Daily Deal Sites – Good For the Consumer, But Bad For Business

It’s hard to imagine a business or consumer that has been untouched by daily deal sites like Groupon and Living Social. Since Groupon’s beginning in 2006, the daily deal site has grown to have deals in over 300 markets in the United States, and boasts of 35 million active users (surprising, right?). The only current competition to Groupon is the similar deal site, Living Social – yet Groupon doesn’t see them as fierce competition as made obvious by their rejection to Google’s 6 Billion dollar acquisition offer (yes, 6,000 times more than his initial demand). With this much financial and social success, Groupon has to be doing something right, right? And Groupon has to be benefiting businesses enough for them to keep participating, right?

Not necessarily.

As Utpal M. Dholakia, business professor for the Jesse H. Jones Graduate School of Business at Rice University, states:

“Although social promotions, especially Groupon promotions, have been wildly popular with consumers, it is unclear how businesses fare upon running such promotions. In a survey-based study of 150 businesses that ran and completed Groupon promotions between June 2009 and August 2010, we find that the promotion was profitable for 66% and unprofitable for 32% of respondents.”

Only 2/3 of Groupon’s customers actually see a profit from the deals they offer? Well that doesn’t seem right. But that’s not even the worst of it. Countless times we have heard of horror stories like Rachel Brown’s. Rachel, like many like her, had lost nearly a year’s worth of potential profit when the Groupon deal for her cupcake shop finally ended, nearly bankrupting her. Yet this isn’t farfetched in the daily deal industry. Thousands of businesses see rises in profit, and increased customers in seats, with one main caveat.

When Groupon brings customers to a business, they bring one-time unloyal customers that aren’t likely to return without another Groupon deal.

It is hard to stomach taking a loss in nearly any business marketing venture, as the goal of marketing and promotion is to bring in more customers. When Groupon and other daily deal sites like it bring customers to a business or location, they are bringing Groupon-Loyal customers to a business for a one-time deal, rather than increasing the amount of loyal customers that each business they market with has.

And this is one of Ekaterina Walter’s suggestions of where and how businesses should look for alternatives to popular daily deal sites. According to Walter, the two main things that businesses should focus on when looking at an alternative to Groupon and similar companies is Loyalty, and offering targeted deals. As Walter (wisely) states:

“One of the biggest concerns with daily deals is that many buyers watch carefully for good deals, but have little interest in paying full price for a service or a product. These buyers don’t come back after they score that one great deal. But loyal customers are the most valuable for most businesses.”

This leaves a few primary differences between the benefits of daily deals, and the benefits of mobile marketing – specifically text message marketing. Daily deals offer the grandiose vision of bring thousands of customers into your store by promoting your business to their “millions” of subscribers. But the key to a successful marketing campaign isn’t creating one-time high-paying customers, the key is to create loyal and returning customers which will be more valuable in the long run for your business. By starting a text messaging or mobile marketing campaign, business owners are given the benefit of being able to create an opt-in database of customers willing to receive targeted and specific specials and offers to increase traffic at times convenient for business owners. This two-fold action then creates a higher sense of loyalty and satisfaction between both business owner and consumer.

By doing this, businesses can create a group of loyal and returning customers, allowing them to increase business at key times with a form of marketing that has one of the highest proven ROI’s available. And that’s what Mobivity offers. We don’t promise thousands of one-time customers, we guarantee more customers more often. It’s what we do. By building a database of loyal and returning customers, we offer you the opportunity to grow your business organically and virally through an effective and proven medium. But don’t take our word for it, you can get started for free today to see the benefits of leaving behind potentially destructive marketing mediums for a platform that has been proven to work, and work best for both business and consumer.

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