Local deals. Daily deals. Group-buying deals. Call them what you will, but they're all the same thing: a very expensive form of marketing that can run a small business into the ground if utilized incorrectly.
They all have the same premise: the client company agrees to offer its products or services at a heavily discounted price. The local deals firm then distributes the deal to all its subscribers near that company's location and takes a large cut of the profits (usually 50%).
That leaves businesses having to provide their goods at a very low cost, usually at a loss. For instance, a restaurant that offers a two-course meal for two at $20 will (in most cases) have to provide that for $10.
The reason so many companies are choosing to jump on the local deals bandwagon is the promise that their offers or deals will result in an influx of loyal, repeat customers.
Yet that is rarely true. Daily deals attract a certain type of consumer—the type who never wants to pay full price. Unless you take steps to draw them back, the day those consumers redeem your deal will be the last you see of them.
Other marketing channels that have taken off recently, such as social media, are based on building relationships and retaining customers. A good social media agency can work wonders for your business, using a process that is slow yet steady in achieving success.
However, Groupon and friends are about instant marketing. But instant marketing is marketing that is forgotten quickly—unless you take steps to make it work long-term, that is.
So what can you do to make your deal work?
1. Offer customers another deal
If you're a restaurant, slip your diners a voucher with their bill. If you're a hair or beauty salon, do the same. If you're an online retailer, thank your new customers for their purchase, and email them a discount code for future use.
The great thing about doing that is that you are now in control. Groupon, LivingSocial, and the like, cannot encourage you to discount more than you want to. You can offer to discount only what your business can afford, and any profit made is all yours.
2. Integrate your deal into social media
Give your new customers a short pamphlet that states that if they want to enjoy further deals from you, they should "Like" you on Facebook, or follow you on Twitter. You are then in a position to build relationships with those customers and offer them those promised deals, increasing the chance of them returning multiple times.
If you're unsure how to use social media most effectively, talk to some local social media agencies. A social media agency will be able to offer advice, or even carry out a campaign for you.
3. Ask satisfied customers to write a review
Many people choose to read reviews online before electing to eat at a restaurant, or buy from a Web-based shop. If you've got lots of positive feedback, you should find your number of customers increasing.
Of course, not all your deal taker-uppers will write a review, but if you ask very nicely, enough of them should.
4. Ask for your customers' contact information
If you're in a customer-facing business, ask your new customers to fill out a short form before they leave. Sadly, as I understand it, Groupon and its clones don't provide you the contact information of your new customers. So, you need to take action to obtain those details yourself.
Offer customers an incentive to motivate them to provide you their information. For example, another deal (obviously) or an entry into a contest for a free return visit will work wonders.
Pizza Hut, for example, executed a fantastic marketing campaign recently. It offered every customer an envelope containing a prize. However, to redeem their prize, customers had to return to a Pizza Hut location after a specific date and have a manager open their envelopes. If the envelope were to be opened any other way, the prize would be void.
Of course, many of the prizes were very small, such as free garlic bread. However, the temptation of winning the "big ones" will get people to return when they may well not have done so otherwise.
Executing something similar to Pizza Hut's strategy could be a very effective way of getting your new customers not only to return to you but also to talk about you, too.
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Employing one or more of the suggestions in this article should help you gain more success from this form of marketing than usual. However, some companies (restaurants in particular) incur such huge losses that nothing will enable them to redeem themselves.
Unlike employing a social media agency or an online marketing company, implementing this sort of marketing is not a decision to be taken lightly. The risks can be huge, so weigh all the pros and cons before agreeing to hand your company to the clutches of Groupon, LivingSocial, and other deals sites.