Do your homework before doing a Daily Deal
As a tour and activity business, you are a perfect target customer for the likes of Groupon, Living Social, or any one of hundreds of other daily deal websites popping up on the Internet everyday. But be warned, the daily deals business can be a real nightmare for your company if you are not careful. I’ve written before about the problem with daily deals on Tnooz, a travel technology media site to which I am a frequent contributor.
Having worked with hundreds of small businesses in the tour and activity segment, I’ve learned many things. One of the most important things I have learned is that almost all the business owners I have worked with are hard working passionate operators who are looking for ways to make a decent living doing what they love. Their business is what sustains them, but DOING the business is not what fulfills them, doing what they love fulfills them. Most of these small business owners don’t have a master of science in management or an accounting background, so they can’t easily calculate ROI when being pressured by a sales person. As a result, these businesses tend to be easy targets for salespeople who pitch a great marketing opportunity that can bring a ton of new business with no upfront costs. The problem with this model, is that the end costs can be catastrophic for a small business.
Don’t take my word for it though. There are a lot of people out there who are saying the same thing. Unfortunately, most of what we say gets drowned out by the buzz and hype around daily deals. After all, how could it possibly be a bad thing when Groupon has managed to make $600 Million in revenues. That’s great for Groupon, but at the end of the day, they have made that revenue on the backs of the small businesses who are willing to give away their products and services for 25 cents on the dollar.
Techcrunch guest poster Rocky Agrawal has written an excellent series of articles about the daily deals phenomenon and why it is bad for business. Rocky’s series is eye opening and well worth the read. If it doesn’t dissuade you from doing a daily deal, I hope it at least gives you some tools to ensure that the deal you run is successful for your business.
You can find Rock Agrawal’s series on Daily Deals here:
- Why Daily Deals Are Becoming A Raw Deal
- Groupon Was “The Single Worst Decision I Have Ever Made As A Business Owner”
- Google Offers Is A Cheap Knockoff
- Why I Want Google Offers And The Entire Daily Deals Business To Die
- Why Groupon Is Poised For Collapse
So why did I write this post? I am disturbed by what I see in the market. I don’t like the idea of a large business taking advantage of small businesses and I certainly don’t like the tactics that are used to do it.
As a long time advocate of small business, I’ll do what I can to protect the interests of my small business customers and educate and empower them to make good business decisions, even if that advice is contrary to popular belief.
We manage a bunch of hotels and websites like http://grouptravel.org and it never made sense to us to offer our services at a 30-40% discount and then give Groupon and living Social half of it.
My argument has always been and continues to be that getting customers the hard way (Creating loyalty, providing great service, going above and beyond expectations) will yield the kind of customers you want to have around. Let the discount seeking, coupon chomping folks go to your competitors.
Also, I don;t really see Groupon taking “advantage” of small business owners. What I see are small business owners who are making the easy decision of discounting versus putting in the energy to create a long term sustainable advantage
Just my opinion, I guess.
I agree with your point about building long term value. I do see Groupon taking advantage of small business owners, because anytime one party is perceived to have the power to influence or manipulate another party into doing something that is not good, the first party is taking advantage of the second. That said, small business people are not stupid, they just tend to be more susceptible to no-risk marketing propositions then most.
I totally agree with what the author wants to share. Its like building your future by striving to build your foundation first.