How Groupon and Daily Deal Sites Have Changed Buyers' Mentalities

Posted on December 4, 2015

From a customer's perspective, LivingSocial, Groupon, and dozens of other deal based, limited time offer sites can be wonderful. You can enjoy discounts on a trendy new restaurant, find deals on last minute vacations, and far more. There is a $20 gift certificate for $10 at the chocolate cafe down the street from us we have used plenty of times. But from a business perspective, they might not be as great of a deal. For every time we have used that coupon for discounted chocolate, we have likely received five phone calls from companies saying "I want to market my business and are interested in your thoughts, but I don't want to even hear about any of those coupon sites."

We have heard the exact same story from clients countless times. "I tried out (Fill in the blank deal site) and we got some business, but it wasn't worth it." So what is it about these sites that make it difficult to reap the rewards?

It Sets The Value Of Your Product
Say you have a $50 product. It's great, but you want to get some new business so you discount it down to $25. You get some good business out of this promotion, but the problem is that you have now framed into your customers' minds that your product is worth $25. Why would they want to pay $50 in the future when they know they can get it for $25? So to get them back, you have to have another deal at $25 and next thing you know, the only time people buy is when they see it at that price point. You've effectively sliced your cost in half when even at $50 you were a great deal.

Daily Deal Sites Reward Brand Disloyalty
You give massages for $100 usually but are offering a deal for $25. Can't beat that offer, right? While you are giving a $75 discount on this first massage, the repeat business you will get will more than make up for it after your customers see how good you are. You'll have a lifetime customer. But unfortunately, that customer that comes in through that LivingSocial deal has one problem: they are on LivingSocial and actively looking for deals on massages probably every day. So while you might give them the best massage they've ever had, they likely are going to go with any of the other $25 massage options available to them as opposed to giving you $100 for their next session.

Empowered Customers
On paper, this doesn't sound like a bad thing. Of course your customers should feel empowered, but daily deal customers know the situation. They know that they are likely getting a good deal because the company wants them to come back again, so they ask for a bigger carrot. We have spoken with multiple restaurants about Groupon customers requiring twice the attention and paying half the price of other customers. They are coming in for the deal, and want to get the most bang for the buck the can. And if you don't meet their obviously high standards, they can give you negative reviews on Yelp and other review sites which opens up a whole new world of problems.

There are definitely situations where daily deal sites can be a great opportunity for your business. You have a surplus of last year's inventory that you want to get rid of. You have a world-class dish that you want people to sample that you know they can't get anywhere else. You're making a profit even at the discounted rate. Just make sure you know that the customers coming to you from these deal sites likely have their own unique mindset that may or may not jive with your business.

The number one take away is that you must create value for the customer. You are working with customers who are largely price sensitive and are trained to look for the best value, which usually boils down exclusively to dollar signs. Create ambiance, provide expert knowledge of your product and sector, give out world-class service. Give them a reason to buy your product or service outside of your price.

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