It seems like everyone is jumping on the bandwagon of these discount websites. You know the ones that has some special deal that's at least 50% off their advertised price. Groupon ignited the nation with a way of bringing in new customers to take advantage of a great deal. Their philosophy started out in Chicago by finding these hidden little businesses and attracting new customers to these gems. Groupon wanted people to rediscover Chicago and the hidden treasures off the beaten paths. The best way and most efficient way of announcing these little businesses was to collect emails of followers and send out daily deals to entice customers to buy the deal. Add in Social Media and fans start following through Facebook and Twitter and you have an instant hit.
The tsunami started with Groupon, now these sites are popping up all over the place. Valpak just announced it's now offering this program in three cities Omaha, NE; Long Island, N.Y.; Las Vegas and more to follow soon. They have a strong franchisee/sales force on the ground in most cities searching for small businesses to advertise in their big blue envelop; they ought to do well. Like most great ideas, copy cats are out in a full assault for new business.
So what's this all about? It's not the "deal" the business owner wants to hand the customer. It's reducing advertising costs and controlling risk to bring a new customer in the door. Now if your new customer does not have a pleasant experience the opportunity and money spent to promote your product or service was lost. If you don't have a plan to retain those new customers the program is a loss. It's just throwing away your profits despite your customers.
Let's just cut to the chase shall we? I was watching sales occur on a local restaurant through one of the largest "Deal" sites. They had over 3200 sales over a day with a $30 worth of food for $15. Is this a good thing for this restaurant? You may say, "look at all these new customers". But if you break out the break even point of food costs and the cost of the program. You realize it just cost this restaurant $45,000.00 in profit. This isn't chump change, this is trying to survive over the next 6 months with all these "New Customers" coming in and enjoying your food. The tough part is seeing your regular customers coming in and enjoying your food at a huge discount. They're not new they just saw a great deal at a place they love to go... This is a losing money proposition. Uncontrolled sales is not always a good thing. That's why businesses put limits on product and services. Too much of a good thing will break the bank.
So you ask, "why am I writing about a "Deals" site?" We just launched a site http://www.e-vitedeals.com/. Our philosophy is to bring new customers to businesses in a manageable and efficient way. Attract new customers with an incredible deal and focus on keeping those customers with a marketing plan in place. If a business can manage the number of new customers coming to their door and have a plan on how to keep them; it then becomes a win win for everyone, including you and your customer.
Our plan isn't to drive a business into the ground with thousands of customers. Our plan is to work on customer development and build a life long satisfied customer. It's difficult to do with 3200 new customers standing outside your door. But you can manage 500 new customers that frequent your business on a consistent basis.
If you have any comment or questions please drop me a line.
Thanks,
Scott
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