Two-for-one steaks at a high-end restaurant? Sounds like a great deal.
I pay $50 for $100 of lawn services so I’m not mowing when it’s 100 degrees? Nice!
A 50-percent discount on spa services my wife can use when I’m watching the NCAA tournament? Why, that’s brilliant!
By this point, you’ve made some assumptions. I’m a lazy carnivore who prefers watching sports without his wife and feels no shame using coupons. It’s not judgmental; it’s a simple market analysis.
Here’s the trick though: I’m not that person. Sure, I might occasionally indulge in a steak, but I’m watching my cholesterol. Other than midsummer, I enjoy yard work. And regarding my wife and college sports, that’s certainly false. (I’d also like to take this opportunity to thank my enchanting wife for being a loyal follower of this blog.)
While small-business owners’ eyes flash, envisioning lines down the block and only paying for responses, daily-deal marketing involves a hefty hedging of bets by assuming customers come from their target.
The actual margin is frightening. With a 50-percent discount and game-leader Groupon taking an additional 25 percent off purchased offers, businesses gamble a 75-percent discount on crowds who may never grace their door again. That’s a huge risk for small businesses — especially if they calculate viability on customer count instead of brand loyalty.
Despite this risk and a disappointing 60-percent business-satisfaction rate, the deals keep coming. Facebook’s jump into the coupon frenzy with their version simply named “Deals,” and the test launch of Google Deals, only added to the fascination. Groupon, which Forbes proclaimed the “fastest growing company ever,” now finds their kingdom crowded among other heel-nippers such as LivingSocial, Yipit, Angie’s List and The New York Time’s venture TimesLimited.
If the dazzling but limited trend expands into a full-blown, competitive medium, will we see the day when it provides safer, targeted opportunities for low-frequency service industries? Can luxury brands overcome the coupon stigma, or will users reach bargain-bombardment boredom? As competition expands, limited consumer mind-set and tolerance research leaves us in a holding pattern.
Until then, I advise businesses considering these deals to remember Monty Hall’s “Let’s Make a Deal” game show. Those eagerly choosing the unknown box could regret trading established brand properties for a price-point emphasis. And, without retaining an analytical basis for their target, they might simply leave with the donkey behind door number three.