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Resource Center > Article
Small Business Daily Deals: Do or Dud?
22 Mar 13 Posted by: Kathleen C Lanza
in Featured Articles
Share this Article:

If you’re a business opportunity, franchise or other small business owner, chances are that you’ve at the very least thought about using daily deals to lure customers as part of your overall marketing plan. But where once they were all the rage, controversy over their actual effectiveness has been growing steadily of late.

Proclaiming “The Affair Is Over” between small business and daily deals, a recent Businessweek article by Karen Klein cites a number of instances where small business owners are now shying away from the once revered practice, largely for two key reasons: 1) They have repeatedly suffered an overall average net loss per order, and 2) Daily deals, in their view, generate little to no repeat business. One small business owner who was interviewed for the piece had this to say: “The average customer we gain through our own marketing initiatives repeats business with us at a significantly higher rate.”

Moreover, a Manta survey conducted last fall revealed that a full 82% of small business owners did not intend to use daily deals to increase holiday traffic. And only 3% reported that their past efforts had generated any repeat business.

Perhaps nowhere are growing sentiments like these reflected more strongly than in the fact that daily-deal pioneer Groupon’s shares are down 80% since its initial public offering in November 2011. At the same time, the company’s chairman, co-founder and newly appointed co-CEO, Eric Lefkofsky, spoke out publicly just last week for the first time since taking over the company’s day-to-day operations in defense of daily deals. “Demand for Groupons has never been higher,” he said. “Our customer satisfaction scores have never been higher.” And as for the ratio of merchants who choose to run with Groupon again? He reports that number is more than 50%.

So what gives?

It’s hard to say, especially when a survey conducted just weeks ago by Constant Contact seems to support Lefkofsky’s assertions. In fact, its findings refute much of what, by many, is perceived to be the new and fairly negative conventional wisdom when it comes to daily deals.

When small business owners were asked which technology tools they deem to be most effective in attracting new customers, daily deals came up on top at 53%, followed closely by Internet ads at 51%. However, when asked which tools are effective at both attracting AND engaging new customers, email marketing falls back to the sixth position at 50% behind other options, such as websites (77%), blogs (69%) and social media (60%). Nonetheless, it holds its own.

“Deals can be a powerful tool,” said Dave Gilbertson, vice president and general manager of SaveLocal™ from Constant Contact, a Groupon/Living Social alternative that promises a better deal for small business owners. “But perhaps more than any other tool, they need to be done right, or they can be highly detrimental to a small business owner. That means giving small businesses greater control.”

With SaveLocal™ from Constant Contact, the company claims, deals are structured so that merchants control the discount as well as the volume of their deal. This can be especially important given their narrow profit margins.

While daily deals in and of themselves are rarely if ever enough to drive small-business growth and profitability. However, they can be a very important tool in any small business owner’s overall marketing mix, especially if they’re well executed with eyes wide open to the realities of what they can and can’t accomplish. Daily deals as an integral part of a full complement of in-person and online interactions, amplified by social media, can effectively create customer awareness about products and services as well as sustainable long-term relationships.

But every business is different. That’s why it’s so important NOT to fall prey to the anecdotal offerings of others and to follow your own instincts. Do your homework. Find a reputable company that can offer you valuable insight and demonstrable results. Then plan, execute and make your own decision.

As with anything else, the right choice when it comes to daily deals is the one that works best for you.

For information on daily deal options to meet your small business marketing needs, go to:

Groupon

Living Social

SaveLocal*

*SaveLocal offers a FREE introductory webinar for small business owners who want to learn how they can grow their business and get more local, qualified new customers. Simply click here on FREE SaveLocal Webinar now for more information!

Tell us what you think... Have you used daily deals in marketing your small business? Why or why not? What kind of results have you gotten? What other marketing strategies do you recommend?

 

 

 

 

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