Would a local deal of the day program work for your business?

Local daily deal programs such as Groupon and LivingSocial have helped many small business owners connect with new customers and drum up sales. I've worked with several small business owners who promote some of their services or products like these, but many have mixed results. These sites target consumers who like to spend their disposable income on small luxuries like dining out, spa and salon services, and even premium car wash packages.

But would marketing your business on sites like these really help your business? For some business owners, the influx of new customers is simply too much to handle and can actually hurt sales. For others, a daily deal site is a great way to introduce new customers to products and services you offer.

Here are some important things to consider before signing up for a local deal of the day program:

Who Succeeds on Daily Deal Sites?

In my experience, the business owners that enjoy the most success with daily deal sites are those that have products they want to clear out of inventory quickly - being able to sell these items in a "flash sale" means that the business owner will get at least some of their investment back. Local chocolatiers or cupcake bakeries, for example, would be able to clear out batches of recently-made treats before they are too old for sale.

Newly-opened businesses also do well on these sites because the daily deals help to attract new customers and stimulate new business. Recently-opened cafes, restaurants, bistros, and other dining destinations can attract daily deal sites with an enticing offer or even a special menu. Businesses that sell food, clothing, or household supplies can do very well on these sites when customers end up spending more than the value of the deal. For example, someone who spends $10 for a $20 certificate good for a food purchase may end up spending at least $30 during their visit.

Businesses that don't fare well on these sites are usually the spas, restaurants, and local businesses that have been in business for years. Loyal customers can be turned off by the sudden influx of new customers who are just looking to use their coupon. A sudden boost in business can be too much for a small business to handle and lead to poor customer service, an inventory shortage, and unhappy customers overall.

Making Daily Deal Sites Work for Your Business

Some key things to remember when advertising on daily deal sites:

Set a cap on your deals. Do the hard work of crunching the numbers to determine how many deals you would have to sell in order to cover your basic costs. Set a cap so that you don't end up losing money because of excessive sales!

Read the fine print. Make sure you understand the terms of the revenue-sharing program - deal sites take a percentage of each sale, so you will need to set the price accordingly.

Don't rely on additional purchases to compensate for a discount. One mistake many business owners make on these sites is to assume most customers will buy more than the advertised deal. For example, selling $30 worth of merchandise or services for $15 doesn't mean that every customer will end up spending more than $30. Assume that most will only use the amount listed in the offer so you can calculate your promotion costs more accurately.
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