My fiance is a huge fan of “date night”. He’s always trying to find the newest restaurant, the latest activity, or the hippest bar to check out.
Last year,the purchased a Groupon for a pottery class at a local studio. We loved it so much that we talked about doing it again.
We took one look at the cost of a full-priced class, and promptly threw away the brochures (and our dreams of becoming world-class potters).
Until recently – when he surprised me with Pottery Night #2!
The catch? It was a completely different studio, in a completely different part of town…but they were the the only studio?offering the Groupon deal, so why not go with them and save some money instead of paying full-price at that other studio?
To the consumer, this makes a world of sense. To the small business owner, I’m sure you’re cringing in your seat right now.
This scenario is far too common. Today, Sweet Rose Studios takes a closer look at the numbers, and discusses why daily deal sites such as Groupon and LivingSocial may actually be hurting your business.
Where Are All The Newbies?
There’s no denying that daily deal sites such as LivingSocial and Groupon increase revenue for your business. The spike in customers (and the fact that you receive payment up front) may seem tantalizing to even the most savvy business marketer.
But what happens once the deal is done and your brand new customers have left?
According to Fortune, the news isn’t good. On average, “80% of coupon users are first-timers, and only 20% of them become repeat customers” of businesses who feature a daily deal on sites such as LivingSocial, Groupon, or OpenTable.
The whole point of a daily deal is to attract new customers to your brand. However, at the end of the day, and depending on your industry, you may be investing (and losing) hundreds of dollars of revenue just to bring in one new client!
Then once your daily deal has expired, you have to start from the very beginning, losing even more money in the process! As the beloved saying goes, “Ain’t nobody got time for that!”
Loyal Customers Are Hurting Your Numbers
You might be thinking, “But I’ve tracked the behavior of my daily deal customers, and I’ve seen much higher numbers of them returning for more!”
Keep in mind that it’s not enough to simply keep track of the number of customers in your database who come to your business, daily deal in hand, and return with smiles on their face to bring you repeat business.
You have to track the number of those customers who were clients of yours to begin with, saw your daily deal, and essentially cut the amount of money they’re giving your business in half by purchasing the deal.
How many new customers are you actually bringing in and how much money are you spending to do so?
To come up with that number, we take a look at a report from Lightspeed Research (keep in mind that their report focuses solely on Groupon).
CNBC quoted Lightspeed Research, which determined that “…63% of Groupons are purchased by existing customers. Just 2% of buyers who returned had never purchased from the merchant prior to the Groupon. So the merchant essentially gave away 75 cents for each dollar of business from the other 98%.”
Yikes! Talk about flushing money down the drain!
Laying It All Out
Now, let’s take a look at what we’ve discussed so far.
As Tige Savage, a LivingSocial board member, so eloquently put it: “The fact of the matter is that vouchers are yesterday’s news.”
To post on sites such as LivingSocial or Groupon, you have to mark down your goods or services by about 50%. These sites collect, on average, 50% of your profit, which leaves you with 25% of the net worth of your goods or services in your pocket.
Also, consider the fact that many of your loyal customers, who would have gladly come into your shop and paid full price for your products, are now slashing their contributions by 75% because they have purchased a daily deal as well.
At the end of the day, you may only bring in a small handful of return customers. But, consider how much money you lost in order to get there!
Still think it’s worth it?
While this business model may work for plenty of larger brands, small businesses need to rely on a more permanent model to help them with their long-term small business marketing.
That is where tools such as SEO (Search Engine Optimization) come into play.
How Can SEO Help Your Small Business Marketing Campaign?
Chances are, if you’re marketing yourself on daily deal sites, you’re probably tech savvy enough to have created a website for your brand.
What you may not know is that this website will do nothing to attract new business if it is not properly optimized!
By establishing a working blog, adding proper tags to your webpages, creating landing pages that lead your prospective customers to convert, and revamping your website so that it looks clean and up-to-date, you are ensuring that your brand will be seen by potential customers in your community!
Not only that, but the customers who find your brand online are much more likely to become return customers, since an attractive, well-functioning website is way more trustworthy than a sporadic Groupon deal or a LivingSocial voucher.
As a small business owner, you know that every marketing campaign costs money in some form or another. The question is, are you spending that money wisely?
An investment in a customized online marketing strategy may be just the tools you’re looking for in order to generate real, permanent, long-term customer growth for your small business!