Make a Deal With Social Media

Jan Littler Finseth is our in house expert when it comes to online couponing. This blog post gives you an insight into the latest web phenomenon and whether it is indeed a viable marketing option.

Make a Deal with Social Media

The morning coffee and email check has become a shopping opportunity for millions who are registered with one of the 43 Daily Deal sites (I counted yesterday!) such as Living Social and Groupon.

How does a Groupon-like deal work and are they a positive internet marketing and promotions tool?

Basically these new coupon deals all work similarly. They make an offer to their list of internet subscribers – every day – in the various geographic markets they serve. The deals work as an assurance contract so that if a certain number of people sign up for the offer, then the deal becomes available to all. If the minimum is not met no one gets the deal that day. This reduces risk for retailers, who can treat the coupons as quantity discounts as well as sales promotion tools. The daily deal sites make money by getting a cut of the deal from the retailers – in some cases up to 50%.

Group-buying deals are by no means new on the scene. They surfaced during the original dot-com heyday and mostly failed. But now advancements in social media have made it a much more stable business model. Facebook and Twitter sharing buttons are ubiquitous on daily-deals sites, as companies encourage consumers to tell all their friends and ensure that the deal goes through. The sites that are the winners are those who best harness the power of social-media channels.

Groupon

Groupon, based in Chicago is definitely the best known and leader of the pack. Groupon was originally called Thepoint.com, a platform to allow people to organize actions or boycotts of some kind. The action would only occur if enough people signed up. But when the financial crisis hit the company decided it needed to re-focus to make money and focused on assembling a crowd -`or the collective buying power to offer the most competitive deals to pre-registered consumers. Groupon and others have quite simply built their businesses around an email subscriber list and by focusing on the deals their specific demographics want.

Groupon goes direct to savvy, deal seeking consumers where they are these days – in their inbox. There is also a built in artificial scarcity

‘in the deals they offer with a tight time frame and the introduction of Caps on quantities of any given deal.

Consumers win by selecting deeply discounted offers from a seemingly endless parade of local businesses – from laser skin care, yoga classes and restaurant meals. Another new twist can be found on http://www.lifesta.com that brokers unused daily deals to those who missed the purchase by deadline. Consumers can also sell deals they can not or will not use.

Should you consider running a Groupon style ad?

Should you consider running a Groupon for your business or service? Yes, if a) you sincerely want more customers, b) can afford to discount your items or services c) are prepared to handle a surge in traffic to your website, your phone and to weather the additional wear and tear on your staff.

Right from the beginning of the Daily Deal phenomenon there have been complaints from participating merchants that they were overwhelmed by the business they gained after they offered a deal. To succeed your Groupon offer must be carefully designed to balance a desire to sell with your ability to deliver. An additional pay-off is the free advertising that comes with being exposed to thousands of subscribers. The exposure is magnified as it gains momentum because subscribers can forward e-mails, post to facebook and tweet the deal to their non-subscriber friends.

Preparation is the best way for a business to survive and flourish during and following a daily deal offer. First crunch the numbers – don’t make an offer that you can not successfully deliver to the high standards you aspire. Make sure your website is optimized and that your email server can handle the flood of inquiries – same goes for your phone line. Train your staff to handle the influx of new customers to ensure that a good portion of those customers become loyal ones. Mine the data of new customers for future offers. Also remember that 20% of the new customers redeem in the first month 20% in the last month and about 10% never to redeem. So plan accordingly.

Detractors report that many of the ‘new’ customers never comeback and are not apt to be ‘up-sold’. Dan Yoo http://www.linkedin.com/in/danyoo wrote that his restaurant business in San Francisco sold 2,600 Groupons and that this gave a huge boost to our business. Our post graph revenue was 63% higher than our pre-graph revenue over same amount of time. He wrote in his article How Social Media can Help your Business Grow that the new normal was almost 50% higher than before the Groupon and that in his opinion the reason for the repeat business was the viral spread through social media efforts combining to create a surge of viral knowledge about his business.

Daily Deals are best not considered as a fad but to be carefully considered as another Social Media tool that can create profitable marketing opportunities for both small and large businesses.

Have you used online couponing either as a consumer or as a company? Please share your experiences with us.

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