Does a deal-a-day keep good customers away?

Posted on February 14, 2011


Happy customers

With many marketing experts tipping group buying sites such as Cudo and Groupon to enjoy a steady rise this year, we thought the deal-a-day phenomenon would make a great topic for our new “Hot or Not?” section.

If you’re not familiar with the deal-a-day (DaD) concept, here’s the low-down:

  1. Businesses register with a DaD website for a ‘no upfront expenses’ advertisement that consists of providing an exclusive deal (usually 30-70% off a product or service, though sometimes as much as 90%) via the DaD site
  2. The DaD site emails one exclusive deal per day to its registered subscribers (ordinary consumers looking to bag a great bargain)
  3. Businesses wait for the ensuing foot traffic and pay a commission (I’ve seen as high as 50%) to the DaD site on every new sale generated through the deal.

Now, let’s look at what’s hot and what’s not.

HOT: No upfront costs – Obviously, this is highly attractive to marketers and sales managers who are ever-conscious of the need to weigh up ROI against everyone of their marketing activities. A campaign spend based solely on the number of sales generated (eg. 15 sales at 10% of $60 each = $90 total marketing spend)  is easy to measure and justify. This is also great for those start-up enterprises that don’t have a lot of cash to splash and need to be sure that their marketing activities will be worth while.

NOT: Massive discounts plus a commission – Imagine you wanted to offer a $100 service through a DaD site – you would need to provide at least a 30% discount on that service and pay a minimum of 10% commission to the DaD site for every deal sold, effectively leaving you $63 per sale via the site before subtracting wages, supplies and other costs. Make sure you run the numbers carefully as you could be running into the red.

HOT: Ability to reach an actively engaged audience – Unlike consumers reached via  traditional advertising media, the people targeted by DaD sites are actively engaged with the content – they are receiving your offers because they personally signed-up to do so. This means they are far more likely to respond to your advertisement and you are less likely to have spent your precious marketing dollars on deaf ears.

NOT: Disloyal consumers and bargain hunters – While we hate to paint everyone with the same brush, it’s likely that many subscribers to DaD websites are keen bargain hunters that are happy to shop-hop from one place to another in search for the best deal. Be prepared for a number of one-sale-stands, as the new faces in your shop may not be back again to pay full price.

HOT:Exclusivity – Everyone wants to feel like they’re privy to a juicy little secret or VIP treatment and with DaD sites, that’s exactly how your new customers will feel. This increases the likelihood that people will “get it while it’s hot” and you are likely to see an influx of foot traffic almost immediately.

NOT: “You get what you pay for” mentality – With big discounts comes a big drop in the perceived quality of a product or service. DaD sites could be costing you more than a bit of profit for a few days – they could be costing you the time and strategy that you’d invested in creating your brand, particularly if yours is an upmarket or luxury item.

HOT: No competing noise – When you register with a DaD site you are buying hot property – a hill-top piece of land with unobstructed views. There are no noisy neighbours to distract your potential customers and you don’t need to keep up with the Jones’ – all eyes are on you!

NOT: A short shelf life – Cyberspace is rife with attention spans to rival that of a goldfish (3 secs) and the immediacy of online publishing means that new content quickly replaces the old. DaD sites offer the afore-mentioned hill-top land for one day only before you’re evicted and a new King of the Hill is crowned. This means you run a bigger risk of missing valuable customers then you would if you advertised the same deal in a monthly magazine.

So there you have it a (hopefully) balanced presentation of the pros and cons associated with DaD websites – whether they are ‘hot’ or ‘not’ ultimately lies with you, so please take our poll and let us know what YOU think.

Posted in: Hot or Not?