Despite the criticism that some businesses don’t profit from Daily Deal promotions, an overwhelming majority do. Businesses should NOT approach daily deal promotions as a profit generator. The expectation should be that the business will NOT generate profit from the promo. After the deep discount of 50-90% and then the commission back to the daily deal site of between 30-50%, those that actually make a profit should be very happy.
So why are daily deals so popular with merchants? Simple: they generate traffic, they generate guaranteed sales and they provide publicity for the merchant. Oh, and let’s not forget that all this is at no advertising cost to the merchant at all. They only pay if there are sales. Merchants also gets paid for the sales the daily deal site makes upfront (in most cases). Therefore the merchant receives cash flow before they have even started redemption on their voucher sales. And in some cases, typically about 15% of consumers do not bother to redeem their voucher at all. Thus providing the merchant with “free” money and pure profit. What other advertising platform can do that? None.
Compare this to a traditional magazine, newspaper or radio ad. These ads costs thousands of dollars to the merchant upfront and provide no guarantee whatsoever that there will be traffic let alone sales. The merchant is already in the negative in terms of profitability. Not the most effective proposition. But until daily deals came along, merchant had little choice in terms of local advertising.
Daily deals sites are changing how local merchants advertise and reach buyers. Through daily deals, the advertising industry is acting more like a commissioned sales person…and that’s a very good thing for merchants. For those merchants who couldn’t afford magazine, newspaper or radio ads, they now have a viable option that they can use in order to reach just as many if not more buyers….and the only costs are if and only if the daily deal sites send them guaranteed paying customers.
Best of luck to magazines, newspapers and radio stations who are now competing with dozens of daily deal sites in their city. Some publishers and media companies have finally figured out the power of daily deals and have started or bought into the concept. See the following post for details: http://groupbuyingcanada.com/canadian-newspapers-hungry-for-daily-deals/
Thoughts? Speak your mind.