Everywhere you turn online these days you see ads for Groupon.com, LivingSocial.com or one of the other big players in the “deal of the day” word.
These sites have become hugely popular lately in part because consumers are demanding better deals due the economy.
And, if you listen to the hype, these steeply discounted offers are perfect promotional opportunities for just about any business. But based on my experience, I’m not so sure.
Here’s the thing.
I’m not saying that Groupon.com, LivingSocial.com or any other group buying website are specifically out to hurt any of the businesses who use them; but that is often the result.
If you’re considering jumping on board this “hyper-trending” promotional opportunity, there are three questions you absolutely MUST ask yourself before signing on the dotted line:
- What are your costs to deliver the product or service?
The biggest reason that businesses have a negative experience when using Groupon or LivingSocial to promote themselves is that they don’t know their numbers.
Let’s do some basic math. Let’s say you normally sell your product for $100 but are offering it for $50. And you have to give another 30% – 50% of the selling price to the advertiser. At the end of the day, you’re going to get about $25 per sale, when you would normally get $100.
If it costs you more than $25 to make the product or deliver that service, then you are going to lose money for every sale.
Loss leaders are often used to get new customers, so this isn’t necessarily a bad thing, but you have to know your numbers.
- How much money can you lose on this promotion?
If you’re using your Group Buy promotion as a loss leader, how much losses can your business safely cover? You’ll need to know this so that you can set an appropriate ceiling (or upper limit) on the number of deals you’re willing to offer.
Then you’ll have to negotiate this number with the advertiser (Groupon or other) since it is in their best interests to sell as many of your product or service as possible.
When calculating how much you are able to lose, come from a frame of mind that you might NEVER recover this money. It’s possible that all those new customers will simply move on to the next great deal and forget about you entirely.
- How will you ensure the highest possible “second sale” percentage?
The biggest value of group buying sites is that you can acquire a huge number of new customers with a single promotion. But for this tactic to work, you must have a strategy in place to ensure that the highest possible percentage of your new customers make a second (and third) purchase from you.
I recently had a cleaning company come and clean my house, which I booked through LivingSocial.com. I was flabbergasted when they didn’t leave behind any marketing material about their recurring monthly cleaning services.
This was a perfect marketing opportunity since they were literally in my house and could hand me a card, brochure or refrigerator magnet or offered me an instant “next cleaning” discount, of which they would keep everything and not have to pay a commission!
Daily deal and group buying sites can definitely have a huge impact on your business, but it’s up to you whether that is a hugely POSITIVE or hugely NEGATIVE experience.
Spend the time to answer these questions carefully.
Devise a follow-up marketing strategy that will maximize your second sales and put an appropriate limit on your offer so that you don’t put yourself out of business.
Let Me Help You Build Your Group-Buying Strategy!
If you’re considering using Groupon, LivingSocial or any other group-buying site to promote your business, let me help you put a plan together that will ensure your success!
I’ll help you:
- Understand your numbers and develop your offer.
- Set an upper limit that will be a win for everyone, while ensuring your business can handle the load.
- Develop a “second sale” strategy to capitalize on all the new customers your promotion will acquire.
Too many businesses have been hurt by group buying promotions because they didn’t understand what they were getting in to. So many more have failed to capitalize on their promotion by developing a strong second sale strategy.
You don’t have to be one of them. You CAN be one of the big winners.
Call For a FREE Group Buying Consultation Today!