The deal on discounts

The growing trend of daily deals and group buying websites shows no immediate signs of slowing down.

Living Social, Cudo, Stardeals (Groupon), Deals.com.au, Spreets and Scoopon are some of the more well-known sites that claim to offer businesses, large and small, a unique opportunity to send hundreds of new customers their way. The catch is that in addition to the cost of using the service, the discount that companies must provide is often very close to their margin.

Take a look at this overview of group buying websites if you would like to learn more: Online Group Buying – What’s the Deal

Despite the obvious risks and costs, it has not slowed down the amount of small businesses that are signing up to offer their product or service on daily deals websites, including one particular domestic cleaning business.

My husband and I have been looking for a reputable and affordable house cleaning service that can come clean our house once a month (if you know of any, please let me know!). So when we saw a deal on Scoopon for a house cleaning service at a reduced price, we thought it was an affordable way to try out that particular cleaning business.

If we had a pleasant customer experience with them and were impressed with their cleaning, we would have seriously considered being a long-term client. However, we have not yet had them over and already the experience has been far from pleasant. In fact, the company has been so unprofessional and rude that we were starting to wonder if they were a legit business! More on that story for another time though…

I am assuming that my husband and I are not the only Scoopon customers to have had a poor customer experience with this business, and as such I am not sure how their profits will benefit from the process.

Daily deals and group buying website schemes can work for some businesses if they consider the following:

• The deals are brought down to be so discounted that you should not treat them as a new revenue stream.
• Where possible, set your own terms. For example, if you are a restaurant, can you set your deal for a day/time when you do not normally have much patronage so it is more manageable for you and does not take the place of full-paying customers?
• Treat the deal as a promotional tactic that will expose your business to new audience, generate brand awareness and give new customers a taste of your incredible service.
• Be prepared to not make much money, if at all (keep in mind you will likely need to invest in bringing in extra staff and materials). The only way that your business will truly benefit is if you can convert your new customers into ‘raving fans’ who are willing to give you repeat business. You need to convince them that you are worth paying full price for – again and again.
• If you are a service provider that has multiple visits as a crucial part of your service (for example, dentists), then you have an added advantage.
• Remember that transitioning people from paying one price to another, irrespective of the value provided, is difficult and not for the unprepared.
• Before the deal goes live, have a well-planned marketing strategy in place to create delighted customers loyalty and maximise repeat bookings.

Clearly, this cleaning business failed to convince us that they were worth coming back to after using our deal. We certainly do not feel that they are worth paying full-price for and there is no way that we will give them positive word-of-mouth referrals. They obviously have not read ‘Keeping your existing customers engaged and delighted’.

In next week’s post, we will show you the downsides of discounting or giving freebies (such as a free consulting session). We’ll also show you how you can get it right and make it work for you without devaluing your business or attracting freeloaders.

In the meantime, has your business had a positive or negative experience with discounting? Have you listed your products or services on a daily deals website, and was it beneficial for your business? What is your opinion on the whole concept?