The Rise of One Day Deal Sites, Are They A Good Business Strategy?

If there’s one thing in a marketing sense that has risen out of the recession it’s the rapid development of websites that promote heavily discounted deals for just one day of sales. These one day deal sites are simple and pitched to businesses as being effective in getting large volumes of sales in a short period.

New sites of this nature seem to be popping up on a regular basis with dozens that are New Zealand based. Some of the big online media companies feature strongly in the line up including APN Media’sGrabOne and Trade Me’s Treat Me. There are so many that there are now websites that aggregate all of the one day deals as a quick way to see them all.

It’s unlikely all of them will survive successfully and you have to wonder how willing businesses will be to continue to discount by such large degrees (typically 49-50%) as the economy improves. It’s likely the deals will get less attractive over time and therefore lose their high traffic volumes or perhaps they will just evolve with less focus on heavy discounting.

There’s no doubt they offer an attractive short term marketing tactic for businesses, but are they really a good strategy to undertake?
Let’s analyze the pro’s and con’s from a business perspective…

Pro’s

  • Great exposure to a mass audience
  • Little or no upfront cost (typically they take a cut of sales made off their site)
  • Can create sales and demand that the business otherwise wouldn’t get
  • Provides instant cash flow
  • If a service provider delivering the service may well be spread out over a long time so low stress on meeting demand

Con’s

  • Could deter sales at the normal price and so may cause slower sales after the deal is no longer available
  • To achieve big volumes of sales you generally need to offer a considerable discount which will drop yields and profitability
  • Selling at discounted prices doesn’t guarantee ongoing business
  • Demand may well be significant and hard to meet if you are a small business

Each business thinking of actively offering these deals needs to consider the pro’s and the con’s – does discounting help or hinder your brand image? Do you really want to be flat out busy at very low margins? How will this affect your regular loyal customer relationships? Can you afford such large discounting?

I’d suggest you try being creative with your offers rather than just straight discounting and include terms and conditions that suit you so you don’t find your business losing out in the long run.

These websites will suit some types of businesses more than others – before you go into it make sure you can deliver good service on what you offer.

Have you tried this for your business already? Got any good tips or stories of success/failure to share? Feel free to leave a comment.

This article was originally posted on the Adept Marketing Blog

9 Comments

  1. Sarah May 11, 2011 at 12:43 pm #

    There has been massive debate about these one day deal sites and whether they are the win- win – win situation that the promotor sells to you. I certainly see the consumer winning and the promotion company winning but as the advertising business is it something that generally reduces your profitability. We have used Grab One twice now for our business and both times they have sold trips when we have excess capacity and ensured that we can run a cruise when we normally might not reach our minimum numbers. (Both times we have sold a limited number of tickets and ensured that this is only a small percentage of our possible overall sales.)But you have to look at this as a marketing exercise and how many people get access to a database of six figures for such a small cost?

    Each time we have used Grab One we have gained plenty of full paying customers that did not know about our cruise. Even better we have gained a couple of long term groups that are coming through our winter and shoulder seasons. Both saw us on Grab One and without that exposure we would have missed out on some great opportunities. We also got print advertising that I never would have paid for that has generated a number of calls about private charters but this is not a guaranteed part of running a one day deal.

    However in saying that we probably won’t be repeating the exercise again anytime soon. I think listing on sites like this on a regular basis will see your normal customers hanging out for a deal rather than booking at full price. But in the meantime I am going to enjoy the fact that I can take all full rate bookings on our winter dates with the confidence that I will have enough people onboard to create the right ambiance and of course cover our costs. This takes away the uncertainty for our guests and enables us to continue to employ staff through winter when we normally would close down.

    A few extra things for a business to consider when thinking about listing on these sites:

    Can I upsell once the customer has purchased a coupon? This may allow you a chance to increase your margin again and of course if you are selling keepsakes it will help get your brand out in the marketplace too.

    Am I a business where people will come regularly but might not try us without the deal? Food and drink places, service providers like beauty therapists and hairdressers all have regulars but how do you get them through the door that first time. A deal may be just the way to get them through the door first time. But remember you still have to deliver a great product/service to make them want to come back again.

    Am I the sort of business where after experiencing my product or service customers turn into a walking talking billboard? For us word of mouth is huge and it certainly helps to have more people out there recommending our product. They are also likely to send friends and family our way at full price.

    Did you negotiate? Most of these companies have room to move depending on your type of product and the traffic it might generate for their site. You may not need to offer 50% discount and this makes the deal more affordable.

    Think about what day your deal will go live. We found that just before the weekend worked really well as people were thinking about what activities to do when they weren’t working. Is that the right day of the week for your business?

    Also look at your price point. Watch other sales and see what seems to get good traffic, discussion and of course sales. Remember people buy these coupons knowing they can be used for a limited time. There is always a chance they may not get to use them. We were told there was generally 10-20% not redeemed. Don’t bank on this. On our first deal 100% were redeemed. But if they don’t redeem them all again it’s a positive for your bottom line.

    And if at all possible talk to some of the other businesses that have listed on the site and see what their experience was before you commit.

    Sarah
    http://www.rocktheboat.co.nz

  2. Andrew Wells May 11, 2011 at 3:27 pm #

    The one day deals certainly seem to be the flavour of the month, in Australia they seem to be a bit more advanced than here in NZ.
    If they are viewed as promotional opportunities I think there is some worth, but not as part of a sustainable marketing strategy.
    They will suit business where there is potential to upsell, ie, a restaurant would have more potential benefits than a tourism activity provider.
    You have to ask yourself if they will be around in 5 years? Hard to know but when consumers are strapped for cash they will certainly be looking for deals.

  3. Hazel Rigler May 12, 2011 at 10:31 am #

    There are some great comments and advice in the above postings – my addition is to be careful about the commission costs, as some daily deal sites have a much larger % than what the tourism industry is comfortable in paying. And in turn always review the return on investment / breakeven point, especially given these required deep discounts.

    Brand exposure and awareness is important to take into account, but can be hard to quantify. If you have a mechanism to track the source of new customers then this may be a good way to measure the success, particularly if they then become a return customer.

    The other recommendation is to read the small print on exclusivity, as some sites (more prevalent in Australia), have clauses preventing the client from offering a similar deal on any channel for a certain period during and after the sale.

  4. Gina May 12, 2011 at 2:26 pm #

    Thanks Michelle for posting about one day deals.

    I believe Sarah at Rock the Boat really nailed what anyone considering one day deals needs consider before signing up.

    That leaves only one more reason for me to post a comment – tell us about the aggregate site that puts all of the deals in one place for us!

    Cheers
    Gina

  5. Simon McManus May 24, 2011 at 7:38 pm #

    Guess we’ve all seen @graboneescapes by now? Another case of locally designed example beating off the big(international) “boys”, in trademe fashion? Should be great for inspiring increase an in domestic tourism, don’t you think? I see other deal sites offering discounted international escapes. How much affect will this have on traditional travel sites?

  6. Daniel Bridges July 6, 2011 at 10:59 am #

    This is a late addition to this thread, interested if anyone has any further thoughts on these deal sites, especially after the high-profile announcement of the Groupon/Expedia relationship.

    Here in Trade Me land we’ve built something we think is pretty cool and helps accommodation operators do deals. We’ve linked Travelbug and Treat Me so that those who purchase an accommodation deal on Treat Me redeem the voucher on Travelbug. The accommodation just gets a confirmation email – no flood of phone calls or emails asking about availability.

    Feedback from the hotels participating is great so far and we see a lot of room to grow to do deals that make sense for operators.

    • Michelle Ackers July 6, 2011 at 6:02 pm #

      Sounds good Daniel, I like the redemption on Travelbug idea – easy eh.

  7. Daily Deals NZ May 7, 2012 at 8:51 pm #

    As the shift to online marketing continues the retail environment is more competitive so the prices will continue to decrease.

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