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by Laura Phillips on 21st March 2014
Discount sites offer their service to just about any and every trade under the sun. Everyone loves a bargain, and these companies have cleverly capitalised on this; offering deals on all manner of products and services for sometimes more than a 70% reduction, while taking their slice of the pie as the middle man. But what do they really mean for your business?
Discount sites and bulk online ‘deals’ are big business. The offer a huge amount of traffic and exposure. There are additional benefits and pitfalls to avoid; so let’s take a look.
The benefits could be described simply as you offer a bargain to the discount site’s vast number of subscribers for a limited period, and gain access to a huge number of new customers. These users are apparently prone to spending considerably more than the voucher they purchase, helping bump up profits for your business.
As an example, Groupon state on their site that “Groupon helps deliver the type of customers that fuel your business growth. They’re generally young, educated, and affluent decision-makers who return to and spend more at the places they love.”
Actual figures and sample size are not disclosed so it’s hard to draw any real conclusions.
For sure. Getting your little known company into the email boxes of potentially hundreds of thousands of customers could create a real buzz! If you’ve done the math properly (really properly), and you KNOW you can afford to take the hit, it could be worth doing, on one condition…you are likely to get repeat business.
In my humble opinion, the best use for these sites is to dispose of overstock with a big margin. Made an error of judgement buying 500 units of something that had good profit potential but failed to sell? Stick it on a group discount site to help move it fast.
If you want to see examples of businesses using Groupon effectively you’re best going to their own case studies page.
The only catch is supposed to be taking a ‘bearable’ financial hit for that limited period, and paying the discount site their fee. The costs could sometimes be described simply as, well, massive costs. Like, crippling, costs.
Tell me, how can offering 90% off at your restaurant to hundreds, or thousands of people create a positive impact on a business, or ultimately its clientele?
It’s easy to overestimate the long term benefits of such a campaign. As described above, you may possibly draw in a large number of new customers, which is always good, but the loyalty of these customers is minimal and retention is likely to be low. Remember, you haven’t researched data to create a highly targeted, carefully crafted promotional campaign. You’ve added yourself to a list of more than 500,000 companies targeting Groupon’s 43.5 million active users (200 million total users worldwide) looking for a bargain.
It is possible that being part of such a discount scheme could actually be damaging to your business online. In researching this post I found a number of success stories on websites such as Living Social, Wowcher, Groupon and others. I found a much larger number of stories from people who had, or had come perilously close to losing their business, their home, and worse, by not fully understanding the implications of taking part in such a campaign.
Some claim that by advertising on their site your brand reputation will improve, however it can also be seen as the death knell of a dying business, turning customers off and diminishing trust . As with all things cheap and in abundance, you are likely to get a lot of attention over a very short space of time, and things can go wrong as businesses become overwhelmed by demand. Users with no affinity to your company or product are more likely to leave scathing reviews, damaging trust and knocking your review status back a good few pegs. You can read more about this on the Rajivsethi Blogspot.
If you have a strong, loyal client base, you may find some raised eyebrows if you start giving huge discounts to new customers. Never underestimate a good customer base. If you have a loyal client base, try not to upset them. It’ll cost your four or more times the original price to replace them. Equally, should current customers become aware of the deal, they’ll most likely go off and sign up for a voucher themselves – and you have gained nothing!
Two of the main discount groups here in the UK do offer free analytics when you sell through them. It is reported that GroupOn offer a profit calculator to help businesses determine cost-effectiveness of their promotions, marketing analytics which can be broken down into different demographics, and customer insights showing the percentage of visits of the site are attributable to GroupOn. Wowcher apparently offer something similar. Based on this fact alone it could be argued that user error is the main cause of businesses experiencing financial difficulties due to their participation in such campaigns.
Here’s an Example…
I was chatting to a friend the other day who is the landlord of the Rockstone in Southampton. He’s currently being inundated with calls and emails from companies offering to add him to their app which will offer a fabulous range of amazing benefits to both the pub and its customers.
Using ‘brand new technology’, customers can place orders and pay using these apps without having to get up and go to the bar or leaving their seat at all! And as if that wasn’t enough, they’ll plaster your special offers on their app too so users can see the best deals!!! Sounds great, huh? Up-to-date, down with the kids, nice little USP…or is it?
If you run a pub and customers no longer need to go to the bar or leave their seat, what is that going to do to your staff levels?
If your special offers appear on their page, how many others do? Will anyone ever see you?
I used to be a pub landlady. Not a lot of people know that. Lovely little pub in Winchester called the St James Tavern. You should go.
iPhones were becoming available for the first time, and apps were few. The dominant form of advertising was still print, and the same thing used to happen back then.
All that’s different is that ‘magazines’, ‘what’s on’ brochures, and tourist pamphlets have been replaced by directory websites, links, and apps.
We would get calls every week claiming that we’d get a pride of place spot in the next quarterly, with an advert designed specifically for us, around our business. They were always extortionate, never seen, poorly designed, and half the time complete scams. Being brand new to the business I fell for a few initially, wasting hundreds of pounds in a dry climate for the pub industry. Very frustrating in hindsight.
I’m not insinuating these apps are the same, but nor am I convinced they are entirely different. These same sales people seem to have simply moved with the times, sometimes to your benefit, sometimes just to take money from the unwitting.
It turned out all we needed back then was ‘good content’. A warm, fun, inviting atmosphere. Amazing food. Bearable bar prices. A friendly face. Good music. Not gimmicky ads and discounts begging for custom at a 90% reduced price.
There are pros and cons of using any form of discounting/deal, be it online or off. You have to be 100% sure your business will benefit, and that you can withstand the fallout if it doesn’t.
There are definitely businesses and situations which can make sites such as Groupon and LivingSocial a great little money spinner, but there are also many cases where they are unsuitable and possibly damaging to businesses. You have to be sure you are part of the former, or risk losing vast sums of money essentially giving away your product or service with little hope of a decent return.
Have you had experience of using these kinds of sites? What was the outcome?
Deal Grunge Stamp from BigStock
Laura has experience of SEO, PPC and Social Media both in-house and within an agency environment. Having worked across a variety of industries from travel to law, and retail to education she is always looking for new and innovative ways to improve the search and social visibility of her clients across various platforms.