Why Daily Deal Sites Are a Mixed Bag for Small Businesses
In the past, we have examined how popular daily deal sites like Groupon and Living Social could help you and your small business. The basic premise is that they send your customers coupons directly to their email or mobile devices telling them about local savings and deal in their area. This is to hopefully entice them to stop in your store, browse, and pick up something else besides the reduced price item. Further, with the developments in geolocation, they could target ads at your current or potential customers when they are within certain proximity to your establishment enhancing the likelihood of a drop in. However, as also evidenced by the dramatic drop in these companies share prices, this entire business model might be severely flawed. Fox Business continues, “According to a recent survey by Utpal Dholakia, a professor of management at Rice University’s Jones Graduate School of Business, only 20 percent of deal users become repeat buyers, with higher success rates found among photographers, education services, health and fitness services, tourism-related services and doctors and dentists, while cleaning services, retailers, restaurants and bars performed less profitably.
"Daily deal sites are a double-edged sword, and unless they are structured properly, they’re likely to produce more harm than good," said marketing expert Charles Gaudet, CEO of PredictableProfits.com, a small business marketing site. "It’s important to realize that the daily deal customer purchased a coupon for your business based upon the price of the product, not because they have an intention to continue doing business with you. Once the daily deal customer redeems the coupon, it’s now the business owner’s job to convert them into a repeat purchaser and a lifetime buyer…”"
Source - Fox Business