Practical Ecommerce

‘Deal-of-the-Day’ Coupons Help Merchants Attract Customers; 4 Tips

The deal of the day group coupon-buying concept has taken the Internet by storm. Forbes magazine called Groupon, the leading deal-of-the-day site, the “fastest growing company ever.”

The concept appeals mostly to local brick-and-mortar retailers and large retail brands. But ecommerce merchants can take advantage of the trend, as well, by offering coupons on the deal-of-the day sites as a method to attract new customers. This article provides some examples of ways online retailers can go about it and options to consider.

OfficeArrow

OfficeArrow is a membership-based, business-to-business online marketplace. It offers deal-of-the-day coupon buying, where daily deals are featured on OfficeArrow’s home page. When users click the “Buy Now” button they are taken to a shopping cart, where the coupons can be purchased.

“The coupon can only be redeemed by visiting the merchant’s website,” said Robert Ball, CEO of OfficeArrow. “The merchant will register the customer and begin to build a relationship with them. Hopefully, the merchant can sell them other items while the customer is there. The deal of the day is a way to get new business and reduce customer acquisition costs.”

Ball does not advise merchants to set up a deal of the day on their own sites. “The merchant is modifying the behavior of their customers, setting them up to wait for the deal. By using a third-party marketplace such as OfficeArrow, the merchant does not run the risk of harming onsite pricing,” he said.

ShopIgniter

Ecommerce software providers are beginning to add a daily deal component to their platforms. For example, ShopIgniter, a social commerce provider, will soon launch its “Social Promotions Engine,” which will enable merchants to manage a variety of social promotions. Merchants will be able to set up private sales, time-based sales like deals of the day, and coupon promotions.

“We believe that any company should be able to leverage these social tactics that ‘activate the network’ and drive transactions, something a Facebook store alone does not do,” said ShopIgniter CEO Matt Compton.

Wildfire

Wildfire, a provider of apps for Facebook fan pages, has just released a group coupon buying app called Group Deals that enables merchants to run daily deals on Facebook or on their own websites via Facebook Connect. Deals are heavily discounted and dependent on having a certain number of users commit to making a purchase.

“Merchants are limited only by their creativity in how they can use the app,” said Maya Grinberg, community manager at Wildfire. “They have the option to upload a set of unique coupon codes, which buyers can redeem at the merchant’s site, or simply fulfill the orders based on the information provided by the purchaser on the fan page.” Merchants also have the option to limit the number of deals offered.

The app offers a number of benefits. Merchants can input unique discount codes compatible with their shopping carts, define the maximum number of deals they wish to release, upload custom designs for the deal, create a custom entry form, send notifications to participants and download participant data.

Addoway

Addoway specializes in using the power of friend-to-friend connections to influence purchase decisions. It offers a milder version of the deal of the day, where deals are handpicked by the seller’s staff, then placed on the site’s home page.

“We allow coupons to be accepted that sellers create and also they can choose to offer discounts for people who like their product or fan page,” said Addoway CEO Fredrick Njim. “In the future users will be able to have Groupon-like deals in their stores and be able to market them.”

The company will soon release coupon functionality for merchants, so they can run limited-time promotions or give discounts to special groups of people with a coupon code.

Four Deal-of-the-Day Tips for Merchants

Here are some suggestions for small businesses that are considering using a deal of the day coupon approach to attract new customers.

  1. Do your homework. Count the costs. This is a form of advertising. Unless there are high margins associated with the product, it’s a given that the deal will be a loss leader. Merchants need to ask themselves how deeply they can afford to discount and how many deals can they afford to offer.

  2. Create a customer retention strategy. The key to profitability, when using the deal-of-the-day approach, is in getting new customers to return. This is where ecommerce merchants have a distinct advantage over their brick-and-mortar counterparts. Normally, in order to make a purchase the customer has to register his or her name, physical address and email address. This allows the merchant to follow-up and build a long-term relationship.

  3. Have a product or service worth returning for. Ultimately, there has to be something deserving of the customer’s attention, whether that is the product itself, the level of customer service and support offered, or the uniqueness of the purchase experience itself.

  4. Decide on the value of your brand. Merchants should address whether or not they want to be considered as a discounter. Not all merchants are comfortable with that label.

Summary

Used wisely, deal of the day coupons, as a group purchase option or not, can be a way for ecommerce merchants to gain new customers, while lowering acquisition costs. They key to profitability is in getting customers to return. A carefully crafted follow-up strategy is necessary to ensure success.

Paul Chaney
Paul Chaney
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Comments ( 8 )

  1. megamelfina October 6, 2010 Reply

    Groupons and daily deals are great ways for consumers to save and for businesses to generate more customers. It’s no wonder that websites that offers these kind of deals are becoming increasingly popular, especially in this economy.

    Dailydealpool.com is another one of these websites that offers daily deals in a easy to access fashion. It compiles a list of savings in your area and e-mails them to your inbox daily.

    Websites like these are a quick and easy way to save money on purchases you need to make, whether online or locally.

  2. Paul Chaney October 6, 2010 Reply

    Sounds a bit over the top. There are benefits to be accrued to be sure, but there are also some very distinct liabilities, such as those I’ve outlined. Smaller businesses need to be sure they can manage the potential success, both in terms of cost of goods sold via the deals and the number of them as well. This is a marketing approach that holds promise, but still needs time to mature.

  3. Steve @Erraticblog October 7, 2010 Reply

    Great tips Paul, thanks for posting. The Facebook Group Deals app sounds really interesting… I’m heading over to check that out.

  4. njdeluca October 7, 2010 Reply

    @Paul – I agree that "marketing approach holds promise, but still needs time to mature", but what would make this really effective for small "brick & mortar" stores using products like Groupon on smart phones, is for Point of Sale system to integrate with this technology. A lot of SMBs I deal with have a website, but no e-commerce. You need a way of tracking it back to the cash register, just like a physical coupon & that technology, although available, it just not affordable for a small biz owner justify making the investment. Smartphone, POS integration & cost is the catalyst to making this work for the small business owner.

  5. researchstan October 9, 2010 Reply

    Strong planning and research is a must as noted.
    A Groupon comment from a merchant can be found at http://mywifequitherjob.com/blog/ .
    I think that your type of product/service and the depth of your pocketbook are determining factors. Followup on customer retention is critical.

  6. Paul Chaney October 11, 2010 Reply

    Good points and I like how you outlined the issues in some detail in your post. It’s certainly exciting to see all the new business such an approach can provide, but as you suggest, only later do you realize the true cost to you business. Small businesses need to think long and hard about whether it’s the right approach for them.

  7. Dean iodice October 19, 2010 Reply

    I’m not a big fan of these group deal sites, yes it creates a lot of action for the deal, but in some cases the deals are so good that the retailer is making very little or no profit at all, trying to attract people with a loss leader. The problem with the coupon crowd is that few return unless you offer another coupon.

    I refer to this crowd as the bottom feeders, always wanting something for near nothing. It’s hard for a business to survive on this business model.

    I read a recent article online about businesses using Groupon and experiencing this exact problem.

    I think busineses are better served creating relationships online using social media and building a client base, then you can always reward your good customers by offering a special coupon for them, at least you know they are buying from you already. I think Groupon and all these services are doin it backwards, building their own bottom line while the retailer takes the hit in hopes of building a future customer base.

  8. Joan Tago November 16, 2010 Reply

    GroupOn, LivingSocial, TeamBuy, WagJag are such great deal sites. If you want to see their daily deals listed in one, try checking out GroupBuyUnited.com!

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