Daily deals can be like hard drugs

Daily Deals could be killing your business.

There are dozens of daily deal sites out there making a lot of money.

These incredibly popular sites can bring any venue a lot of customers. But who do they serve the customer or the venue?

The challenge for some of the venues we come across, is that just like a drug, they have become dependent on them, sometimes without realising and now they can’t get off them.

How daily deals came about?

The concept for the daily deal sites never started out to provide a constant supply of new customers to a venue.

When daily deal sites launched, they intended to give your business an boost of new customers. Once you ran the deal, you were supposed to capture information from the customer and then use this to follow up with them yourself.

For the venue, the daily deal was probably a huge loss maker, but it was a cost you could easily recoup later on through developing your marketing to take advantage of these new customer relationships.

The question therefore, is…

How did this become a central part of any venue’s sales and marketing strategy?

Unfortunately, daily deals if not used correctly, can be like a highly addictive drug – a quick fix which creates long term issues.

Here are some numbers from one of our restaurant clients as an example. They have been running daily deals for over 2 years now and it had become a major source of ‘customers’, (though not profits.)

With their last deal, they sold 750 deals at £29.95 for two people dining with 3 courses and wine.

From this they paid a referral commission of 35%, which means they took £20 in revenue for 2 people dining.

Each customer therefore generated £10 from which they had to provide the meal, service and so on.

If 70% of people claimed the deal, this would therefore generate £5,250 in revenue from 525 customers.

The cost was £7.50 per person, so the total profit was £2.50 x 525 = £1,312.50.

An alternative approach

Since working with us we have redeveloped their website, introduced data capture and direct marketing. As a result, they can now promote their own events.

As well as direct and digital marketing, we use social media – primarily Facebook and Twitter to promote these events.

At the last event, we charged £35.95 per person and had 70 spaces available. We sold out early so managed to find an extra table for 6 people and sold this through Facebook. There is zero referral commission to pay as all of this is done internally.

Total revenue for the event was £2,732.20.

The total cost of running the event was £9 with wine per person, so the total profit was £26.95 x 76 = £2,048.20!

Bear in mind that this event takes place on a single evening, not 3 months of fulfilling single orders.

During a 12 month period

Let’s look at this over a 12 month period.

We are now running an event like this at least once a month for this restaurant. We have successfully sold out the last 3 events since we took over the marketing so over a 12 month period, this will generate £24,578.40 profit from 912 customers. (Many of these will actually be repeat customers!)

With the daily deal, we can only run every quarter so this means only £5,250 profit from 2,100 customers.

By the way, these are real numbers, not projections. They are based on an actual client who is happy to talk to you about the results if you want!

Which one makes more commercial sense?

By the way, the daily deals will also be taking potential customers from the events! After all, why would you pay £35.95 if you can pay £29.95 for two people? So the daily deals are actually reducing the number of people at the main events.

However…

You may think that we are saying that daily deals are bad, but that actually isn’t necessarily the case.

If done correctly – as a loss leader to capture data in order to run future events, they can serve a genuine purpose. They give you access to a much larger audience than you could otherwise reach.

The problem arises like hard drugs. If you do them too often, or if you are using them to create a short term fix, the outcome can be very negative for your business.

Our aim is to help to wean your business off them and use them for their true purpose – occasional loss leaders to stimulate new customers.

The results

In the scenario above, the difference is amazing.

That single evening alone is almost enough to pay for all of the redevelopment we have done on the website, email marketing, social media, reputation sites, marketing plan, feedback forms! Effectively, we have set the business up for the future at no additional cost to them!

If you are still propping your business up by running daily deals, we therefore need to talk. Our team are available on 01772 978 199.