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Daily Deal Companies and Whether They’re Right for Your Business

You’ve probably been hearing a lot lately about Groupon, the market leader in the “deal-of-the-day” options that are sprouting up all over these days. If by chance you’re not familiar with Groupon, it features discounted gift certificates for local or national businesses.

A certain number of users need to accept the deal in order for it to take effect. Even though the platform was only launched in November 2008, it already has registered an astonishing 35 million users. It is available more than 150 markets in North America and 100 markets in Europe, Asia and South America.

Groupon rules the roost, but as with any great idea these days, competitors have started flooding into the industry. LivingSocial, which launched less than a year after Groupon, now has more than 26 million email subscribers, and Facebook recently joined in the fun.

Facebook Deals is taking a slightly different angle, concerning itself more with bringing friends together in shared activities. It obviously provides an inherent social aspect that is more challenging for Groupon and Living Social.

Though Facebook’s entry into the market would seem likely to endanger Groupon and Living Social, there are enough differences between these competitors that each can thrive.

The bigger question for local businesses is whether it makes sense to use “daily deals” sites to help improve revenue, drum up new business and improve awareness of one’s company or brand. If you’re wondering whether such sites make sense for you, here are a few questions to consider:

  • Are you ready for the business your deal can produce? We know that too much business sounds like a great problem to have, but a small business with a limited staff might not be able to easily to adapt to a sudden crush of new customers. If your customer service falls short because you can’t handle it all, the resulting injury to your reputation–especially with the advent of review sites such as Yelp and Google Places–could be devastating.

  • Are your profit margins sufficient that you can offer a discount and still be profitable? If not, are there enough other advantages to the deal–e.g., customer generation, brand awareness–to be worth it. What quantity of deals do you need for the deal to be worthwhile? Depending on your margins, that number might be more than you’d expect.
  • What is your expected return rate for people who take advantage of the one-time deal? The likelihood of repeat business can be affected by a lot of factors. Are your regular prices reasonable enough to retain clientele who would be attracted to discounted prices?

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