The study looked at popular Australian deal of the day sites including Jump On It, Ouffer, Scoopon, Spreet and Zoupon and found that Beauty (37%), Eating (28%) out and Leisure (21%) are the most popular deal categories overall with these three categories making up 86% of deals on offer.

Deal of the Day: Deals by Business Type

Uploaded with Skitch! Source: Altima Interactive

The study supports my view that service businesses that have low product overhead are the best targets for deal-of-the-day sites due to the high costs associated with successful promotions. Unless there are high margins associated with the product/service, it’s a given that the deal will be a loss leader.

So here are some suggestions to work out if promoting will be worthwhile for your business:

1. Work out the real costs of the promotion. Do you have the ability to offer a heavy discount plus pay the fees and still make money?
2. Think about lifetime value. If the initial promotion is a loss leader then it’s important the customers introduced by the promotion come back and buy again. Can you measure lifetime value? How many repeat visits will it take to make your promotion worthwhile?
3. Can you cope? Work out if hundreds of customers over a short period of time is manageable. Will these people get the type of service you usually provide?

Technorati Tags: Deal of the Day, Local Discount Programs, Restaurant Promotion

1. Ask for typical redemption rates from their sales guy and see if they can backup their claims with some solid evidence.
2. See if they have examples of similar businesses to yours using their directory.
3. Ask about long-term customers. If they have long-term advertisers that keep coming back then there is a better chance that their directory works.
4. Call in to a couple of the businesses promoting in their directory and see if it’s working for them. Referrals from the people using products provide the best indication of a products worth.

These steps will give you a better idea of the value of paid local directories. If you are satisfied with the answers you have to the above questions then calculate how many customers you would need to attract to make the advertising pay for itself.

Cost per customer = advertising spend / new customers.

My preference is to go for directories that are free or have ‘results based advertising’. So you pay only when you get additional business instead of committing to fees upfront. Yellow Pages, an example of a business that relies on upfront advertising has been put under a lot of pressure by ‘results based’ options like Google AdWords where you pay per click.

Free Listing Cost Per Customer = $0

If the directory is free to get started or if you only pay for people redeeming then the above questions are less important because it hasn’t cost you to participate and there is less risk.

Technorati Tags: Local Discount Programs, Marketing Tips, Small Business Marketing

1. Treat the discount as another form of advertising. I have spoken with many small businesses who don’t give a discount because they have their own customer reward program, but they then spend on advertising to attract new customers. Local discount programs or reward programs should be viewed as advertising you pay for only when it works. It’s like a brick-and-mortar version of Google AdSense in that you are only giving a discount away when someone uses the discount coupon or member card.
2. Structure discounts around your personal circumstances. For example, if you are a restaurant and you are fully booked every lunch and dinner then you don’t need to offer a discount. If you are only fully booked on weekends then offer a discount that is applicable during the week. If your store or restaurant is quiet then you have nothing to lose!
3. Maintain Control. Make sure you understand where, when and to whom the discount is going to be offered. The discount should be appropriate to your area and your desired customer base. You should always have an understanding of the terms of the expiry of the deal. Ensure the local reward program is legitimate and test their claims. Ask about the members that they will be providing discounts to.
4. Consider your branding strategy. Many business brands prefer not to discount if it’s not consistent with their branding philosophy.
5. Can you afford it? Review your product margins and make sure you can afford to give away the discount you are offering.
6. Don’t be bullied. Some local discount programs will only promote your business if you provide a discount they nominate. Ensure you can afford to offer the discount under their terms, or don’t participate.
7. Test and test again. If you provide a discount and nobody is redeeming the offer it may be because (1) the discount is not attractive enough or (2) customers from the reward program are not the right target market for your product or service. In my next post I’ll run through some approaches to testing and assessing if your discount is appropriate.
8. Communicate the discount to your staff. The benefits of the discount can quickly turn into a negative experience for the customer if staff are not aware of the discount. Ensure you are able to communicate the discount to staff as part of your internal marketing process.

As a general rule, unless you are turning away customers I think it’s worth giving promotions in local discount programs a go. Members of discount programs will select or try merchants based on their participation. So long as there are no costs to participate and you can afford the discount it’s advertising you pay for only when it works.

Technorati Tags: Discount Marketing Plan, Local Discount Programs, Small Business Marketing