An SEO colleague once told me, “Never let good content go to waste.” So, today, inspired by this article, Will Groupon Really Boost Your Local Business?, by Carla Dewing on SocialMediaExaminer.com, I decided to write this meme that I’ve been preaching on the Daily Deals for the last few months.

When I refer to daily deals, I mean the likes of Groupon and Living Social, as well as a plethora of other up-n-comers and local programs. The model is pretty consistent across the board. Web site offers a double plus good deal for product, usually in the form of a gift certificate. Consumer pays 50% (or less) for the value of the product/service, whatever. They then go into your store (or visit online) give the coupon and walk out feeling they got new stuff at clearance prices. Yay!

On the flip side, the daily deal collects the money from the purchase, splits it in half, deducts credit card processing fees from your half and cuts you a check for around 47% of the profits.  What? They pay you to advertise? Yup. (Okay, seriously, if you didn’t know that part by now you probably shouldn’t be reading this article).

Before  you get too excited about the no-cost advertising this appears to be, consider this: You are giving new and existing customers a 78% coupon to your business. Changes the game a little bit, doesn’t it? But hat’s the thing, daily deals are a game. Its easy to get a call from the salesperson and start thinking that a zero cost advertising campaign totally fits your marketing budget. But you can’t stop thinking there. Like ALL marketing, a lot of forethought needs to be invested upfront!

I’m apparently the only local advocate for Groupon. Living Social won’t touch my market and we’ve had discussions about that….so far I’m losing. I have conducted half a dozen Groupon offers on behalf of various clients and they’ve all been successful. One was even, dare I say, profitable. There are a lot of daily deals critics, and for good reason.  For example, this good (though alarmist, in my opinion) post about Groupons and the spa industry.

Christopher says

I can only assume “Jesus” (& partner) thought they could get rich as salon spa owners by opening their own place and using Groupon/LivingSocial to get them all the business they need. No need to work for 50% and let some “greedy” owner keep the rest for their hard work! Or, God forbid, work for $20/hour for a “super-greedy” owner. Jesus is now living the good life. Living social sold over 800 of his services (most 2 at a time, so to 400 clients). He’ll be getting a nice, hefty check for around $6,400

…BUT, it will take him 1,00 hours (THAT’S HALF A YEARS FULL-TIME WORK) to redeem all of these, which means he’s earning about $6.50/hour.

No, Groupon is not for everyone, and Jesus here was destined to get burned because he didn’t think it through. The question then becomes, as the author claims, will industries that are sensitive to the pit falls of daily deals suffer an overall failure because of the actions of a few not-so-savvy members? My answer is no. Especially in the spa industry, the people who are buying Groupons to get a cheap massage would never have been in the studio in the first place because they are not willing to spend $80/hr for a massage. No, Jesus may not get new loyal customers, but he got $1,000 worth of customers he never had, and never will. I understand the author’s argument about commoditizing the industry, but in the luxury services, the real money is in the customers who are willing to pay a premium and aren’t as interested in the coupon.

The web is filled with stories of companies who lost their shirts with a daily deal, but almost every one of them are themselves at fault for the undermining success of the campaign.

Its all about strategy. Here’s a few ideas you should consider:

1. Use the Parameters – Daily Deals have parameters in place to help advertisers control their campaign. Things like total number of purchases per user, expiration dates, tipping points and most importantly max # sold. Here’s my rule of thumb for this. Let’s say that every single customer came in 2 days after the deal went live to redeem their coupon. What is the number you could survive with? OR, for those math people, write down what you want your total spend to be if it were traditional advertising. Calculate the difference between the deal’s value and your income, per unit. Then divide. The result will be what your maximum should be.
2. Adjust Your Line Item – whether you do a Groupon or a TV spot, you’re gonna pay. The deceiving part is that daily deals take their cut from your product ledger and TV takes it out of your marketing budget. The real area where people can get in trouble with this shifting is when they’ve spent they’re marketing budgets, or have no marketing budgets, and figure they can stretch those lack of dollars into one more rifle blast.  If you do a daily deal, the figure you came up with in number 1 needs to be moved out of you marketing budget. If you don’t have the money, don’t do it.
3. Don’t give away what you don’t have – I did a Groupon for a client’s performance. We did a cap at 500 and 60% off. Our goal was new customers and awareness. The performance cost the same to us whether we had 5 people in the audience or 5,000 so we had nothing to lose. It was risky to set this precedent that people would only come to future shows if they could get a coupon, but the result was increased tickets sales for all the concerts. If you can’t afford to give a 75% discount to 100 people, don’t do it. You will lose.
4. Know what you want – daily deals are a great way to get new customers, but not necessarily loyal customers. You can always implement other tactics to get new customers to come back (and it doesn’t have to be a discount or gift card). Do you want a profit? Oh, yes, you CAN get profit from Groupon. Revisit the section about the game.
5. Price Means Everything – you have to keep the price of your daily deal offer in line with the prices of your products. Its a strategy.
6. Negotiate – Daily deals are HOT – and the likes of Groupon and Living Social know it. Their strategy is to go directly to the business owners because they can hold the business owners hand. They don’t like companies like ChristolBranden because we give them too much grief to make sure our clients are getting EVERY advantage.  That just rubs their billion dollar egos the wrong way.

Don’t fear Groupon or Living Social. Embrace them. In this economy people are choosing to retain their buying power as opposed to giving it up. Don’t eschew its potential to grow your business – just don’t expect a silver bullet to come directly from the sales people at any of these daily deal suppliers. Be an active participant and you’ll find success.