As a consumer, I love deal sites such as Groupon or LivingSocial. In fact, most people I know are hooked! According to most consumers, these sites are a win-win situation for the consumer and the business. Consumers buy great deals, and businesses use this marketing tactic to reach many people, spread their name, and make a profit.
A recent article in USA Today presents a different side to this picture. For small businesses, these deal sites can do more harm than good. Although these sites offer small businesses great exposure, they also bring to them customers who are not looking to pay full price for services or products. Providing deals through these sites also means splitting approximately 40% of the revenue with them. So, at the end of the day, a small business ends up sharing what they earned and struggling to make profit.
The article continues to offer small businesses some great suggestions to help them profit from dealings with these sites. Although the suggestions are great, they too have their disadvantages. For instance, offering more experience-oriented deals than products may help businesses profit since they do not have to pay for goods. The other side to that is that people buy more goods than services on a daily basis. Therefore, it is likely that a business will sell less of the experience-oriented deals, making less of a profit after splitting the earnings with the site.
Another interesting suggestion was to accumulate the contact information of the customers who frequently buy your deals, and market to them separately based off of what deals they looked at. The problem here is that a lot of people do not like targeted marketing efforts because it freaks them out.
A perfect example of this is the reaction to targeted online marketing efforts. When people found out that companies were buying information from certain browsers that track a persons search history, so that companies can provide targeted ads on the side while a person surfs online, they were angry. Many felt that their privacy was being invaded because information regarding their search history was being tracked and sold to companies. Others felt annoyed having items they had previously viewed pop up on the side while they surf the net. Overall, people did not like the idea of being watched while online so that companies can learn what they looked at, and then target their ads accordingly.
Similarly, many may feel annoyed knowing that businesses are personally targeting them based on what deals they looked up online. After all, people are becoming very sensitive to keeping their online activity private. One thing businesses should remember is that the key to building a loyal following is not be to make people feel as if their online search history is being tracked and used for the businesss advantage.
Of course, the suggestions in the article, being some amongst many, do provide practical solutions to the issue that small businesses face with these deal sites. It is just important to look at all suggestions and solutions objectively, and see if it works for your business.
As a last resort, even in the age of the internet, one of the most effective marketing strategies is still word of mouth. Perhaps businesses should not lose faith on the power of having others spread your name for you. Perhaps online deal sites should be an alternative resort to the good-ole-fashioned technique of spreading your businesss name one person at a time.
By: Neha Sareen