5 Downsides to Deal-of-the-Day Websites

by Stephanie Faris on January 29, 2013
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Deal-of-the-day websites can attract hordes of customers with snappy, humorous copy and deep discounts on products and services. But will offering an online bargain through a third-party promoter ultimately help or hurt your small business?

For most, daily-deal websites do appear to drive business. A study by Rice University [PDF] showed that 55 to 61 percent of participating businesses ultimately make money on these promotions. Web-based discounts also can be a great way for recent startups to introduce themselves to customers (who may then spread the word to others in town).

However, sites like Groupon, LivingSocial, and SweetJack have a few pitfalls, too. Before you submit your next deal request, consider these five frequent merchant complaints.

  1. Too much at once — Many small businesses start out slowly, with some seasons busier than others. A daily deal can bring in a large volume of customers at once, often before a business is equipped to handle the influx. A small cupcake shop that can usually operate with two or three employees, for instance, may find that it lacks not only the staff to handle long lines, but also the equipment and supplies necessary to meet the sudden increase in demand.
  2. One-time customers — One of the biggest complaints about deal-of-the-day sites is that they don’t attract repeat business. Not only do customers use the coupon once and never return, but they also buy only the items or amount of service necessary to take advantage of the deal.
  3. Small tips — With daily-deal sites, customers receive a discount on products or services, often resulting in a drastically reduced final bill. Although sites like Groupon encourage users to tip on the total due before the discount and restaurants urge this as well, people often don’t oblige. Business owners complain that their workers get grossly under-tipped.
  4. Tedious coupon tracking — The responsibility for keeping up with which deals have been used falls on the business. Because some small businesses have no mechanism in place for keeping up with hundreds (or even thousands) of coupons, in some cases customers get away with using a deal multiple times.
  5. Lack of guidance — Although daily-deal sites have proliferated over the past couple of years, they are relatively new to the business world. Growing pains are still common. Businesses gripe that they are often given scant information about what to expect when a deal “goes live” or tips for how to prepare for a daily deal experience.

However, if used properly, daily-deal sites can be effective. Remember that this is your big chance to wow these customers, so provide friendly, quality service, and consider offering an additional, smaller coupon that might bring deal-chasing customers back a second time. Follow these tips to maximize your chances of retaining customers.

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