There’s no question that daily deal sites like Groupon and Living Social have become all the craze lately. So much that they are literally everywhere – originally for consumer deals, and now we’re starting to see them pop to offer business to business (B2B) deals.
Deal sites are essentially a form of advertising. The merchant works out an offering that the site operators believe will sell. The deal site then publishes the offer and pushes it out to its customer list. And the idea here is that the deal site is then driving loads of traffic back to the businesses site where the purchase can be researched or redeemed.
The offers are these deal sites, however, are different from the usually coupons merchants frequently offer as the expectation is that the deal is typically a very steep discount – usually more than 50% off. For merchants, the advantages are that there are no upfront fees and they are only paying to get actual customers. For example, if the deal fails to sell, the merchant has only invested his or her time in setting this up. The drawback, however, is that the merchant pays a hefty price for the customer, as they get less than 25% of the full-price face value of the product or service.
And this is where you have to carefully weigh whether or not this is a good opportunity for you and your business. And the answer is – it depends.
There are 5 things to carefully consider before lunging into the world of daily deals and huge discounting:
1. Carefully understanding your variable vs. fixed costs. If your deal is very successful, are you making any money on it?
2. Insure you have the capacity to manage the volume of traffic that could be generated.
3. When the deal is sold, you don’t own the customer contact details of those who purchase the deal – the deal site does. You need a plan to overcome this.
4. Ensure you have an up-sell opportunity to create an even better and more memorable experience with those who buy your deal.
5. Once you get people in the door with this deal, how do you plan to capture them as repeat customers?
While there is an opportunity to create a flood of customers, a decent cash influx, and great buzz and visibility, you have to do your homework and plan this promotion carefully. I would even advise doing a practice run with a smaller deal site to ensure you haven’t made any critical mistakes and you’ll see some ways in which you could even improve your process.