One of the most interesting developments of the Internet in recent
years is the proliferation of daily deal sites. These sites come in
many varieties, the most common three are: coupon sites like Groupon and
Living Social, 24-hour sales like those featured on Woot, and software
giveaways like Giveaway of the Day or Amazon’s Free App of the Day.
This article examines the pros and cons of utilizing these sites for
your business, including exposure and profitability. No Such Thing as Bad Press: Profitability vs MarketingSince
the appeal of daily deal sites to consumers is getting a product or
service for cheaper, chances are that the deal itself won’t be very
profitable for your company. Furthermore, most sites charge a steep
commission to be featured on their site (up to 50%). Resulting, most
companies report a large increase in revenue but little change (and
sometimes even a loss) in profits. The logic is that offering a deal is
largely a marketing venture. Being featured on a site like Groupon
attracts new customers with the potential to turn into return customers
or at least spend money beyond what the coupon covers. The drawback is
that as daily deal sites increase in popularity, returning customers
that would be willing to pay full price ma instead take advantage of a
coupon. That being said, for many small businesses, loyal customers
will elect to not use a coupon to support the company. A series of
studies by Rice University professor Utpal M. Dholakia (linked at the
bottom of this article) found that "55.5% of surveyed businesses made
money, 26.6% lost money, and 17.9% broke even on their daily deal
promotions; close to 80% of deal users were new customers of the
business, and they spent $64.3 during that visit. However, just 35.9% of
deal users spent beyond the deal’s face value, and only 19.9% returned
to purchase at full price. 21.7% of deal buyers never redeemed their
deal vouchers.” The last point is particularly interesting, as for
many participating companies the difference between a successful
promotion and losing money was how many people let their coupon expire.
Thus, its probably a good idea to make redemption durations shorter and
put an upper limit on the deals available. Many businesses have
complained about the quality of customers they get from daily deal
sites. Many owners cited them as cheap, that they upset service staff
by not tipping, were unwilling to pay beyond the deal, and seemed
unlikely to ever return unless there was another promotion. Double-take: Is the Exposure Worth it?In
theory, increased exposure means a better likelihood to find target
customers, the chance to work out bugs through increased customer
support, and higher revenue numbers to pitch to investors. There will
also be an increased customer support burden and your physical inventory
could be depleted frighteningly fast. Regardless of other
outcomes, one thing that participating in a daily promotion guarantees
is more clients. With the proliferation of review sites such as yelp!
and feedback forms on software giveaway sites, this will also mean an
increase in reviews. While you may have confidence in your product and
will undoubtedly get some positive reviews, the same sense of
entitlement that causes people not to buy services beyond the deal will
inevitably result in bad reviews with little justification. Another
common complaint is that the exposure from deals has few long term
benefits. This is most true for free giveaways. An interesting case is
of Android app ShiftJelly, which you can read about on GigaOm. That
being said, being featured as a fee giveaway does mean that you are in
the backlog on the offering sites. This gives you some credibility and
the chance to get new customers through backlog browsing. Popular Deal SitesRelisting SitesThese
websites specialize in reselling deals that people decide they don’t
need anymore. Pro-tip: you could buy some of your own deals and relist
them on these sites to increase your exposure and search engine
footprint.
http://couprecoup.com/http://www.dealsgoround.com/los-angeles The Future of Online AdvertisingSince
participating in a daily deal is essentially advertising for most
businesses, the cost and risks are usually associated with the marketing
budget. As for 2011, businesses spend more on online coupon
advertisements than on Google AdSense, email promotion, or social media;
and certainly more than on print media, paper coupons, yellow pages,
TV, radio, etc. An analysis of these ‘traditional’ types of advertising
can be found in the docstoc original article " Are Radio, Print, and TV Advertising Dead?” You can view the Utpal M. Dholakia studies on DocStoc here: http://www.docstoc.com/docs/89114790/How-Businesses-Fare-With-Daily-Deals http://www.docstoc.com/docs/89114784/A-Startups-Experience-with-Running-a-Groupon-Promotion http://www.docstoc.com/docs/89114780/How-effective-are-Groupon-promotions-for-businesses source: http://www.docstoc.com/article/89147381/selling-through-daily-deal-sites-pros-and-cons
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