There are daily deals flooding the market place. There are national companies handling both national deals and local geo-targeted deals and there are local deals often offered through existing local media.
From a consumer's point of view this is great. Who doesn't like to save money, especially in today's economy. But are these daily deals good deals for the merchants?
It can be expensive. The merchants are asked to offer deep discounts on their goods and services. They need to be really good offers. Many daily deal companies view these offers the same way a media company would view its news reporting. It is content and if it is not compelling content then the consumer will move on to another deal. The daily deal companies do not want that to happen because their "product" is their email list. Remember: These email lists contain direct contact information for people who have already proven they will buy stuff online. Every address on that list is valuable. These companies want those lists to be as large as possible and as active as possible and therefore many will reject an advertiser if they do not believe the offer is compelling enough.
An interesting concept. I am certain that the media companies getting into this game have a hard time understanding that one.
But back to the merchant/advertiser: They need to offer a deep discount which will of course cut into their margins. Additionally, they share a large portion of the gross sales of the deal with the daily deal company, as much as 50%. Clearly, these deals are loss-leaders to get customers through the door. But are they good investments?
Well, they certainly would be if the deals brought in new customers and those new customers became repeat customers. Is that what happens?
Lightspeed Research released a study in May of this year that brings the proposition into question.
In their study nearly two-thirds of the people said that they had indeed returned to businesses where they had redeemed a daily deal. Nearly 60% of those people said they had spent more than on the first visit.
Success? Well, no.
A deeper look showed that nearly 63% of those who redeemed daily deals had been previous customers of the merchant. They redeemed the deal only because they were already familiar with the goods and services of the merchant. Only about a third of those redeeming deals were new customers.
Furthermore, check out this statement from the Rice "Groupon Effectiveness Study" released last year:
One restaurant owner observed that “Most of the Grouponers were what we call ‘deal- seekers’; they felt entitled to special treatment, didn’t spend more than what the Groupon itself cost, they didn’t tip, and most won’t be repeat customers.”
So, are daily deals good deals for advertisers? Maybe, but it's not an easy call. Can you devise a deal that will be more attractive to new customers than it is to old customers? Can you do that in a way that will neither anger your existing customers nor be rejected by the daily deal company? Can you create a strategy where your deal will lead to stronger, deeper loyalty from your existing customers? Maybe, but that's going to take a lot of good, creative thinking. A lot of it....
— Pete Nikiel combines 20 years of marketing experience with clear, forward thinking. He is available to help out companies and agencies in a number of different ways. Think of him as your utility player on call. If you need any sort of help in marketing, branding and advertising contact Pete. Freelance. Project work. Part time. Work.
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