3 Tips to Avoid Daily Deal Disasters

Aug 25, 2011 1:39 AM  By

We’ve all heard the horror stories of daily deal disasters: a merchant signs up for a 90% off deal on a giant group buying site, sells a bazillion and two vouchers, and goes out of business. Yes, it happens. But, like plane crashes, lightning strikes, or losing a limb to a rogue chimpanzee, it doesn’t happen often.

The good news is merchants can take measures to ensure that their offer is effective, attractive, and a positive experience for itself and its customers, alike. Here are a few:

1. Stay local (or niche): Look for daily deal programs offered by media outlets in your town or new media sites focused on your niche. Because they are local and/or operate in a focused market, niche and community daily deal sites will be familiar with your business, more motivated to structure offers that are truly successful for you, and eager to keep you advertising in the future.

Whether a local TV station, newspaper, radio, or niche website, publishers with existing local or regional content can also build custom packages of online and on-air promotions to supplement your feature. With local deal programs, offers can be one piece of an advertiser’s larger total marketing mix and serve as a online to in-store metric to track overall campaign success.

2. Structure a smart deal: The nuances of creating a blockbuster daily deal can be part art, part science and should hinge on your promotional objectives. Do you want your offer to: spotlight a popular product/service? Draw first-time customers? Drive signups for a loyalty program? Defining what you want to accomplish ahead of time (and measuring if that goal is met) will help you determine if daily deals are a successful promotional tool for your business.

Price point is also one of the most critical factors in structuring a great offer and, oddly enough, one of the most poorly executed. When determining your price point and discount, set it so that buyers will be encouraged to spend over the voucher value.

For example, if your average sale is $25, offer a daily deal valued at $20. Also, consider price points and discounts of offers run by competitors or merchants like you; if you offer $75 for $100 in spa services, while your competitor down the street offers $50 for $150, your deal likely won’t do so hot.

3. Find your audience. In offering a daily deal through a local or niche publisher, you secure exposure to an audience full of your target customers, reaching people who are more likely to buy the voucher, spend more upon redemption, and become loyal regulars.

Consider the results of programs run by Tomlinson’s Feed, an Austin-based pet retailer, and U.S. Toy Co., a toy store in Kansas City, MO. Both are popular merchants in their markets who ran similar daily deals around the same time this year.

U.S. Toy Co. ran with Groupon, sold 3,000 vouchers, and estimates that a vast majority of voucher holders spent only the offer’s exact value of $20. In contrast, Tomlinson’s ran with a local Austin publisher 365ThingsAustin, sold 600 offers, and calculated that voucher holders spent an average of $26.10 after their discount–133% above voucher value.

So, what was the difference? Audience attraction. Groupon’s draw is discounts on services; thus, the site’s audience is looking for big markdowns and isn’t concerned with merchant loyalty.

Niche deal sites have high-affinity audiences who come for the site’s great content on food, beauty, or local culture and trust the publisher to feature deals on only the best businesses. These are the customers that businesses want because these are the customers who come back.

As demand for daily deals continues to outgrow supply, the days of running a costly deal on an unfocused group-buying site with audiences full of bargain hunters are done. Merchants today have a bevy of options for reaching their target audience, building the best offer based on their business goals, and giving new customers an experience catered to their unique interests. In teaming with local deal programs, structuring smart offers, and focusing on audiences with your target customer, you can better dodge the pitfalls of daily deals and tame group buying into a measurable, low-cost piece of your promotions mix.

But when it comes to crazy chimps on the loose, you’re on your own.

Martin Tobias is founder and CEO of Tippr, a provider of group buying solutions and the flagship PoweredByTippr.