Daily deal Web sites are thriving as consumers search for more ways to save money in a sputtering economy.
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These sites, which offer users discounted products and services from local merchants, can be good tools for small businesses looking to create a buzz and reach new customers if managed correctly.
“You want to look at them as a marketing tool,” said Limor Elkayam, founder and CEO of Dealery.com, the New York-based site that aggregates a slew of daily deals at one place. “You have to look at them as a promoting service. What happens when they come through the door, you can only control.”
Many people are familiar with the giants of the daily deal Web site world, Groupon and LivingSocial, but there are a host of sites offering deals in pretty much every market across the country. The Web sites are attractive to local merchants because of the type of customers they attract. The main users of Groupon and LivingSocial are predominately educated women that have money to spend.
Deal sites work like this: a local merchant offers a discount on their product or service and the site distributes the offer to users; many of the deals require a minimum number of buyers for the discount to become activated. While the local merchant is offering a discount, typically a deep one, it drives new traffic into a store and potentially repeat business.
“It’s an unparalleled marketing opportunity compared to anything traditional,” said Julie Mossler, a spokeswoman for Chicago-based Groupon. Local merchants taking out a radio ad or billboard won’t be able to reach the same amount of people, she claims. Groupon touts 40 million customers with 19 million coupons sold. Of those customers, 77% are women. According to Mossler, local merchants that use Groupon face good odds that customers will come in and redeem their discount.
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YipIt, the New York-based daily deal aggregating Web site, recently surveyed 100 merchants to find out if the deals translated into repeat business. It found that 19% of customers came back at least one or twice. Within a year, 80% redeemed their voucher purchased on the deal sites.
According to Jim Moran, co-founder of YipIt, the most successful local merchants are the ones that offer discounts that create excitement and differentiate themselves from the slew of other deals. For instance, Moran said restaurants can offer discounts on special tasting events or dinner at the chef‘s table. He said by creating specials, the restaurant can control the amount of discount and won’t turn off repeat business when the prices go back to normal.
“As long as you are doing something unique and special, that’s a lot better strategy than just offering 50% off the standard service,” said Moran. “I do think this can be a very profitable way to get someone to try a business. What’s important is to focus on turning them into repeat customers.”
At Washington D.C.-based LivingSocial, the company works with local merchants to help them create deals that resonates with users. “The most important factor in creating a successful deal is making it unique for that market,” said Tim O’Shaughnessy, CEO and co-founder of LivingSocial.
The company worked with the Washington Nationals on a deal that let people visit the professional baseball team’s stadium, run the bases and check out the dugouts, all unique experiences they couldn’t do on their own.
“Everyone wants a fun, exciting experience and really likes to save money at the same time,” said O’Shaughnessy.
Secondary discounts are another way to keep customers coming back. Moran of YipIt pointed to ScoutMob.com, a daily deal Web site that sells certificates to restaurants and bars. Every time a customer uses a deal they are offered a follow on discount that’s smaller than the original bargain, but gives customers a reason to come back.
According to Elkayam at Dealery.com, if you want repeat business make sure you treat those customers like you would any full-paying one.
“You don’t want to give them the “B” chef or the student masseuse,” said Elkayam. “You want to make sure they have a good experience even though they came in at a discounted rate.”