Companies who use sites like Groupon have to offer discounts of around half, and then Groupon takes half of that. So they’re only getting a quarter of the listed price.
San Francisco, CA (Vocus/PRWEB) June 29, 2011
Every day, daily-deals sites like Groupon and LivingSocial send out a major discount offer on a local product or service to their thousands of subscribers. These limited-time offers are usually huge discounts—50 percent or more—that people pay for up front and can redeem right on their cell phone. This new kind of coupon seems like a great deal for people who purchase it.
But Manuel Torres, a business strategist with over 25 years’ experience and owner of San Francisco printing company AlphaGraphics, says that businesses who choose to offer daily-deal discounts may not get as much out of it as they hope. The payment structure means they will typically only get ¼ of the usual price of the discounted item or service, and the customers who are attracted by the discount may not be the type desired. He says other marketing strategies, such a combination of print and Internet marketing, are less costly and attract a preferable demographic.
“Companies who use sites like Groupon have to offer discounts of around half, and then Groupon takes half of that. So they’re only getting a quarter of the listed price,” explains Torres. Offering goods and services for that steep a discount may mean that a company is barely making a profit, or even losing money.
When Torres consults with small to medium businesses (SMBs), he suggests that they try other outlets that will allow them to offer less steep discounts, and won’t require that they give half of the offering price over to another company. Google AdWords allows companies to place ads that use specially targeted keywords to reach people doing a Google search. Unlike daily deals, companies have a lot of control over this system: they can choose the discount, write the ad, and determine a set cost limit. They only pay when someone clicks on the ad.
Another disadvantage to daily-deals offers is that these discounts may bring in lots of people, but they don’t necessarily bring in the right people. While some people may be introduced to a new business by these coupons and decide they like it enough to come back at full price, many may only be interested in the good deal, and will move on to the next place offering a similar service for cheap.
"It becomes very difficult once you get consumers into that pattern, into that habit where they won't go without the coupon,” brand consultant Laura Ries told Reuters. “Like drugs, the best way to avoid the problem is not starting to begin with."
Instead of appealing to hordes of deal-hunters unlikely to form brand loyalty, Torres recommends that SMBs build an online presence with social networking sites like Facebook to reach out to and expand their group of regulars. Businesses can use Facebook for instant direct communication with their core group of customers and offer them rewards for being regulars. They also get word-of-mouth advertising from fans who post about the business to their friends.
When searching for an effective advertising strategy, many SMBs are drawn in by the daily-deals websites. But Torres says they can be more effective for less money with a combined strategy of old and new media. He consults with SMBs to create a personalized multi-pronged strategy that brings together Internet channels like Google and Facebook in combination with flyering and direct-mail. His strategy helps clients create and cultivate lasting customer relationships for less.
For more information about the downside of daily-deals offers, or any of AlphaGraphics San Francisco’s products or services, call AlphaGraphics at (415) 644-5272, visit them on the web at sanfranciscoprintingservice.com, or drop by one of their three San Francisco locations at 441 California Street, 199 2nd Street, or 44 Montgomery Street.
AlphaGraphics is a San Francisco printing service that specializes in poster printing, banner printing, business card printing, and offset printing. They offer multi-media marketing strategies that combine print and online media campaigns.