The dark side of the Daily Deal
Daily Deal web sites: loads of new customers, great exposure for your business, but be aware of the side effects these deals may bring.
It seems that Groupon or daily deal style web sites are here to stay. Even our own James Packer is said to be considering getting in on the act. If you’re unfamiliar with the business model, these group buying sites may vary a little but the general idea is this.
They get a special deal from a business, for example a massage treatment and instead of it’s normal $100 price tag if you buy through the site you’re able to obtain the service for say $25 – a greatly reduced and attractive price.
Some of the $25 goes to the business providing the service and the ‘daily deal’ web site takes a cut.
The perceived benefit for the business, mass exposure to many new clients and a wave of new business.
What’s the catch?
Don’t get me wrong, when well thought through these kind of sites can be beneficial but as a business owner make sure you keep you’re eye on the ball and don’t be too easy on the ‘daily deal’ sales guy. He’s going to try and get you to give the best price possible, “make it attractive” but don’t forget you have to provide the service.
I will give you a great example of where this can go wrong.
Up on the Northern Beaches of Sydney, I go to a great little restaurant (let’s keep it vague), usually once every month or so. It’s a bit out of the way but the food is terrific. It’s not cheap, with a bottle of wine you’re lucky to get away with change from $250 for 2 covers, so you get the picture.
However on the last visit things were a little different. First thing noticeable is that they place is full, it’s usually not that busy. Then while talking to the owner, she tells us about their participation in one of these deals. Fair enough, seems to be working, loads of people in.
While looking through the menu we then noticed subtle difference, mostly the same dishes but some of the nice touches (read: more expensive ingredients) were missing. Then when our mains arrived it hit us. The portion sizes were literally halved – we were helping fund the daily deal!
Having been there a number of times and order similar things, we knew right away what was going on. In order to fund the cheap deals the entire menu had been changed, even for full paying clientele, with the result being that we had been massively short changed.
A better way?
Certainly a better way of dealing with this would be to have a set menu for the daily dealers and keep your regular clientele happy with what they’re are used to.
So ensure when you’re going into one of these deals that you are still able to keep your product or service up to standard while servicing the (hopefully) large uptake of new customers. Consider giving the dealers a cut down version of your product or service and do it well.
After all you do want them to come back!
This post really hits the mark. I work for a new daily deals website called http://www.mydeal.com.au and we are hearing stories from business owners that some daily deal websites demand such a big cut that once they are left to service the deal it is hard to maintain quality with such an influx in customers. Furthermore, clients have reported that the ‘type’ of clientele are not really their target market since they are unlucky to ever want to pay full price (this is especially the case for high-end establishments).
Businesses need to hold there ground with sales guys and even insist on having a cap so that are sure they can handle the demand and so not be a detriment to their loyal clientele.
If we don’t look after our business partners then the daily deals business will not last!
I have a client that I do work on his website and he has been approached and took up such a deal with a company as well, but was smart enough to give a set menu and allocated a certain number of people per night to use their coupons. Obviously these are a great way to entice customers, but there as to be a balanced approach or it will simply not work as it is supposed to.