In the heart of an economy that's far from healthy and a growing number of unemployed in the U.S., it's no wonder that daily deals websites like Groupon and Living Social are an attractive solution for businesses and consumers alike. I'm assuming that most of the reader base here at Young Entrepreneur has at least some knowledge of the Groupon phenomenon. Therefore, I'm not going to focus on the basics, I'm going to tell you what I've learned from the people who actually buy and sell through these email marketing services.
My daily focus has to do with helping small businesses compete online with the big dogs. Through my experience and conversations, I've had an opportunity to learn about how well these deals websites work. I've spoken with the customers that buy the daily deals and the businesses that list products to be sold at discount. Groupon and other daily deals websites are a powerful marketing tool for many reasons, but it seems that it's the mass exposure more than anything that these businesses are finding valuable
Does Your Business Have what it Takes?
Groupon is a very popular service, so it's very selective about which companies and products are featured each day. One of my sources tells me that amount of Yelp reviews and other local online activity may play a part in how Groupon decides if your local company has enough online buzz to support a deal. With each deal that's posted and emailed, a set amount of participants must buy in before the deal is activated. Therefore, placing only deals that will sell is key for Groupon and the local business. Once the deal time has run out, Groupon collects a significant percentage of the earnings as commission and sends the remainder earnings to the local business who posted the deal.
Restaurant deals are very popular with Groupon-like websites. A restaurant may post a deal where buyers can purchase a $25 gift certificate for $15. Groupon may collect 40% of the $15, and they are also responsible for submitting certificates to buyers. This sounds fairly simple, but Groupon has thousands of employees. The back-end management may be a bit more involved than some would believe. The restaurant receives the remaining $9 per gift certificate and a list of voucher numbers to match up to the incoming certificates.
One may wonder if this is really a good deal for the restaurant. With hundreds of sold certificates, that's a significant discount for a restaurant to be offering. There are a few other keys that come into play here. Many of the certificates that sell never get claimed. People lose them, move out of town, or give them as a gift to someone that is not as much of a fan. Whatever the reason, unclaimed certificates may be contribute toward a better return in investment. Also, a restaurant has a staff on hand each night whether customers are showing up or not. A few extra tables at a fraction of the cost is probably better than keeping those table empty. Many restaurants also post special requirements on these certificates to ensure that they are not spent on alcohol or during the restaurant's busiest dining hours.
The Challenge for Brick & Mortars
One of the largest challenges for storefront businesses (restaurants, boutiques, insurance companies, real estate firms) is simply to lure a new customer or client through their door for the first time. We are creatures of habit, and we find comfort in revisiting the same local businesses over and over. When a new restaurant comes to town, it's not always so easy to pluck new customers from their comfort zone. You may not even realize a new restaurant has opened in your area if it's off your beaten path. For this reason, Groupon is a great deal for restaurants and other local businesses. It gives customers a reason to come through the door (to cash in their gift certificate), and that creature of habit instinct will likely bring them back again and again, assuming it was a good experience. Therefore, small business owners are finding the best value with the daily deals program in the exposure that it receives. Even the non-buyers received an email or Facebook message that day that mentioned this restaurant in their neighborhood.
Since 2008, when the Chicago-based Groupon launched, many new and competing daily deals websites have sprouted. According to the most recent Office of Advocacy estimates, there were 27.5 million businesses in the U.S. in 2009. There seems to be room for more than one Groupon, and there's no shortage of new daily deals websites popping up everyday. Customers don't have to be a member of every daily deals website, but there are definitely some great deals out there. Many deals sites are focused on niche products, services, and location. Consumers should try to find the options that closely match their business and personal life. Here are a few of the niche daily deals websites:
ââ€â€Â       BizyDeal.com has daily deals for small businesses
ââ€â€Â       Cardilly.com has deals on gift cards
ââ€â€Â       MadeinMIDeals.com offers deals on Michigan-made products
ââ€â€Â       MightyDeals.com has deals for web professionals
ââ€â€Â       JuiceInTheCity.com only offers deals for local mom-approved activities and products
What's your favorite deals website, and why? Are you a customer or business that's utilized one of these email marketing services? Please take a moment, and let me know about your experience.
Angela Denby is the founder and CEO of Java Social Networking, an online marketing firm focused in website design, social media strategy and online community management. Read more about Angela here.
