Article by: Sara Mannix, CEO of Mannix Marketing, Inc.
Customers frequently ask me – should I do Groupon? Or Deal of the Day? The answer is “it depends.” Discounting is not for everyone’s business, but for some, it can be a great way to market their business at no upfront expense.
The recent Huffington Post article on “Using Groupon ‘Worst Decision I have Ever Made,’ Says Merchant” highlights the problems with jumping on the latest bandwagon. You need to have a marketing advisor, someone who really cares about what is in your best interest.
Don’t assume that you will have repeat business, or that many buyers won’t redeem their certificates, and don’t assume people will spend more. All of this can be true but it’s not true for all businesses. When a salesperson is selling you a product or service, they need to have YOUR best interest in mind. Obviously, the plethora of Groupon and Groupon knock off companies don’t always have your best interest in mind.
As we offer a Deal of the Week on our sites – Albany.com, Saratoga.com and LakeGeorge.com – our integrity and client satisfaction is key. That is why we will readily tell a client when it’s not in their best interest to do certain advertising with us.
Most of our 600+ clients have been with us for over 10 years. So we train our sales team to look for the right candidates for the deal programs… not just any candidate.
The best client for a daily deal type promotion is a client that falls under one of the following categories:
- A new business who needs to get the word out on their location and products
- A business who needs instant cash flow and can handle the loss of margin
- A business that a product that has a high profit margin on their product like a frozen yogurt shop
- A business whose clients need to continually buy the product in order to gain the benefits like a monthly yoga program
- And lastly, the best business is one with fixed costs – where there is no additional cost for accommodating more clients. For example, consider someone who does tours; it costs the same to walk around the city with 3 people or with 40, so that type of business does very well. Or if you have excess inventory for your event that you can’t sell anyway… say you are doing Shakespeare in the Park, and only sold 20 tickets but can have up to 1000 per performance.
Businesses must be aware, that the deal advertising programs are NOT about making money on those transactions, it’s about the exposure. Your business will be advertised for free by the advertising company to thousands. You will definitely get the deal seekers who have no intention of returning as well as new potential customers.
Questions to ask yourself:
- Can we afford this?
- Is it worth giving away our product for 25% of its original cost for the exposure?
- How ready are my employees to upsell the new clients?
- Can we wow this new potential client with the experience? (especially if you get a quick influx of business). Nightmare stories abound on the web as to the results of these campaigns because the businesses did not think about how the influx of business would affect their bottom line, quality of service and customer morale.
Because there are many determining factors, there is no easy answer “yes” or “no” whether or not Groupon or Deal of the Day programs are right for each business. In the end it comes down to weighing the pros and cons and consulting with your trusted marketing advisor for a second opinion.
Pros:
- You expose your product to a new audience
- The buyers might not redeem their certificates increasing your margin
- You gain free advertising on the media that is marketing your business building your brand’s top-of-mind awareness
Cons:
- You may be discounting to people who would have paid full price or bought the product anyway
- You will attract deal-seekers
- You are taking a risk in hopes that the customer will become a regular, but many say it did not happen for them
- If you have a high-end product, discounting can have a negative impact on the brand you are building
Still on the fence about whether or not to proceed with offering a deal on Groupon or one of these other deal platforms? Feel free to contact us for more advice. Give us a call (518) 743-9424, and we’ll give you our honest opinion based on your specific business.
