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The Truth About Groupon, Living Social & Daily Deal Sites

As a business, have you ever considered using Groupon, Living Social or any of the other “Daily Deal” services on the internet?  Or, have you ever wondered if they would actually bring you more business?

If you’re like many businesses I’ve talked with, you are looking for ways to get new customers and to keep existing customers or get them to buy more.  You probably don’t have time to thoroughly investigate each new service that comes along and promises new customers or repeat customers.  And I bet you’ve been swayed, or at least tempted, to try something like Groupon or Living Social.  But do these services really deliver what they promise?  And if so, at what expense to you the merchant?

Let The Numbers Speak For Themselves

Are Daily Deals Really a Deal for a Merchant?

I recently did the math for a restaurant owner that asked me to look into a Daily Deal Service for them.  If he were to offer a Daily Deal online (via Screamin Deals) for $20 worth of food at a 50% discount, what would occur is the following:

  • consumer would purchase a coupon off of Screamin Deals for $10
  • consumer would redeem the coupon at the restaurant and would be given $20 worth of food (with no money changing hands if the order was exactly $20)
  • Screamin Deals would send the merchant “half” of the amount that the consumer purchased the coupon for…in this case $5.00…and keep the other half as their fee

In the above example, the restaurant owner would give out $20 worth of food and would only get $5 in return.  What starts out as a 50% discount on his food, would only bring him 25% of the purchase price (so in effect, that’s a 75% discount).

To make matters worse, Screamin Deals’ merchants don’t receive their money right away like they do in a traditional sale.  The restaurant owner, in this case, would be paid his $5.oo portion of the sale, in several installments, over a period of 7 to 30+ days.  (Some Daily Deal sites take as long as 60 days to pay all installments to the merchant.)

Read This Before You Launch an Offer on a Daily Deal Site

  • In an article on USAToday.com, Rhonda Abrams points out that Daily Deals are far less costly when offered on Services versus Products, because there is no cost of goods.  Makes sense!  Click link to read Rhonda’s 10 Strategies for Offering Daily Deals to increase your chances of success with a Daily Deal.
  • Next step is to make sure you are clear on the terms of the Daily Deal site you are considering and then do the math for your product or service and the discount you are thinking about offering.  In the end, only you can determine whether or not using a Daily Deal site is a good move for your business.

What’s Your Opinion or Experience With Daily Deal Services?

I hope this article, and the links it contained, helped shed a little light on how Daily Deal Services really work and that the info will help you make a choice for your own business.

What’s your opinion or experience with Daily Deal Services?  (Leave your comments in the box below.)

Cheers,
Kimberly