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Get the real deal on daily deals Lunch & Learn
- 1. Get the Real Deal on Daily Deals Arkansas Small Business and Technology Development Center © ASBTDC 2012 All Rights Reserved
- 3. The Good Daily deals are still purchased Groupon: + 70 M subscribers No difference in DDVs 20% repurchase rate © ASBTDC 2012 All Rights Reserved
- 4. The Good Success! Special Events Restaurants Adventures © ASBTDC 2012 All Rights Reserved
- 5. The Bad DDVs keep 50% 20% redeem beyond value* 40% business dissatisfaction* Cash flow problems © ASBTDC 2012 All Rights Reserved * What Makes Groupon Promotions Profitable for Businesses? Uptal Dholakia, Rice University
- 6. What’s wrong with daily deals?
- 7. What’s wrong with daily deals? Saturated
- 8. What’s wrong with daily deals?
- 9. What’s wrong with daily deals? “[All] The deals are for the same types of products with hardly any variation.” –Tom Adams, Chesapeake, VA
- 10. What’s wrong with daily deals? “When the deals were more experiential they kind of piqued interest a little more. My favorite deals from the past have been ones that really enabled me to try new things.” – Kait Smith
- 11. Right for My Business? Unprepared for large influxes Never have repeat sales Lacking customer service Don’t have a goal © ASBTDC 2012 All Rights Reserved
- 12. New Target Market © ASBTDC 2012 All Rights Reserved
- 13. When to use a daily deal • Introduce new product • Excess inventory • Gain repeat sales • Price conscious • Instead of advertising • Excess capacity • Attract a new demographic • Generate buzz • Additional sales © ASBTDC 2012 All Rights Reserved
- 14. Can I handle the traffic? © ASBTDC 2012 All Rights Reserved
- 15. Best Practices 1. Limit the deal 2. Get an add-on purchase © ASBTDC 2012 All Rights Reserved
- 16. Best Practices 3. Have great customer service 4. Make them come back!
- 17. http://mobmanager.com/daily_deal_calculator © ASBTDC 2012 All Rights Reserved
- 19. Arkansas Small Business and Technology Development Center www.asbtdc.org www.facebook.com/atbtdc @ASBTDC @JennyRockus © ASBTDC 2012 All Rights Reserved
Editor's Notes
- InGet the Real Deal with Daily Deals, we are discussing the good, the bad, and the ugly of daily deals; whether daily deals are right for your business; best practices in developing a daily deal marketing plan; and alternatives to daily deals if it isn’t right for your business. We’re also going to discuss how much is cost to run a daily deal, and how to calculate your gains and losses.
- Ok, so the good news is that daily deals are gaining in popularity. More and more people are signing up for daily deals everyday. Groupon is the biggest and has over 70 million subscribers in each of the cities that it’s present. More good news is that there is no difference in DDVs on the business side. This means that all the DDVs in a city have the same reach, the same commission, and the same model. The average repurchase rate is 20%, and that doesn’t sound like a lot, but compare it to other advertising models like tv advertising and yellow pages and it’s a lot higher.
- Health Service, special events, and spa/salons are the most successful businesses to run daily deals. Restaurants are the most commonly purchased. This generates great traffic for the restaurants, but the owners need to wary of how many persons they can serve, make sure they have enough inventory, and the customer service levels are up.
- The DDVs are going to keep 50% of the voucher price. That leaves the business with only 0.25 cents to the dollar for every voucher they receive. That is a really big loss on each purchase. Only 20% of customers will redeem beyond the voucher value, and the business dissatisfaction is with the DDVs is really high. Many businesses aren’t coming back to daily deals as way to promote their products for various reasons including the commission being too high, the deal was difficult to manage, and unprofitability.
- Your business should never use a daily deal if you have any of these problems. If your business has no repeat customers, like roofing, you wouldn’t want to offer a heavy discount on a new roof. How often do people need to replace their roofs? Every 20 years, so it would badly impact your revenues if you offered a deep discount on a new roof, because you won’t get any repeating customers. If your business doesn’t have excellent customer service, you should stay away from daily deals. Also, you should have an achievement goal, like how many new customers you want to get in the store, how many repurchases you want to make, how many add on sales, ect.
- DDVs are attempting to change the “deal-seeker” attitude, where people are buying the deals only to get 50%, to more of a higher income level or people who like to explore new places, restaurants, and locations.
- So, now you know who is buying daily deals, now lets talk about when you should use a daily deal. Does anyone have any ideas when to use a daily deal? *click* Excess inventory, like end-of-season wear, or if you want to try a new product offering. To gain repeat sales, like for example, to reach out to previous customers, or the price conscious who have been unwilling to try your business because of the price point, you can use it instead of advertising. If you have high fixed costs, like a ferry boat ride, where it is the same cost for you whether the boat is empty or full. You can attract a new demographic, like the segments we just talked about. Daily deals are a great way to generate buzz because the DDV give your business a lot of attention the day the deal runs, also it’s a good idea during your slow period to get some additional sales.
- When you run the deal, its important to think about if your business can handle the traffic volume. The biggest peaks are immediately after the deal is run, many people will come in with their promotions, and then it drops off after the first month. Deals usually expire in a 6 month time period. As the end approaches, many will flock in suddenly to redeem their promotions before they expire. I wanted to share this with all of you so that you know the high traffic points and can prepare accordingly by having enough inventory and staff.
- There are four things that will help you have a successful daily deal. *Read the list.*
- When thinking in terms of money and the return on investment we need to think about two major things. Is a daily deal going to be profitable now in the short-run? DDVs like to say that your business will gain lots of money by using their service. And you can make money running a daily deal, but only 55% are profitable according to studies done at Rice University. So, the next question is: If I don’t make money now, will I gain enough new customers to make long-term profits from this deal? The daily deal calculator from Mobmanager can help you determine these important questions. Now we are going to use the ipads in front of you. This Mobmanager site is bookmarked right on the home screen for you. *Get everyone to the advanced options where they need to be.* Our example will be for my pie restaurant. Let’s say that I would like to do a dollar deal. My DDV and I decide on $7 for $12, and the average customer purchase is 1 pie, which costs $12. The DDV is going to take 50%, my expected sales is going to be 200 and my labor cost and goods cost are 0.15 cents each. Hitting calculate, I see that at this price point, I will lose about $20.00 on this deal. But, $20 for 200 new customers is not a bad deal. Let’s perform a new calculation and we are going to leave everything the same except the average customer purchase. Now, let’s say that instead of my pies costing $12 each, lets say most of them are actually $15. Now I potentially am making a profit from this deal of $400. Its really important to take a look at the break even point, if you can you want to meet or exceed that point, while still offering a good deal. Also, if you don’t know what your cost of labor is or cost of goods is, just leave it at the 0.25 cents. That is a fair, off the cuff estimate, and if you like, after the class we can talk one on one about finding out what your business expenses are.
- Now we are going to take a look at another handout in your folder entitled Is a Daily Deal Right for Your Business? This is a flow chart designed to help you determine a plan and whether or not a daily deal will be a useful strategy for your business. We’re going to start here*point* and *go through it*.