Daily Deal Horror Stories – Are they True? #SocialCommerce

Image representing LivingSocial as depicted in...

Image via CrunchBase

By now, you have likely heard some of the horror stories about businesses that have destroyed their bottom-lines, or worse, with daily deals or coupon offers. There are those like the LivingSocial deal offered by Scripa Massage & Wellness that allowed customers to save more than 88% on an enjoyable spa experience. However, the shop sold so many deals that it would have taken Scripa Massage & Wellness from three to five years to complete them all. A bad case of overselling.

80% of Merchants are Willing to Run Subsequent Deals

LivingSocial’s CEO, Tim O’Shaughnessy, shared with Business Insiders CEO Henry Blodget, that around 80 percent of businesses that run a LivingSocial daily deal, will agree to run another deal if offered. O’Shaughnessy’s response came on the heels of the questions and horror stories shared by merchants at the Social Commerce Summit in New York on February 7th.

Although O’Shaughnessy admits that they do not nail it every single time, he also insists that on the whole, it does work in just the manner the merchants advertise it. He shares that the most vital element to a daily deal such as through LivingSocial, is that the merchants upsell their products and services if they want return visitors.

The Whole Picture

Although Amazon reported that LivingSocial showed a loss of around $558 million just last year, O’Shaughnessy reiterates that those numbers do not show an accurate view of any profit or loss margins for LivingSocial. Although the biggest part of the sum was in the beginning of the year, the gap definitely narrowed towards the end of the year.

“There’s one small chart that Amazon filed that doesn’t really give a particularly illuminative view of the business. There are certain things from an accounting perspective that you can’t see with that limited of a view. It’s fun to see little snippets and extrapolate them out without the big picture.”

With around 60 million users, O’Shaughnessy also shared that aside from Groupon, LivingSocial has virtually no serious competitors currently, and that is company is doing extremely well. He also insist that as they grow, they are also learning how to more efficiently market to their consumers. If a consumer has never opened an email about for a discount on a local sports event, they probably shouldn’t be sending the emails to them anymore. LivingSocial has been working on a better way to engage those who do look for and desire their specific service offers.

Author:

@BasilPuglisi is the Executive Director and Publisher for Digital Brand Marketing Education (dbmei.com). Basil C. Puglisi is also the President of Puglisi Consulting Group, Inc. A Digital Brand Marketing Consultancy that manages professional and personal branding for Fortune 500 CEOs, Hedge Fund Managers and Small Business Owners.

Sources:

How to Manage Daily-Deals to the Benefit of Your Small Business

Although Groupon and other daily-deal sites have cropped up rapidly in recent years, it may be helpful to analyze your business thoroughly before taking on a tasks that may involve more expenditure than you were prepared for.

On a very basic level, if you are a numbers person, you have very little work to do to determine how much financial loss your business may take on offering a daily-deal, in order to gain marketing leverage. Coupon sales of any kind are a source of loss in the areas of product and productivity. In order to prevent a daily-deal marketing attempt from collapsing, the vital infrastructure of your business must be protected.

Protect Your Daily-Deal Investment

The only way to protect your marketing investment in a daily-deal site is to be thoroughly prepared for all scenarios. If your organization cannot handle the extra costs of hiring temporary workers to meet possible influxes of customers, or purchasing an increased product supply, it may be a better idea to wait until it can.

Be Prepared for Mass Customers

Although you may not receive them, you do need to be prepared for a largely increased number of customers. Commonly, you can expect that the more smokin’ the deal, the more customers will come. Part of your marketing team’s management plan should include a lot of calculating about what the business can offer in the coupon department, without marching out the red line.

Be Prepared to Lose Money

The best way to be prepared to lose money, is to have extra money. If your company does not have extra money, this is not the best method of advertising for you at this time. Start smaller. Once your profit reaches well over your costs, try again. Try to realize that doing a daily-deal, is a marketing strategy, not one that should be used to increase profits on a small business level.

Hold Onto Those Customers

Once you have achieved the overhead to run a daily-deal marketing campaign, the ones that do arrive and take advantage of your coupon deal, should be highly valued, and they should know so. Prepare a coupon deal of your own, even if on printed computer paper, that rewards those who took advantage of your first deal, and encourages them to come again. Without nurturing those relationships, your daily-deal campaign can just become a shot-in-the-dark marketing strategy that will leave a business with little more, if anything, then exactly what they started with.

Online Presence

These days there are almost no legitimate excuses for a business that does not have some kind of online presence. When you do run across the rare person that has not been on the internet, you look at them with something akin to the same look DVD player owners would now look at the owner of a Beta Max.

Although this may be a frustrating fact for some, others know that when they are looking for a bargain, the internet is the first place to look. Be sure your business has a site, no matter how small or insignificant to link to your daily-deal offer. If you have zero web presence, you can change that by setting up a free site on the hundreds of available options, and post your businesses physical contact information in the very least.

Be Aware of the Daily-Deal Terms of Service

Be aware of all elements of your contractual deal with the daily-deal site. Read the small print before you sign on the bottom line, check for hidden cost and fees, and always be sure to set your daily-deal coupon limit at a rate in which if every allowable one is purchased, it won’t put your business in the red.

Will Groupon Boost Your Small Business?

When Groupon is Bad for Your Business (And Mine)

Does Groupon Erode Price?

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