Groupon and other Daily Deals–Are they worth it?

Yes & No!

Sitting on the fence, not really! It depends if you are on the receiving end or giving end.

If you are a consumer you probably love deal-of-the-day (DOD) sites but if you are a retailer you may not be as delighted!

Daily Deals Infographic

Click for larger image

As a consumer you will obviously find daily deal sites valuable but businesses are divided on whether as a promotional tool they are as effective at generating new and repeat business.

Recent studies indicate that 82% of businesses are unsatisfied with the amount of repeat business they generate after running a Groupon deal (see graphic).

Not really a great surprise!

Many if not most small businesses running daily deals are “sold” the idea of the deal by a sales person using buzz words and a sales pitch that convinces them to signup.

They are often told it is “free” advertising! In today’s economic climate it might seem an opportunity to attract more customers with no “real costs” but not all small business owners are marketing experts and perhaps don’t fully understand that daily deal sites can cost them a great deal (excuse the pun)!

It also depends on the type of business offering the deal. I can understand that a business with fixed overheads to cover, eg a theatre with empty seats, perhaps even a restaurant with staff, chef, heating and lighting cost to cover, considering it.

It will bring in extra income and contribute to fixed overheads. Might make the difference between turning in a loss or, at least, covering costs.

But, nothing about daily deal sites is free, it just doesn’t involve any upfront costs. As a result many of those businesses can actually loose money on the deal.

It involves looking at your cost base, expected and actual income from the exercise and what level of contribution the extra footfall makes to covering these costs.

This issue is not new and there was post, last August, by Christine Fife entitled Groupon Nearly Killed My Small Business which outlines the effect on one business.

It’s all about the Opportunity Cost of Daily Deals

And, now jumping off the fence completely, I’ve never understood why so many businesses seem so keen to give away any of their hard-earned margin!

It might be as one of the comments on Hubspot blog 82% of Businesses Are Unsatisfied With Daily Deal Sitesthat it’s because the business owners are fair-weather participants and didn’t come around to using DoD sites until the economy was really and truly tanking – and expecting too much and just trying to save a buck, not trying to spend MORE.

Whether that is the case or not the real question is one of Opportunity Cost!

What better way could I, as the business owner, invest the money simply given away or lost, through Daily Deals, which would accomplish more, in terms of real value to my business.

The approach of applying the concept of opportunity cost analysis does not just relate to DoD promotions but can and should be applied to every aspect of proposed marketing activity to achieve the best and most effective returns.

All marketing activity has a value (I’m not going to use the normal term of cost) apportioned to it as it is not or shouldn’t be a cost but an investment in the future of a business.

What do you think of Daily Deals? Worth it or worthless?

About Rob Willox

Inbound Marketing and SEO professional working and living in Scotland. Owner of Search Marketing company, WebMedia Inbound Marketing dedicated to helping small businesses get more from the internet and improve their profitability.
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