Daily Deal Marketing: Pitfalls and Benefits of Coupons

Post image for Daily Deal Marketing: Pitfalls and Benefits of Coupons

by on November 14, 2011

Daily deal marketing can be used judiciously for some local businesses, but may weaken others. Local business owners are often enticed when imagining customers streaming through their doors, especially restaurateurs that are new or want to fill tables during slow times or days. Similar coupon benefits have drawn in health- and beauty-related services, evident by the acceptance and incredible growth of deal websites catering to them, quintupling last year to over 340 sites.

According to the New York Times:

“Our life changed after Groupon — we would do it again,” said Michele Casadei Massari, 35, an owner of two Piccolo Cafes in Manhattan. Groupon sells its online coupons for half their food value and then Groupon takes an additional 50 percent of the discount sales. On March 1, in a timed deal, Piccolo Cafe sold 1,142 coupons for $14 worth of food in 24 hours.

“You don’t make money on the deal,” Mr. Massari acknowledged, “but in the end we are even.”

That’s because “people spend more than on the coupon amount,” he said. “They’ve been ordering about double the $14 from us. And people usually bring other customers, who are paying full price.”

Beyond that, among those who are redeeming coupons, “80 percent have come back without a coupon,” he said.

The health- and beauty-related businesses are also leaping into deal making with spa treatments, dental whitening and hair or nail salon services. They sold an impressive 31% of all discounted deals in the first quarter of 2011, totaling 78 millions dollars in sales, stated an aggregator of daily deals, Yipit.

As beauty coupons multiply, business owners are tallying and sharing their outcomes:

“You kind of take it as a loss leader because you hope people have a positive experience and translate into a lifelong patient,” said Dr. Jennifer Jablow, a cosmetic dentist in New York who sold 50 cleanings and 63 whitening treatments on Gilt City this year. So far, 13 of those new patients have returned for additional services at regular cost.

But at what point does a business risk devaluing itself in the name of finding a few new customers? Dr. Steven Pearlman, a facial plastic surgeon who listed discounted prices for chemical peels, laser services, Botox and Juvederm on Gilt City last year, said he would not work with a deal site again for a very long time.

“I don’t want to undercut patients who have been seeing me for years and paying full price, the majority of whom do,” Dr. Pearlman said. “I don’t want to cheapen the brand.”

Many local businesses discover that while their coupon deals bring highly valued exposure, it happens in surprising ways. Some experience new peaks in activity on Facebook and then drops in their online review ratings, according to Boston and Harvard University researchers:

  1. The popularity of a daily deal spreads via Facebook and its ‘Likes’, and their research model suggests that Facebook plays a significant role in boosting sales of daily deal coupons.
  2. The number of customer reviews increased significantly due to daily deal marketing, but average rating scores from reviewers who mention the leading dealer and coupon are 10% lower than scores of their peers, dropping from an average of 3.71 stars to 3.59 stars; these customer review scores typically change very little, month to month.

Local business owners should consider the impact of daily deal marketing on their brand, existing customers and online reviews. When the benefits of coupons outweigh the risks, they should develop a plan so its profitable over time, while creating positive experiences for its new customers.

Leave a Comment

Previous post:

Next post: