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Can Daily Deals save your business?

In the US, it's common practice for a struggling business to run a daily deal, in hopes of saving the business. But is running a daily deal the best thing to do if your business is struggling? We discuss options for troubled businesses below.

This whole discussion depends on your definition of struggling. If struggling to you means that you are normally busy, but this year seems to be a little slower, then that could be a good chance to run a daily deal to boost business. You may just need to get some new customers in to start repeat buying, and word of mouth.

On the other hand, if your type of struggling means that you would run a deal simply to get a large amount of cash upfront to cover your bills, then a daily deal might not be the best answer. Typically when you run a daily deal you need to sell your service at 50% off. Of that 50% you need to pay the deal website their fee, which is usually 25-50% of the deal price.

This means for most service businesses, you will be losing 50% - 75% on each deal. Losing money not a good strategy if you are in a bad situation, unless you are taking a long term approach.

As a business owner you need to first look at why your business is struggling. Is it due to increasing competition? Or worse, is it because your service is lacking, and customers aren't coming back. At the end of the day, running a daily deal might plug a hole in the short term, but you need to identify if there are serious long term factors that are affecting your business.

Without running a daily deal, what could you do to fix things? Raise prices, lower prices, offer multiple discounts. Have some mystery shoppers come through and give you feedback on customer service?

There is no point running a deal, if your customer service, and products are not up to scratch. That would just make the problem worse because running a daily deal isn't a profit driver in of itself. It will cost you money to run a deal, even if you sell thousands in vouchers, so dont' expect that profit is going to come from the deal itself.

If you reckon that your customer service and products are fine, and that just you need more promotion, then consider running a deal. Let's look at some numbers to see if it might be beneficial. Let's say you run a restaurant and you want to offer a deal for 2 dinners, and 2 drinks. Let's say the normal price for this is $50.

So you would run the deal on the deals site for half of that, $25. Out of the $25, the deals site will take their cut usually $5 - $12.50. So that leaves you between $12.50 and $20 to cover the cost of the food and drink.

So you can see here that running a daily deal isn't really a way to make money. Sure you might get a whack of money upfront, but that goes straight into covering the cost of the food and paying your staff. Daily deals need to be looked at a cheaper way to advertise.

Instead of shelling out $2000 for a series of ads in major newspapers, of which you have no way to know if you made your $2000 back. With daily deals you know exactly how many people took up the deal. If you break even on the deal after all the costs are taken in to account, then you just paid $0 for your advertising. And better than an advertisement, you actually got people in the door and trying your food.

So daily deals are more of a way to showcase your business to new customers, not a big profit driver. While you might get a large amount of money upfront, there won't be a lot of profit in there. It's a longer term strategy where if you give customers a good experience, they will likely return without the voucher, and pay normal prices.

You may also like to read these related articles:

Tips for running a successful daily deal for your business

Should your Business run a Daily Deal

Posted: Mon 26 Aug 2013


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