Daily deals: 6 ways they ruin your business, 3 ways they might not
If you’ve considered doing a daily deal with Groupon et al, first consider what do they do to your online business.
1. They massively lower profit
There are so many daily deal websites out there that many consumers have signed up to three or more. But to create cut-through in their inbox, they require you to provide an ENORMOUS discount. Even percentages like 50% off makes their eyes glaze over; discounts of 75% to 90% are increasingly common. Even if you "just" offer 50% off, you must also give a further 50% to Groupon or the daily deals company, giving you, at best, just 25%. Can you even make a profit with 25% of the original price?!
2. They impact your customer service team
The daily deals sites will ask for as many units as you can provide. Once the deal closes, you could have hundreds of customers simultaneously redeeming their vouchers. Many be unfamiliar with your website, most will fail to read the instructions and conditions and will call or email your customer service team for help.
3. They impact your operations
You may have to hire casual employees to deal with the spike in shipping or put your already-busy team under more pressure to deliver now! Or not. I am still waiting for the $100 worth of Elle Macpherson lingerie I bought for just $39 six weeks ago to be delivered.
4. They impact your regular customers
No-one likes to pay full price if it’s unnecessary. So your regular customers feel annoyed they have paid full price while new, non-loyal customers get those items for a fraction. However, your regular customers will most likely buy as many as possible from you. And not pay the full price. And will not return to you for some time because they’ve stocked up.
5. They impact customer satisfaction levels
Everyone loves a bargain yet most people are willing to pay extra to get preferential service. Your new, unfamiliar customers will expect to receive their product or service immediately but fulfilment delays are almost inevitable. Their satisfaction level are low by the time they receive it so you’ll have received almost no profit to irritate new customers who won’t shop with you again.
6. They impact your brand
High-end brands like Tiffany don’t do daily deals. However, budget brands have almost nowhere to go – “You mean, I should be able to get this even cheaper?” Any offer I see now, the daily deal price is the one I “think” I should be paying. No matter if that is sending them slowly broke while the “real” price makes me think it’s a rip-off.
However, there are 3 reasons you might use them:
1. Quickly grow your database
A daily deal may help you add new customers, some of whom may buy from you again. You will have all of their contact details and extra specifics like their clothing size or birthday to help target them again.
2. Sell old stock or trial offers
Shift discontinued stock; lower profits are better than stale inventory sitting on the shelves, or why not trial new products. Perhaps you could list them in another country’s daily deal site to take advantage of their special occasions held at different times. For example, Father’s Day falls on June 17 in the US and UK, but on September 2 in Australia and New Zealand.
3. Extra SEO
Long after you’ve run special offers, the search engines still show them in conjunction with your business name. So you might try creating targeted offers to get your business associated with that type of search term.
I think we could extend the negatives a bit further.
I really struggle to see a real benefit for the end user on 90% + of the deals that arrive at my inbox.
Most discounts are made on top of over inflated RRP claims and a quick Google search could reveal some offers aren't that much of an offer in first place.
I have been approached by Deals websites and none of the offers they proposed really benefit either me or my potential customers, but themselves by getting a big cut of the work I would have to do.
I think that as the internet and its users mature, the deal websites will have a ever increasing hard time finding merchants and adding value to its users.
Elizabeth Ball says:
Thanks Casudo, I totally agree with you!
James Kitchener says:
I agree with these because I've got friends who had bad experiences with deal sites. This is a perfect example of not jumping into the trend wagon just because it's the new thing to do.
James Kitchener says:
Well some businesses recognize that Daily Deals will ruin their business. I guess that makes the difference in online business rather than the traditional consumer method. Especially considering the fact that they are really offering lower prices than the regular price.
Al Igator says:
there's really only one reason a company would use daily deals. get rid of cheap junk that nobody wants.
daily deals simply get you volume. at the end, all you have is existing customers who didn't pay you full price. a lot of these people on daily deals lists want something for nothing and some take joy in wasting your time.
if you really want to build a successful business in this era of super competition and emergin markets, target your customers, provide good service and take it slow. daily deals will just set you back.
Daily deal sites are like bees. There's just too much sweets but if you don't know how to handle that sweetness, you'll end up getting hurt. While its tempting to go with the flow, it wouldn't hurt to back off a bit and think it over.