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Daily Deals - Advance Planning Is the Key to Success

  |  June 2, 2011   |  Comments

Considering a daily deal campaign on Groupon, LivingSocial, or Facebook Deals? Start here.

Finding new customers is the top business concern for small to mid-sized businesses (SMBs), according to Bredin Business Information. So it stands to reason, SMBs need to tap a number of local online business-building techniques to remain successful. Increasingly, many SMBs are turning to online discounts and promotions.

The new wave of coupons often referred to as "daily deals" has proven how these services can drive a lot of new business to local SMBs. But preparation and execution are key to maximizing these business-building efforts.

The daily deal concept is deceptively simple; a business signs up with a service such as Groupon, LivingSocial, or Facebook Deals, identifying their town and some other information about their business and offering. The services send emails to their database of subscribers (Groupon claims 41 million subscribers). In Facebook's and Foursquare's cases, posts are shared with friends and locals via the social graph. The consumer prints the voucher, prepays for the service, and exchanges it for the product/service at the retailer.

grouponexample

If you are familiar with these services, then you may have also heard about the issues consumers and retailers have encountered with the services:

  • A retailer is inundated with one-day deal seekers, creating purchase volume it cannot handle.
  • Customers are frustrated because they had to wait too long to receive the product or service offered. This results from poorly planned inventory and capacity issues.
  • Retailer provides a significant discount to first-time deal seekers with no brand/business loyalty, resulting in loss leaders that generate no repeat purchases.

Essentially, daily deals can play two important roles for local businesses: 1) obtain new customers, and 2) help move excess inventory or capacity that has not sold well under traditional pricing. With either of these roles, retailers must ensure a good customer experience because success is all about repeat business.

The "daily deal" can be a powerful business builder and has a place in the local interactive marketing mix, but SMBs must have a clearly defined plan before entering the arena.

First, be honest with yourself about your capacity and inventory. Ensure that your business is prepared for the onslaught of new customers. Negotiate a "cap" from the deal provider on the number of offers that can be redeemed in a fixed period of time.

Secondly, consumers are savvy; do not raise prices just prior to the offering. Base all discounts off your true retail price. Remember, this is the Internet; checking up on prices has become the easiest thing for consumers to do. FTD angered consumers when FTD directed people who purchased a Groupon coupon to the campaign's website where some prices were higher than those on FTD.com

Third, have a retention plan. If you are driving a high volume of new customers with a local Internet daily deal, how will you retain them without continuing the use of daily deals and eroding your sales margins?

SMBs that use an online daily deal service for their Internet marketing business-building programs must plan for the post-deal relationship from the start. Loyalty programs can keep people coming back; return-with-a-friend deals, or similar programs should be planned as part of the online daily deal. One tactic is to develop an email program, encouraging new customer sign-up at the store with a return purchase incentive.

A second tactic is to consider local deal sharing services like Closely's – "Social Select" that provides SMBs with a discretionary private deal handed out at the point of purchase for savings off a customer's next/repeat visit. Leverage the new customer relationship through loyalty techniques to lure him or her back to your store and break the habit of customers seeking alternative businesses with loss leader discounts.

privatedeals

National franchise and dealer programs have a unique situation with local Internet marketing. Unlike The Gap that can centralize the daily deals for all locations, these organizations have to facilitate local interactive marketing deals across multiple, independent businesses that share the same brand name. There are a few areas that present a particular challenge:

- The mechanisms for corporate support are structured around advertising and marketing programs and not necessarily set up for online daily deal-style discounts. Brands and parent companies need to integrate their sales channels to allocate marketing budget and rebate funding around this new concept, specifically supporting local Internet marketing deals, but also related loyalty programs.

- Developing a consensus around the daily deal offering among multiple independent businesses can present a challenge. Typically referred to as local marketing groups (LMGs), these groups need to build a program into the beginning of their annual or quarterly Internet marketing plans.

Bottom line: while daily deals are great for driving customers, SMBs and franchise/dealer networks alike must carefully plan their place in the Internet marketing mix and general marketing. From ensuring that you can deliver on the promise to leveraging online daily deals for relationships that last more than just a day, make the most of these for you and your customers. Plan ahead before diving in.

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ABOUT THE AUTHOR

Gregg Stewart

Gregg Stewart is founder and president of 3rd Act Marketing, a full-service marketing agency and consultancy, specializing in digital solutions, headquartered in Connecticut. 3rd Act supports businesses and agencies of all sizes, including Fortune 500 companies. With more than 20 years experience, Stewart applies his successful tenured career in interactive advertising and local search to the ongoing development of digital and mobile solutions for his clients' online-marketing campaigns. Through his strategic counsel, national and local brands become better equipped to target and reach niche consumers for increased leads and sales. In addition to his ClickZ columns, additional columns can be found in the Search Engine Watch archive. In 2013, Stewart was recognized with the ClickZ Hall of Fame award.

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