In mid-September 2015, Groupon announced it would be cutting 1,100 jobs and shuttering its operations in many countries around the world. It marks a devastating turn for the leader in daily deal sites, a company that was once the fastest-growing business in the world. Where did it all go wrong?
Unfortunately, for small businesses and large chains alike, daily deal sites cause more problems than they solve. Touted as an inexpensive way to land new customers and increase revenue, many business owners have found daily deals generate nothing but headaches. And yet, some businesses are still tempted to purchase advertising space on these sites. Before you make this faux pas, consider the four problems daily deals create:
1. Daily Deals Attract the Wrong Buyers
Pulling in a new customer with a great sale makes logical sense, right? Unfortunately, daily most deals shoppers are simply bargain hunters. You’re not reaching members of your target audience—you’re giving away products and services on the cheap to people who likely won’t come back.
2. Traffic Issues Cause Lasting Repercussions
If you flood the market with an unbeatable deal for your business, you could see your traffic increase exponentially. Sadly, very few small businesses are ready to deal with the challenges that accompany a short term traffic boost. If your service or product suffers as you scramble to serve a massive number of new customers, unsatisfied buyers will flood the web with poor reviews and negative feedback.
3. You’re Selling Yourself Short
In marketing, perception is everything. By setting your prices, you’re teaching buyers what your product is worth. When your $45 entree becomes $15 on a daily deals site, you’re rewriting customer value perceptions. Why should that customer ever want to spend three times as much on the same service he received at a discounted rate?
4. You’re Not Maximizing Your Marketing Dollar
When you purchase a daily deal ad, you’re selling discounted vouchers to customers through a third party. If you’d offered the same sale yourself, you would have the buyer’s personal information, which you could use for marketing initiatives down the road. Instead, you’ve simply purchased a customer’s business as a one-off opportunity.
Even worse, you likely won’t see the money from that sale for some time. For example, Groupon lays out a complicated payment structure for its merchants. You won’t receive the entirety of the money until two months after the sale, by which time you’ll likely have seen the customers come and go. If you operate on a tight budget, this could cause serious cash flow issues.
The clever idea behind sites like Groupon caused the daily deal to explode in popularity a few years ago. As the economy has recovered, and buyers have started spending again, however, the novelty has worn off. Buyers aren’t near as interested in daily deals, and the vendors hawking them aren’t turning a profit. Don’t fall prey to the mistakes of others—instead, use tried and true marketing efforts to grow your bottom line.