Running a deal with sites like Groupon and LivingSocial can be a risky venture, but it doesn’t mean local merchants have to feel like they’re following in Felix Baumgartner’s Red Bull-sponsored free-fall trail in the sky when they’re about to offer one.
Here’s some guidance from a handful of experts on what local businesses should and shouldn’t do when offering a deal.
A common goal of running a deal is drawing new customers to your business. However, merchants should consider how to entice new customers without affecting current paying customers, according to Patrick Lefler, founder of pricing consultancy The Spurance Group.
“You need to erect ‘fences’ so that loyal customers aren’t able to take advantage of these types of deals,” says Lefler. He gives an example of restaurants that limit the hours during which a deal is valid. So a restaurant that runs a deal before peak dining time will be able to attract and serve new customers without affecting its regular customer base that prefers to dine later in the evening.
On the other hand, a case can be made for running deals to reward your best customers who are already paying for your product or service. Zain Raj, CEO of independent marketing services company Hyper Marketing Inc., supports this approach and recommends that merchants should consider running offers that are based on the behavior of their best customers. For example, a local dry cleaner might have a best customer who usually gets two suits and four shirts dry cleaned each week. The merchant can consider offering a daily deal to the tune of, “Get one suit and two shirts cleaned, and we’ll do a second suit and two other shirts for free.”
“That’s a best-practices offer because it’s rooted in the merchant’s absolute understanding of my needs,” says Raj.
Local businesses also need to prepare their employees for the customers that will enter the store during a deal. “Don’t just expect your employees to treat every customer the same,” says Noah Fleming, president of Fleming Consulting & Co. “Your employees view the person with the deal voucher much differently from the person who pays full price. This often requires a mindset shift.”
Merchants should also build a customer database to capture customer information. If they don’t, “then you’re throwing money down the drain,” says Fleming. “You need to give yourself the opportunity to re-engage the customer and have a fighting chance at getting them back through your doors.”
Jessica Schneider, director of account management of group-buying and local-commerce platform NimbleCommerce, adds that merchants should be intentional about their approach to deal providers. For one thing, they should pick the right deal site for their target market. “This matters more than pure reach,” she says. Schneider also tells local businesses to build relationships with a handful of deal sites and try to get a discount for running multiple offers with each of them.
Maybe the biggest “don’t” when it comes to merchants running deals relates to pricing. “Never discount your products or services more than you normally would,” warns Tyler Barnett, founder and CEO of full-service consumer and lifestyle public relations firm Tyler Barnett Public Relations.
“When you offer such a steep discount, it basically sets the value of your products or service, which can never be changed,” Barnett says. Add to this the pervasiveness of deals on sites like Groupon touting “50 percent off” and the resulting apathy consumers have to these discounts, and Barnett says that deep discounts essentially lower the value of your product or service.
“This is especially true when companies put out multiple deals in a short time,” he says. “A company who offers their product at 50 percent off all the time is basically in the same group as a storefront that has the words ‘Sale Today’ permanently painted on their window. Any smart consumer knows there is not really a sale going on.”
Offering an unusually large discount that sends the wrong message is bad enough, but what makes a deal even less effective is running it with the goal of getting everyone and anyone into the store to make purchases. If a deal is purposely generic to appeal to everyone, it’s just a one-off solution.
“In other words, that type of deal just brings in people who are only taking advantage of offers instead of people who are looking for top products and services,” says Raj. “The latter are likely to be customers who use your product or service on an ongoing basis, and their satisfaction means they’ll recommend your place of business to others who, in turn, could become repeat customers.”
By Jason Hahn