“Since we’ve only been in business the past two years, the Groupon has actually helped give us attention because during the first year, people didn’t really know we were here,” said Michael Callahan, assistant store manager/installer at the Bensenville, Ill., Tint World. “Thanks to a very bitter winter, Groupon has helped us increase sales 25 percent with remote starts since last year (with more than 400 sold since October) and has increased our detail work in the process.” Another store that’s greatly benefitted from offering online deals on seasonal product is former Mobile Electronics Retailer of the Year Perfectionist Auto Sound and Security of Anchorage, Alaska. “We have a couple of methods we use to get the word out about seasonal product,” said owner John Schwartz. “We put out hints on Facebook and start offering pre-winter specials to sell remote starts on Groupon.” The function of sites like Groupon is to provide goods and
services at up to a 90 percent discount. The deals often have expiration dates to entice users to visit the store sooner rather than later. Deals don’t require expiration dates but if a date is set, the customer retains the paid value (i.e. $20 paid) after initial purchase but loses the promotional value ($20 for $40 worth of product). Each deal has a set limit established by the retailer to allow them to sell only a set number of products at that rate. Refunds on deals are possible but must be part of the deal and are usually listed in fine print. While Groupon is perhaps the most well known of these sites according to various online surveys, each site is set up for differ- ent purposes. Living Social has deals for individuals and groups, and offers single services and dependent deals like buy one get one free, but sometimes limits the user’s ability to redeem the voucher on the same day as purchase. There are also sites like Woot! that promote one deal per day per category on the site, but still allow users to purchase other products. Excluded are activity-based deals like dinners and vacations.
Risk Versus Reward
Each site allows businesses to sell product at huge discounts, but profits are often split 50/50. However, this isn’t set in stone, as some rates are negotiable when the deal is being set up. “Negotiate with Groupon and Living Social and get the share from a 50/50 split to something that favors you more,” said Ryan Autry, owner of Audio Innovations of Fresno, Calif. “I like to shoot for a 60/40 split or even a 70/30 split. But these are never guaranteed.” It’s also important to go into these deals with the right mind-
set, according to Schwartz. Stores looking to use the deals to boost profits might be disappointed considering they were designed for a different purpose. “We look at Groupon as advertising,” Schwartz said. “A lot of shops on Groupon do it because they need the money. I look at it as a partnership. When they first asked me to do it they offered the deal at 50/50, but I said that was impossible.” To make sure the deal remains profitable, Perfectionist offers
two options. They offer an introductory deal with a basic remote starter and install package at $199, of which they pay Groupon
$49, and a more advanced package with Compustar’s Drone Mobile at a rate of $399, of which they also pay $49 to Groupon. The arrangement costs the shop around a third and a sixth of its gross on each deal, respectively.
Customer Service is Key Daily deal product strategies vary based on region, but can be adjusted to fit the needs of each customer base. One trend that remains consistent is using the sites as a marketing tool to introduce car audio to customers who are unfamiliar with the industry and what it offers. “We used Groupon and Living Social to drive new customers into our stores, so we were seeing new clients that have never even stepped into a car audio store before,” Autry said. “We noticed the Groupon customer wasn’t our average customer by any means. After we gave them an above-average experience on the sales floor to the install bay, most of these people became repeat clients. We were able to sell them on many other items that they didn’t know we could add to their vehicles.” In April 2012, Edison Research, a firm specializing in various
types of research and polling for major organizations like CNN and Fox, conducted a poll on the usage of daily deal websites. The poll found that out of the 2,020 people polled, women were more likely to use the services than men, and most users were between 25 and 54 years old. Ultimately, the study found that users with higher income and high advertising-avoidance behaviors were
Daily Deal Strategies
Social deal sites can be effective when used strategically and in specific situations. Digital strategist and author Mark Smiciklas from the website Social Media Explorer recently provided some examples of effective ways to use these sites:
Seasonality – Deal sites are useful if a business experiences severe seasonal fluctuations in sales. An off-season promotion will either attract new customers or act as a reward to existing customers who support a business during peak times.
Inventory – Daily deal sites are a great way to help move excess inventory. Although a store might be ready to offer discounts already, making deal sites a good fit, it’s still important to com- pare the commission costs with inventory carrying costs. If deal sites can help a business speed up sales on expensive inven- tory, it’s likely a worthwhile tactic.
Advertising – Using part of an advertising budget on a daily deal promotion can be an effective (and measurable) way to build awareness, especially in new markets. A store that’s opening in a different region, for example, can benefit from using a deal site as a market launch tactic. This allows the store to benefit from increased traffic and makes it less susceptible to price erosion due to the introductory nature of the promotion.
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