Tuesday, April 17, 2012

Deal of the Day... Groupon... Living Social... Is this a good marketing tactic?

I know when I say that I LOVE Deal of the Day, Groupon, and Living Social, I am not the only person out there.  It's pretty obvious that in these hard economic times, people want to save a few dollars on the things they love to buy or want to try.  It's even better when you save anywhere from 50% + off of these items.  Although consumers love to bargain shop and save some serious dollars on these fabulous deals, is this a good marketing tactic for businesses?
This question can be answered in different ways.  This tactic may be fantastic for some businesses and not so great for others.  It really does depend on the goals of the business, what is trying to be accomplished by using this method, and how customers are handled after the deal is purchased.
So how do these deals work for businesses?  It's pretty simple.  What is great about these marketing tactics is there are no upfront costs to the business like advertising has.  You simply create a deal that is 50% off or more for the consumer and sell the deal for one day.  Once the deal is sold, Deal of the Day, Groupon or Living Social split the profits made with the business 50/50.  This allows the business to generate a client base and bring people in the door.  But the main concern I hear with this when I recommend the Gazette's Deal of the Day to clients is "Well I can't afford to sell my product that low and split the profits with the Gazette."  I'm sure many business owners feel this way and this is exactly why they have not tried this marketing tactic before.  However, when looking at this form of marketing with a "glass half empty" perspective, takes away from the overall big picture.
The overall big picture... what is the overall big picture for a business?  Well for most businesses it's getting people in the door to buy product.  Consumer + Product = Business Growth.  Simple logical math right?  Without the consumer there is no business growth.  The equation fails without the consumer. So to fix the equation, a business owner may ask "how do I get the consumer in to sell more product?  How do I do this if I don't have the money to advertise?" 
 This is where a marketing tactic like the Gazette's Deal of the Day comes into play.  Create a fantastic deal... advertise to the consumer for one day only to entice the consumer to try your product... sell a lot of product... split the profits in the end.  You pay for the marketing after the results of your campaign are in.
But the bigger picture... just exactly how many new consumers did you bring in that have never tried your product before?  Out of those new consumers, how many will like your product enough to come back and purchase again... at full price?  After the deal, a yoru business will have a whole new equation... “How many new consumers did I bring in and how do I turn then into long term buyers?”  New consumer + _____________ = long term buyer.  That equation can only be answered depending on how well you plan out this deal and manage your results.

The Deal of the Day, Groupon, Living Social… can all be marketing tactics if done correctly.  For a business to effectively work this campaign with great results, specific steps and strategies should be put into place.
1. Great a fantastic deal!!  All deals must be 50% off or more.  The bigger the discount, the better your odds of selling more deals will be.
2. Honor all coupons with a smile.  DO NOT treat these consumers like coupon bargain shoppers.  Treat them as if they are paying full price for your items.  This will ensure the consumer will come back.
3. Be upfront and honest with your deals!!  Do not bait and switch and do not try to charge more unless specified in the deal.  For example, if you have different versions of your product that may be more expensive, then specify that in your deal when it is being sold.
4. Have enough time for your expiration date.  My recommendation is 6 months to a year, but do not go less than 3 months.
5. Above all, make sure you have a way to turn your deal consumer into a long turn consumer.  This includes different marketing strategies like email, direct mail, social media and other costumer campaigns.  Make sure that you are always in front of the consumer.

So don't think of this type of marketing tactic as a "glass half empty" type of strategy.  The long term rewards will more than pay for the great deal offered.  Hey, it may work so well that you can do it again.  I have seen many businesses do these deals multiple times. There is a reason that many businesses use this strategy.  It's because it completes the equation and makes business work.

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