it possible to negotiate a maximum amount of coupons per sale? This would be interesting in order to control the sale and the production needed to satisfy the customers from a daily deal site! For small businesses, I believe this feature is useful, and many times a life saver! The cupcakes example with groupon could have been avoided if they had defined a maximum number of coupons per deal!

rags
rags

With Group Coupon sites, businesses get no control over - what type of customer segments to target - whether the new customers will fit well with their current customer mix - utilize excess capacity more effectively - track customer lifetime valueBusinesses are attracted by the "no upfront" cost argument but if they do not take into account all the implicit cost, this can hurt them.-Rags Srinivasan Author: To Group Coupon or Not: Small Business Guide to Groupon, LivingSocial and Others Amazon: http://amzn.to/gsusoL

Nora
Nora

I think daily deal sites are a great way to save, as long as you do your research first and don't rush into buying anything impulsively. You have to be careful not to over buy.A site you can use to find all the best daily deals and sales in your area without having to search through all these money-saving websites is http://www.dailydealpool.com. They'll email you a list of the best buys in your area, ensuring you don't miss out AND that you won't have to endlessly search the web!

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  1. [...] filled with tales of woe from companies that later regretted running an offer. However, if you do your homework and determine that a deal could benefit your company, consider these additional report findings, [...]