Customer acquisition cost is high for any business but more so for a small business. To put it simply, you cannot be in business without customers!
We’re all familiar with the old media forms of marketing, like television, radio, and newspaper advertising. These forms of advertising are expensive, and the campaign has to be for an extended period for it to be effective. The effectiveness of such campaigns is also difficult to measure.
There are also internet-based forms of advertising like Pay-Per-Click (PPC), Facebook ads, and banner advertising. With these, you have the ability to directly measure the effectiveness of your campaign, but the cost for these forms of advertising has risen drastically.
The newest online marketing tool now is the “Daily Deals” also called Group Buying sites.
Most people have heard of Groupon, the pioneer of Daily Deals and Group Buying sites. But there are many daily deal sites targeting all kinds of niches.
Here’s how they work for people who are unfamiliar with this marketing modality.
The operators of these sites send out daily emails to their subscribers who then buy vouchers redeemable at the merchant’s business.
Simple you say, here are the caveats:
- Discounts must be at least 50% off.
- The Daily Deal site takes their commission from the already discounted amount which could range from 30% to a whopping 50%! For a 50% commission, you are looking at a sale of 25 cents for every dollar.
- Some sites will further deduct merchant fees 0f 2.5% to 3% from the payout to you.
- Some sites may stretch out payments to you; most pay up within two weeks, some as long as three months.
- The initial rush of voucher redemption could be overwhelming if the merchant is not prepared for the influx.
Here are steps to take to make the deal worthwhile for your business regarding sales and new customers.
1) Sharpen your negotiation skills and think “What’s in it for me.”
The daily deals sites are there for their commissions, and their subscribers are there for the deals. The only person in this triangle who cares about your business thriving is YOU.
2) Watch out for this when doing your research.
Don’t sign up with a Daily Deals Site that takes more than 40% in commissions including the credit card merchant charges.
3) Negotiate to at least 75% of sales proceed paid within 30 days of having your deal run.
The earlier, the better. You will need the money to fulfill orders coming in.
4) Structure your deal in a way that would nudge customers to pay above the voucher amount.
You can do this by offering vouchers for either slow-moving items or in low dollar amounts relative to the goods being offered.
5) If you are an online business, avoid roll in shipping or taxes with the deals.
The last time I checked, USPS, UPS, and FedEx are not offering steep discounts on their service, if anything, it costs more to ship.
6) Do not cannibalize your sales!
I see businesses announcing their run on daily deal sites to their regular customers. I would not recommend this. Your goal is to have new people who have not heard of you or tried you enticed by the deal, try you out. In fact, you may include a fine print stating that the deal will be honored for new customers only.
7) Prep ahead of time.
Prepare for the rush in voucher redemptions by stocking up reasonably and getting temporary help.
8) Be sure to obtain their email address.
Capture as many emails as possible to include in your mailing list for your newsletter.
9) Offer a discount for return visits.
For online businesses, slip in a coupon for their next order.
10) Measure your results.
How else can you know whether you lost money, broke even, or actually made money on the sale?
My observation is that the niche daily deals sites subscribers buy more and make good return customers compared to the more general sites with the perennial deal chaser.
Conclusion
Lastly, don’t expect your run to be a big money-maker, strive to break even. You’re certain to have unredeemed vouchers. The industry standard for that currently is 20% – 40%. You get a day of dedicated advertising with no upfront cash outlay; the cash register rang, and you got new sign-ups for your newsletter for future engagement and with the influx of voucher purchasers are a few customers that would go on to become loyal and recommend your business to their own contacts.
Bola Ajumobi owns SlimyBookworm.com, an online children’s bookstore with the feel of being in your neighborhood independent bookstore. SlimyBookworm.com is committed to improving childhood literacy and donates 20% of profits to literacy efforts for the under-served. Feel free to connect with me Facebook, Twitter, or my blog.
Tina
Great info thanks! Some great ideas here on keeping the return customers and excluding shipping fees from the offer.
Kaitlin
Thanks for the advice! I’ve been hearing a lot about working with Daily Deals sites, but this is definitely the most clear-cut explanation I’ve gotten as to how the costs and the profits are factored in.
Carole Bennett
You have no idea how timely this is; I’m looking at doing a promotion for a business-based deals site, and these are tips that will help me avoid going in completely blind. Thank you!
Holly Hanna
Carole – Keep us posted on how your promotion goes.
Bola
Just want to say thanks for featuring my article on The Work at Home Woman.
Carole Bennett
Thank you for your article – it’s very timely for me, and great advice!
bola
Carole,
Glad to be of help.