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DQ News: The Long Tail Issue for Daily Deal Sites

When daily deal sites like Living Social and Groupon came to the market, many observers looked at it as another nail in the coffin for offline retailing.

By bringing huge discounts to consumers via their local business partners, Groupon and others like them would show business a new way to make more money, while bringing more customers to them.

Except it’s not quite worked out that way yet.

Short Term Gain, Long Tail Miss

The problem with daily deals sites – and, to be fair, any of the stack-em-high-sell-em-cheap options that many businesses look at – is that they’re not really set up for long-term loyalty. And that’s a key reason why so many businesses fail in general, and something that many daily deal partners are complaining about.

Sure, they’ll give customers a nice discount and a reason to come to your store or business in the first place. But where’s the incentive to come back if I’m a new customer, once I’ve taken advantage of your sale product?

Unless there’s a relationship sale versus a transactional one, if I don’t normally shop with you then I have no real reason to come back unless it’s for another daily deal. Which sees you lowering your profit margin to make the offer in the first place – not ideal.

Business and Consumer Apathy

It would appear that more folks from both sides of the fence are beginning to think like that, too. According to a new survey from Cooper Murphy in the U.K., a whopping 82% of businesses surveyed that have run campaigns on Groupon were unsatisfied with the amount of repeat business it brought.

Add these figures to a study by Rice University in May of this year, that reported just over 20% of daily deals customers become repeat customers, and you can see why the daily deals market is one that seems to divide opinion on its benefits.

It’s not just the business owners that are suffering. Because one of the major premises of daily deals is to attract the low-spend customer, restaurant and bar staff have found that customers using a daily deal offer will usually tip less than those paying full price. Ironically, the less you have to pay, the less the tip should be too, it would seem.

So what’s the answer?

Loyalty and Long Term Gain

Everyone likes a bargain. I do; you probably do; I know my wife does. It’s human nature – if we can pay less, we will (although paying more for extra quality isn’t a bad thing).

The problem with constant bargains is that customers get into the mindset that they’ll only wait for these bargains, and ignore you the rest of the time. Get ignored by customers and… well, you don’t need to be a rocket scientist to know the outcome of that scenario.

So while the short-term benefit is clear, businesses need to be building long-term benefits for the customers, to encourage return visits and loyalty.

• Episodic discounts. Say a daily deal saves you 60% on the transaction. Instead of the one-off approach, offer three transactions saving 20% each time. On subsequent visits or purchases, have an amazing add-on deal that encourages further spend on top of the discount.

• Split the location. If you’re an offline business, with multiple locations, why not split the offer between different locations on different days? A sports shop could offer different goods on different days of the week at different stores; a restaurant a different appetizer based on location; a movie theatre group, a different 2-for-1 admission to a different movie across town.

• Promote loyalty. If you don’t already have one, build a loyalty card around your daily deals customers. The first time they come in, have them fill out a short form with their information, and then give a loyalty card with unique offers based around the daily deal. Use it X amount of times and they receive a free product or service (within a certain budget).

The beauty with the loyalty approach is that you can now tailor email and mobile campaigns to your customers (opt-in, obviously) that offers more call-to-action specials just for them.

Run that alongside any specials you offer existing customers, and you’re encouraging growth and repeat custom across the board. Which seems to be all that businesses and consumers of daily deal sites want, anyway.

Worth a shot, no?

image: jakelevine

The Long Tail Issue for Daily Deal Sites originally appeared on Danny Brown | Social Media Marketing Blog - The Human Side of Media and the Social Side of Marketing under a Creative Commons license.

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