Are Daily Deals Like Groupon Good For Local Businesses… In The Long-Term?

Local business marketing , Kevin ToneyGroupon and other coupon services are very popular right now, but do they support the long-term success of local small businesses? Sales reps from these companies will tell you that’s it’s a “win-win” situation because of the increase traffic to your business, but increase traffic doesn’t always mean increased profits.

After recently hearing about a situation with a Greenhouse that may go out of business because of a coupon campaign and doing some research, I’m convinced that coupon services are good for the consumer, but in the long-run the merchant too often gets the short end of the stick.

Here are my three reasons why I believe daily deals coupon campaigns too often turn out to be a bust:

1. Most small business owners have no written marketing plan; so the decision to run a coupon campaign is often made with very little strategic thinking as to how it will affect the business in the long-run. No marketing goals or objectives are usually set.

The decision is usually based on tactical thinking without asking some key questions like: will you be able to meet the increased demand? How will we get a return on our investment? Should we put a cap or limit on the number of coupons we want to sell?

2. I see these coupon campaigns like bands with one hit that you never hear from again, the “one-hit wonders”. Also, they remind me of lost-leaders in the retail industry. Chances are the merchant is barely making a profit (if any) on the campaign. Big companies might be able to absorb the cost, but most local small businesses can’t.

3. I called one of these daily deal services to find out if they provided the merchant with the contact information of everyone who bought the coupon, the answer was no. Based on my 15 years of experience working with small businesses, I’m betting many merchants don’t have a strategy to capture the contact information of customers when they come in.

So how the heck do you follow-up with these mostly “first-time” customers to start building a relationship and turning them into REPEAT CUSTOMERS? Any smart business owner knows the real profit is in repeat sales. Most of the people who buy these coupons probably wouldn’t have visited the business if it wasn’t for the coupon and are not likely to come back without another coupon.

To take full advantage of these coupon campaigns local businesses must implement a follow-up program or relationship building program, before they sign the contract with companies like Groupon.

Coupon customers should be treated like VIPs, make sure you have a talk with your employees so they know they have to roll out the red carpet service to ensure people have a great, memorable experience.

Many of these coupon services will tell you to think of the daily deal as an advertising campaign, but does the short-term bit of PR or advertising make up for the loss in profits that could have a long-term negative effect on your business?

My intent isn’t to denigrate companies like Groupon. For some businesses this could be a profitable experience. The larger points I want to make is that you must have a marketing plan, think strategically not tactically, don’t make hasty advertising decisions, ask the right questions before you sign the contract and do some research to find out what results companies similar to yours have had with daily deals coupon campaigns.

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1 comment

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