In general, the one deal per day concept is simple enough to understand. Everyday an email with a highly discounted deal from a local business is promoted. Customers go to a secure site and purchase the daily deal. Once the deal promotion has ended, the coupon is available to be printed and redeemed.
The business model is pretty simple as well. The daily deal provider collects the money and for each redeemed coupon will send approximately 25 percent of the coupon value to the business. The daily deal provider keeps all the revenue on coupons not redeemed. Yipit, a daily deals site aggregator estimates that 15 percent of purchased coupons are not redeemed. Overall revenue growth for these sites has increased more than 40 percent between 2010 and 2011, according to a report from BIA/Kelsey, a media research and consulting firm.
For local businesses, the daily deals phenomenon is attractive because there is no upfront marketing costs. Daily deals offer an opportunity to reach unknown customers, introduce products and services to new markets, reward loyal customers and purge old inventory. For this opportunity, the daily deal sites are looking for items that will sell. A deep discount on something that nobody wants will not see the light of day on these sites. Also, any business interested in participating must be prepared to put together a great package as discounts typically range from 50 to 90 percent off retail price.
However, there is one critical success factor that often goes overlooked. In order for the daily deal to be successful, the business must convert the deal seeker into a long-term customer. This means providing a high-quality experience when a customer redeems a deal. This is especially important in a service-based business. For example, restaurant servers has expressed how much they dislike these coupons because they are working much harder than usual during the redemption rush on the restaurant, yet they are most likely to be tipped on the reduced amount of the bill. Keep staff motivated by giving them an opportunity for upsell or an ancillary product/service contest.
What’s next: the combination of mobile with the daily deal. Foursquare recently announced that it will distribute AT&T’s Deal of The Day. In the future, we will see daily deal immediacy, like your phone buzzing if you walk past a store with a deal of the day.
By the way, if you have daily deal buyers’ remorse, you can resell coupons on CoupRecoup. Let us know if you are addicted to the daily deals and if you’ve had any negative experiences. Share your thoughts with us on Facebook at Weise Communications and follow us on Twitter at @Weise_Ideas.