At one point, daily deal programs were incredibly hot. Now the average small business owner’s interest in daily deals appears to have gone cold.
And that’s why, if you’re a contrarian and like to move against the crowd, this might be a great time to use daily deals to attract new customers and generate more revenue--as long as you do it right, of course.
I talked to Julie Szudarek, VP and GM of North America Local Deals for Groupon, to get more insight on what makes a campaign successful.
Truly understand your goals.
We've all heard the stories of businesses that ran daily deals only to be crushed by the short-term wave of customers... and who came out the other side of the program somewhat the worse for (profit) wear.
Start with where you are: average order size, average customer spending, open capacity, etc. Then look at where you want to go, factoring in your systems, staffing, and cost structure to determine what amount of increased volume you not only want but more importantly can effectively handle.
New customers should beget repeat customers, but that only happens when your systems and infrastructure allow you to provide those customers with outstanding service. A daily deal that only generates short-term revenue is a wasted opportunity: not only do you miss out on future revenue from returning customers, but you also risk negative word of mouth if those customers are unhappy with the product or service they receive.
Speaking of service…
The goal of a daily deal program is to generate new customers, and depending on the nature of your business, new customers tend to need more information, ask more questions, etc. And if you aren't prepared once they arrive you could become another over-subscribed and under-staffed cautionary tale.
Staff for “normal” times and the extra business can quickly overwhelm your employees (and systems)... and underwhelm new customers.
Train your staff to upsell.
New customers, especially those unfamiliar with your product or service, tend not to realize everything you have to offer. Add to that the fact that some will reflexively feel they have more money to spend because they saved money by using a daily deal and you have a great opportunity to up-sell. Make sure your staff is ready to offer additional options and services.
A new customer who may already be extremely open to trying something new might only need a small--but non-pushy--nudge.
Just make sure to avoid giving the impression your daily deal was some form of bait-and-switch: Gladly and graciously provide what was purchased, but be ready to gently upsell when appropriate. Go into the program comfortable with the deal you've created, and see up-sales as icing on the cake.
Groupon was known for sending mass email blasts, and while email is still used as a marketing tool, those efforts now extend to online and mobile tools that are especially useful for longer-term programs.
Say you own a restaurant. Set up a daily deal that runs indefinitely and a couple who plans to eat out tonight can search for your deal on the Groupon website or mobile app. (Approximately 50 percent of Groupon transactions are now made on mobile devices.)
Longer-term deals generate a slower flow of customers, making it easy to manage capacity while giving potential customers greater flexibility. And of course you can adjust your deal as you go to better optimize the use of your excess capacity.
Think longer term.
Many businesses that jumped on the daily deal bandwagon focused solely on the revenue from that deal--and were disappointed when they only broke even (or worse.) A better strategy may be to see a daily deal as a break-even or even loss leader proposition, with the real revenue coming from repeat business.
Of course your cost structure may allow you to profit from every daily deal transaction--but if it doesn't, set up strategies and systems to allow you to profit from repeat business from those customers you otherwise might never have landed.
One way to do that is to...
Capture contact information.
Sign new customers up for your loyalty program. If nothing else, collect email addresses.
Groupon users--and daily deal seekers in general--are extremely active Internet users, and the majority are active on mobile, so getting contact information allows you to continue to communicate and engage, turning that one-time daily deal customer into a long-term customer.
Analyze your campaigns.
Some businesses that ran daily deal programs saw them as a cure for open capacity and revenue shortfalls, and then had no way to measure the total impact of the program. The only way to know whether a deal was successful--and how it should be tweaked in the future--is to determine the real revenue and true costs of that
Groupon provides a free Merchant Impact Report tool, an easy way to analyze a campaign, providing data on the total number of Groupon subscribers who receive a deal and which subscribers purchase the offer (broken down by age, gender, and geography.)
You can also see what percentage of customers are new to your business, track future sales, and calculate the ROI of a campaign by calculating initial sales, upsell spending, and revenue generated by repeat visits against your costs to run the program.
Groupon's tool is just one way to analyze your campaign. No matter what, make sure you put a system in place so you can analyze the short- and long-term results of your campaign. The only way to know if a program made sense is to know if it made cents. (Sorry, couldn't resist.)