Groupon and Living Social

These "deal and coupon" sites allow users to see daily deals and coupons in local markets. Hundreds of millions of users visit these sites on a regular basis to check out local deals and promotions that are going on in their area.

This is a great way for businesses to get exposure and bring in customers, with an overall goal of getting those customers to become regulars. When used properly, it can introduce your business to 1000s of people that otherwise never would have heard of it.

You've probably had a friend or two in the past that told you they got a "Groupon" or "Living Social" deal to some place, and that's the other great aspect of these kind of deals — The word of mouth that comes along with it. One person gets a deal and tells their friends about it, who tells theirs friends and so on.

And if you offer buy one get one free deals, you're going to be bringing in two people instead of just one with that deal!

So How Does It Work?

Typically deals are a percentage off a certain product or service (typically at least 50% off), or buy one get one free deals.

The way that these sites make money is by keeping roughly 50% of the sale. So, if you sell your package for $50, they keep $25 and you get $25 minus credit card processes fees. So, from the actual value of your package you are only getting 25% of that money.

However...

Your deal will have an expiration date. You get paid whether the consumer redeems the deal or not. So typically you have a higher return that 25% of face value because some people never get around to redeeming.

This might sound like a huge turn-off, but if structured correctly, this can be a money making opportunity. That's where we come in. We can help you get creative to structure offers that are appealing to customers, but will not hurt your bottom line.

The cost for you to advertise and get in front of thousands upon thousands of people is expensive. And this does not guarantee they will show up. With Groupon and Living Social, you get your brand in front of thousands of people who actually want to see your message and if they decide to buy, they will actually show up in your store.

If you have lots of loyal and regular customers, but you're struggling to bring in new customers, then these deals might be for you. Or, if you are a new business trying to get the word out, this can be the fastest way to fill your location or promote your website.

Say your business that has an overload of inventory and you're trying to get rid of it. Earlier this year you ordered "x" amount of a certain product and you've already sold enough to make your money back, but now you're struggling to get rid of it all. These deals would be a great way to sell the rest of that inventory, and best of all, you'll still be making a profit the whole time, even with the percentage that is going to be given to Groupon or Living Social! It might not be as much as profit as you were originally making, but your revenue for that innovatory had come to a halt anyways, and you'll be able to build a new buzz around your product. Plus, your business gets free branding.

That being said, it's important to realize that these deals aren't for everyone. You really need to figure out the pros and cons of this. Mainly the loss of revenue vs. the influx of customers and how that will affect your business. Take into consideration the loss you could see from these deals, and figure out if you can afford it or not. The last thing you want is to have an overload of customers that you don't have the resources to handle or a loss of profit that will be too much for your business to handle.

A Few Things to Note

If you're worried about the loss of revenue, consider putting an expiration date on your deal that isn't going to kill your business or consider doing smaller deals instead of larger ones. The larger and cheaper the deal, the more likely consumers are to not forget about that deal, not to mention the greater loss of revenue you could see.

One important thing to note — If there are any "unused" vouchers (meaning deals that were bought by consumers but not used) then you still get their money. From our experience, there's always going to be some people who purchased a deal but never used it, typically around 50%. So in essence, if your deal was $50 dollars, and there were 100 unused "vouchers", that's $2500 dollars right in your pocket.

So Will I Really Make Any Money Off These Deals?

In the short run, you're probably not going to make any money on these deals, but if you set up your deal right, you will at least break even or get close to breaking even. And, you get free advertising! So if you decide to set up a deal, it's important to look at it from a marketing and long term perspective in terms of profit.

If your overall goal is exposure, think about it in terms of your marketing budget. It's much like the money you would spend on social media and online marketing, but it's just a different approach to marketing that will get your business out there and bring customers in.

In the long term view of things, these deal sites could potentially bring in customers again and again once they've used their deal, and will help spread your business to their friends and so on. And if the right deal is presented, they will most likely spend more money with your business during their visit.