Are Daily Deals Right For Your Online Store?
Daily deals are appealing for the eyeballs, email acquisition, and potential online sales. But are they really worth it in the long run?
With the rise in daily deal sites like Groupon and LivingSocial, there’s no question that this model can be an effective but it’s important to understand what you’re getting yourself into – for better or for worse.
Daily deals are short term sales that last anywhere from a few hours to a couple of days. The deals offered typically range on the higher side of typical discounts you’d see online. Instead of 10% off, we’re talking deals as high as 90% off of certain items in that limited amount of time. For many brands, deals are also limited in number, simply adding to the demand and urgency for purchase.
According to a survey of 1,400 US consumers, 1 in 3 people said they’re more likely to buy something on a daily deal website when it comes from a small business or a brand they haven’t heard of. When bigger name companies are offering major deals, there’s a stigma around them that the company may be in trouble.
When it comes to a smaller stores, however, daily deals prove to be a great way to get in front of people who are not just looking to try something new, but also more willing to test out your product.
New and Repeat Customers
Getting the first sale can oftentimes be a business’ ticket to your long-term loyalty. Since consumers are incentivised to buy your product when it’s not only on sale but also when there’s a limited time to purchase and/or limited quantity, this is your ticket into their wallets. From here, consumers are more likely to come back and buy something again.
That being said, it’s important to consider what your product is – but, we’ll get into that more later.
Well, not exactly free since you’ll be giving a discount. But since we all know the power of getting in front of prospective customers via email, this is one way to do it and your only cost is the discount you’re offering. For some brands who come back for another round of deals, some daily deal sites like Groupon and Gilt will use retargeting to trigger people who have bought your deal before.
Case Study: Seychelles Shoes
Building a relationship with a shoe brand is an important move for consumers, most notably women. Since going to the store to try on and find shoes can be time consuming and daunting, the Seychelles sale on Gilt roped me in early and I have to say, I’m a lifelong customer because of that one daily deal.
Since Seychelles has so many variations on their shoe brand, I have become a repeat customer not just on the daily deal site but now on their own store. While it’s not a tiny online store or brand, I never would have known about Seychelles had it not been for the Gilt sale.
Now, I get frequent reminders when there’s a new sale added and I already know my size. This keeps Seychelles at top of mind for me, even if I don’t choose to purchase the next deal. The benefit here for them is that Gilt is doing the retargeting for them and almost serving as an interim nurture program for the store.
Another reason it makes sense for a shoe company like Seychelles to turn on daily deals is that there’s a lifecycle when it comes to purchasing behaviors around shoes. You have new seasons and shoes get worn out, so the online store can not only leverage these change in seasons with new daily deals at pertinent times but also enter the consumer’s own purchasing life cycle.
For example, I recently decided to purchase new fall boots and the first place I thought of was Seychelles since I loved the pair I bought on Gilt two years ago.
Too Much Demand
There have been a ton of stories in the news about businesses closing up shop because of daily deals. While these are less likely with online stores, since you’re in more control of production needs, it’s something to think about and consider.
Conducting a daily deal is going to send a surge in activity at your online store, and that means you need to be ready to supply the goods. More importantly, you also need to supply the service. With more purchases come more questions, problems, and returns. So, be ready to staff your call center and make sure you can handle the volume of shipments you’ll need to coordinate.
One Time Customers
Not everyone who buys a coupon for your shop would willingly come back. Depending on the kind of product or service you’re selling, you need to be careful not to expect too much. For example, if your product is a high-end blender, there are only so many blenders one person needs.
Every daily deal website is different so it’s best to do your research before locking in an upcoming offer with Groupon or LivingSocial etc.
Many of these bigger sites, like Groupon for instance, cannot legally share the email information with your business so if you’re thinking this will help in future lead generation or to help build your subscriber list, think again. Be sure to do your homework and don’t get caught with unmet expectations.
Too Steep a Discount
By offering a major price cut, you’re acquiring “new” customers that aren’t necessarily willing or able to pay your regular prices. For example, if I’m buying a discounted pair of jeans for 75% off, I’m likely never going to return to buy a similar pair from you at full price. Not to mention, you want to be sure you’re not losing too much on your daily deal program.
Case Study: BluePrint Juice Cleanse
To be fair, I don’t know the outcome of the BluePrint Cleanse deals they’ve been running. However, I can share my thoughts as a customer so you can get a sense of the drawbacks.
I see their deals a lot, so I’m sure that in terms of locking in new customers and more importantly, filling the gaps of low sales, they’re finding success with daily deals. But if we’re talking about long term customers and achieving more regular sales as a result of these deals, I don’t think their product is right for this tactic. Here’s why.
BluePrint is expensive. At almost $200 for a three-day juice cleanse, you’re making a serious investment. For me at least, the only way I would ever do a juice cleanse is with a deal. In my mind, knowing that it’s frequently available for sale on Gilt, the sale price is what this product is worth to me in my mind and I’m not willing to stretch my budget further than that.
While I purchased a three-day cleanse once on Gilt, I’ll never purchase something from them online and they weren’t ever able to lock me into their nurture program of emails due to privacy policies.
The only time I think of BluePrint is when I see another deal for it or if I’m tipping the scales. Either way, I now expect to get this kind of deal on this product and couldn’t imagine paying full price.
2 Questions To Ask Before Committing to Daily Deals
Here are some key things you should keep in mind before committing to daily deals:
1) What Kind of Product Am I Selling?
Products that generate repeat purchases or brands that offer a wide variety of products for one given target audience make sense for daily deal sites.
If you can lock someone in as a brand advocate by making them really happy with a discounted purchase for something like shoes or a dress, they’re likely to come back to you for other items that align with their style. If your product is more likely a one-time purchase, like a blender, you’re essentially just running a super-sized sale. There’s no promise of a repeat purchase.
2) What Are My Goals?
The most important question is to determine your goals. My advice is that if you’re looking to test something out, expand your brand awareness, and surge sales early in your business (or during your slow season), daily deals are a great move.
If you’re banking on a daily deal site like Groupon or LivingSocial to completely turn your business around or drive a consistent increase in sales and revenue, try not to get your hopes up.
Have you used daily deals for your online store? I’d love to hear about your experience. Let us know in the comments!