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Daily Discount Coupons: Pay Dirt or Raw Deals? - Part 3

By Erika Morphy E-Commerce Times ECT News Network
Jun 10, 2011 11:44 AM PT

Daily Discount Coupons: Pay Dirt or Raw Deals? - Part 2

Daily Discount Coupons: Pay Dirt or Raw Deals? - Part 3

Seen on the MarketSharing daily deal website recently:

    "Clearview Security is offering you an affordable 2-camera closed circuit TV system, complete with a 4-channel DVR for just $1,050...a 50% savings. This system will enable you, the small business owner, to remotely monitor your business workplace. Clearview's custom-designed system will give you peace of mind, thanks to the ability to remotely monitor your business workplace. They consider each and every installation a custom project and are fully-insured and licensed by the State of NY Department of State to install, service and maintain security and fire alarm systems."

If this doesn't sound like the glib write-ups typical of Groupon or LivingSocial, which generally offer products priced less than US$100, that is because MarketSharing is a serious-minded site aimed at businesses.

Image Control

Clearview Security COO Drew Martin picked it, as opposed to Groupon, because he wanted to maintain control of his company's image and its product positioning, something that MarketSharing was willing to accommodate. The deal ran on the Friday before the Memorial Day holiday.

Martin was not expecting the usual hordes that take up a daily offer on the larger sites, but he was pleasantly surprised by the sales he did make, he told the E-Commerce Times. Staffing was not a problem because Clearview Security had hired additional installers before posting the offering. That was something it was planning to do before summer began, but Martin made sure they were in place before the offer ran.

Be Prepared

All in all, it was a good experience, in large part because Martin was prepared.

However, many firms are not properly prepared for the response to a daily deal offering. Reports of companies and their unsuspecting staff being overwhelmed by redeemed offers are plentiful.

Other common mistakes are underpricing an offering -- which Martin noted is the trickiest part of the transaction -- or partnering with a daily deal site that simply is not a good fit. Clearview believed its deal would not have been a good fit for Groupon, for example.

"We didn't want to be associated with a discount site," he said. And because Clearview is a security offering, he didn't want the write-up to be saucy and fanciful -- a style that Groupon has perfected.

In short, Martin hit all of the points a company must consider when it embarks on a daily deal offering.

A Daily Deals Checklist

"These offers can be wonderful if they are analyzed correctly by the company," Greg Sterling, principal of Sterling Market Intelligence, told the E-Commerce Times. "If they are not, then it can easily be a disaster."

The daily deal sites are the first to agree.

"The most successful Groupon merchants stock up before a deal is published," said spokesperson Chad Nason, "whether it is on additional staff to answer the phone, on the product itself, or just on sleep."

Getting prepared, fortunately, is not rocket science. Some factors to keep in mind:

  • Know Yourself. "Before you even speak with Groupon, analyze everything," Nason told the E-Commerce Times. "Look at your business critically. You need to know your business inside out, from when your busiest night is to the slowest season to what is your average ticket. Groupon will bring a lot of customers to your business -- so it needs to be running smoothly before adding these new customers."
  • Choose the Right Price. Arguably this is the most important element influencing the success or failure of a deal. "There are a number of daily deal calculators now that help a business figure out what the optimal price is for an offer," Sterling pointed out.

    The daily deal sites themselves are more than willing to help with advice, by providing general demographics and help with tailoring the offer, Nason added. "Also, you can always talk with us about a potential cap to make sure you are preserving quality of service and are still able to make a profit," he said.

    Also, keep in mind that a certain leap of faith will be necessary, Martin advised. Clearview priced its deal so that no matter the scenario, it would still make some margin on the sale. "But we always looked at it as a value-add transaction -- that it will bring us recognition, additional sales by customers, sales where the customer might buy up and so on."

  • Prepare for a lot of One-Off Customers. Some of the early users were disappointed by the less-than-robust conversions of one-off-offer participants into regular customers, Sterling said. "You have to face the reality that a lot of people will be taking advantage of the discount and have no intention of buying again at the regular price."

    Also be prepared to lose money off regular customers who seize the low-price deal, he added. The repeat rate of a Groupon offering could be as low as 15 percent -- which should be factored into any pricing decision.

  • Be Ready to Capture Customers' Information. Most of the sites don't share the emails or contact information of the customers who buy the offer, Sterling said, so figure out in advance how to capture information when people come in to redeem an offer.

    'This is a non-negotiable point for Groupon, Nason said. "The trust our subscribers have with us is very important, and they expect us to guard their privacy."

    Groupon does provide some information -- such as demographics or ZIP codes of where the deals are being purchased, he said, "but no personal data."

Daily Discount Coupons: Pay Dirt or Raw Deals? - Part 4


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