Archive for the ‘Dartz Deals for Business Posts’ Category
When it comes to Deals of the Day, consumers always win, hands down, no questions asked. But when we begin to consider the merchant side of the dynamic, what’s in it for them? A lurking “grey area” is still being debated, with the crux of the issue being how do you calculate the actual advertising cost or for the Deal of the Day Campaign? Given the typical Deal of the Day cost model, there is a gross margin difference which leaves room for ambiguity and much needed research. Some business owners refer to the margin difference as an advertising cost, but others feel differently.
It’s easy math and the way many business owners view it varies on several levels. A business owner can potentially think to themselves, “It doesn’t cost me a single penny to sign up with a Deal of the Day campaign; I pay nothing out of my pocket and receive a check!” Well . . . not quite so. Another prospective approach of the Deal of the Day mentality is “It only costs me 30 – 50% of the selling price of the coupon for advertising; I still don’t have to write a check!” Again, this logic is flawed. Here is the key question. Since most businesses end up selling their product or service at a larger discount than their normal average discounted selling price, how such you calculate the difference in gross margin?
In order to understand this dynamic, take a typical restaurant Deal Offer:
• Deal of the day offer is $5 for $10 in food (50% off)
• Processor takes 40% of the $5, or $2, thus leaving the business with $3 per voucher
• Average ticket is $17, the voucher is worth $10, adding $7 more for the merchant
• Merchant gets $10 total from a $17 food ticket – discount of 41%
Let’s assume as a restaurant owner you average a 10% food discount based on all promotional campaigns throughout the year. The Deal of the Day yields a 41% average (after you upsell and cross sell above the value of the coupon) discount. After a customer redeems the coupon, s/he purchases more than face value. So, a meal worth $17 would bring in $10 (this includes the payment from the deal processer plus the revenue above the coupon value) – that’s a 41% discount –versus $15.30 (10% discount) on average.
Should the difference of $5.30 between these examples also be considered an advertising expense or a promotional discount? We believe it should! The true advertising cost of a deal of the day is not always what it seems. If the restaurant owner had 1000 customers redeem the coupon, then this is an extra $5,300 that should be added to the tab!
We’d like to hear from you; do you think the Deal of the Day cost model is profitable for the merchant end in the long term or are these Deal of the Days’ only breeding benefits on a one-way-street? Share your thoughts and let’s discuss!
Derek Hall is the Founder and CEO of Dartz Media, an Austin based company helping small to medium sized businesses grow more profitably by acquiring and retaining the best customers. He has personally been involved in these types of conversations with thousands of local merchants over the past several years and provides advice and suggestions for them regarding their advertising challenges.
Like we said before, businesses who participate in the “Deal of the Day” type promotions are still paying for it. The average discount after a campaign (after adding in up-sell and cross-sell) is larger than normal; it lowers their overall margins. All this means is that companies who sign up for one-time promotions are making less money than they would with a normal customer base who isn’t just “in it” for the novelty of a discount.
With Groupon being the fastest growing company in history, it has attracted many competitors including Deal of the Day and LivingSocial. The main issue with these promotional entities is that the businesses themselves are toying around with customer loyalty and trust. Sure, these qualities are (to be straightforward) “priceless,” except in the end, they do count for nickels and dimes. And boy oh boy, does pocket change make a difference!
The Deal of the Day / Groupon model establishes an arrangement with the given business so that the retailer discounts their service or product by 75%. At this point in time, the consumer receives 50% and Deal of the Day or Groupon takes the rest of the 25%. Obviously, and temporarily enough, the retailer appropriates new customers – how can this be a negative thing? They toy around with the risk that these consumers are one-hit wonders, they’ll never see the likes of these clients, or their wallets, again. This is why Deal of the Day and Groupon can be seen as a customer acquisition cost, which is quite similar to advertising.
It can be easy to forget sometimes but it is crucial to keep in mind that customer base is key, and when a company establishes a widespread popular customer base, it becomes extremely tough for competitors to lure these customers in.
The 7 Deadly Sins of “Deals of the Day” for Advertisers to Consider
“Who wins from these coupons and at what cost?” That is a crucial and often overlooked question for businesses rushing to join the emerging “deals of the day” bandwagon being driven at breakneck speed by hundreds of companies across the US. Unquestionably, these arrangements drive short term spikes in business, but closer inspection reveals all is not what it may seem.
Here are seven (7) personal observations I have developed over the past year, having worked with small to medium sized businesses every day. These companies range from $500k to just under $10M a year in revenue and are always setting aside part of their budget to try new advertising ideas.
The 7 Potential Deadly Sins are:
1. Businesses are still paying for it. The average discount after a campaign (after adding in up-sell, cross-sell) is larger than normal. It lowers their overall margins.
2. They own the data. Daily-deal companies typically keep the consumers data and don’t share it with the advertisers. Unless there have an efficient way to capture the consumer data when the certificate is used – businesses lose.
3. Think it will bring “loyal” customers? Forget it! Double-check the research. Recent studies conclude the national average for repeat customers from campaigns such as these is less than 20%.
4. Is the business prepared not to blow all those new 1st impressions? They should expect an abnormal demand for their products and services in a short period of time. Unless the first impression is great, the business can develop a bad rap fast.
5. What about current customers? They could be casualties. They are the ones that have been loyal, and as they say, “brought you to the dance.” Unless they are receiving the same love and attention during this heightened demand – watch out!
6. Breakage – potential liability issues! “Breakage” is the term many use when a business can’t fulfill a promised coupon offer where a customer has paid for it in advance. Many government authorities are investigating complaints from consumers that can’t use the coupons. Businesses could end up holding the tab for all “unused” offers or have to put money into escrow.
7. A company’s image and BRAND could be at risk! These campaigns can be very effective for new locations or brand new businesses with hardly any customers. BUT, if the business has an established brand – beware – consumers are smart and they may sit on the sidelines until that ridiculously great teaser offer comes along again. These campaigns have also been used as “ATM Machines” for businesses that have struggled during the financial downturn, but in the long run overall profit margins can be severely compromised.
The top tier companies that promote these offers have a great business model and many investors can’t wait to become their shareholders. But in the long run do they have the “middleman” or their advertisers’ best interests at heart?
STAY TUNED. There is more to come! Every few weeks I will post more granular details and ideas about each of the topics in this edition. I hope you find this useful and share your comments and stories.
Derek Hall is an entrepreneur and founder of DartzDeals based in Austin, TX. He also has over 21 years of experience in executive management in the technology industry. He has founded several very successful companies since 2005 to serve the advertising needs of local business owners. DartzDeals business model is based upon persistent advertising via smart phones, the web, personal branded apps and high end print for local businesses to use for client capture and retention. DartzDeals website is www.dartzdeals.com.
So you’ve decided to use a coupon to promote your business (Hopefully on DartzDeals…but hey, we know you have options). Now what?
Coupons are great for promoting your business to new customers who, otherwise, may have never visited your business. They are also great to thank your loyal customers for their business. But one of the most overlooked benefits of coupons is the opportunity to gather information.
Information can help you track who your new and existing customers are, where they live, what they enjoy/dislike and what the word around town is about your business. You can also ask permission to contact them about future promotions and start building a database of customers.
An idea: ask your customers to fill out a short survey when they use your coupon. As a reward for filling out the survey, offer them another coupon to encourage repeat business.
Keep your surveys short. Customers should be able to fill them out in one minute or less.
Here are some examples of questions a restaurant (We’ll call it Dartz Diner) may ask it’s customers:
What is your name? Email? Zip Code?
How did you learn about Dartz Diner?
Is this your first time dining at Dartz Diner?
How would you rate your experience at Dartz Diner?
What did you like or dislike about the service, food and decor?
Will you be a returning diner?
These are just some examples of questions you can ask your customers. For Yes or No questions allow guests to circle their choice rather than writing it in, they will appreciate the seconds of time saved.
Have someone reliable and accurate enter the information into a database. Even a program like Excel will work to store data and track patterns.
Coupons are a great way to get measurable results, but if you want these results to last you need to know your customers and their needs. You need to have a conversation with your customers.
Daily Deal sites don’t provide you any information about your customers. What good is that? DartzDeals can provide business’s with basic demographic information about their customers such as name, email, zip code, gender and what categories they are interested in.
You’ve heard about it. Maybe you’ve even saw the press conference (if not, no worries, a link is at the bottom of this blog).
Facebook’s integrated messaging service, aka Project Titan, is here.
We’ve watched the press conference (live and 2 times afterwards…yes we’re tech nerds) and read what the experts have to say. It’s a lot of information, but we’ve compiled what we feel are the most important tid bits of information to know about this new service.
What is it?: A messaging service through Facebook that integrates email, chat and SMS. You will be able to receive mail from outside of Facebook to your @facebook.com e-mail address as well as share Microsoft Office files.
Why?: Facebook’s Director of Engineering, “Boz”, said the purpose of this new system is to seamlessly integrate all the mediums we use to converse with people. In his example, he has to keep a mental database on how people preferred to be contacted: his Grandma likes email, his new nephew only responds to text and his best buddy prefers chat. That can get pretty complicated in an age where communication should be simpler. This is what this service intends to do.
When?: Facebook will be rolling this out slowly over the next year. DartzDeals heard something along the lines of 10% at a time.
Although your business will be able to send e-mail to a Facebook user’s account, this approach may back fire…big time. Any unsolicited (key word here) messages will be considered Spam by users who may resent your brand for intruding on their Facebook without their permission.
Facebook may one day turn this service into a revenue generating stream, but for now its strictly a service for the users.
Things change and evolve at Facebook even faster than I can type this blog entry, but here are some other features of this new service:
- One conversation stream: This new message service has done away with the subject line. The subject is the conversation. You will be able to view you entire conversation with someone in one stream. What I wonder is this: These conversations could get very long (anyone ever used Blackberry Messenger?). Will there be a search function so that you can search within your conversation?
- Social Filtering: This feature is designed to prioritize your messages. Your close contacts will appear in your inbox while other message will appear in a separate inbox titled “Other”
- Your e-mail address will be your email@example.com. To get a username, go to Account Settings and then click on “change” under “Username”.
- You can opt out of receiving messages outside of Facebook. They will automatically bounce back to the sender.
We want to hear what you have to say about this new service. Post any questions or comments!
And if you want to see the full press conference click here: http://apps.facebook.com/facebooklive/
It may come as a surprise but according to the 2010 Digital Consumer Portrait done by Insight Express, males ages 25-34 are using their phones the most to shop and look for deals.
Not only are males using their phones more to shop, they over-index in coupon usage in the following types of stores:
Electronics store – 30 percent (general population 10 percent)
Clothing store – 33 percent (general pop. 15 percent)
Department store – 30 percent (general pop. 15 percent)
Service location – 16 percent (general pop. 7 percent)
The study also said that men prefer to find coupons themselves via an application: 51% of men vs. 28% of the general population.
What does this mean for your business? Smartphone technology makes shopping even easier by putting information at your fingertips. Not only do 53% of men own smartphones, they are using them to make their shopping easier and faster by downloading applications and browsing for reviews. With mobile shopping still rapidly developing, we expect to see the segment grow along with it.
What entices a consumer to redeem your coupon? A good money saving incentive is certainly a huge part of the equation, but often it isn’t enough. At DartzDeals we have the expertise to help your business exceed expectations with a coupon campaign.
Here’s a list of some Dos and Don’ts when creating and posting your coupons. Want to learn more? Contact us (866) 358-3325.
1.Expiration Date: Be upfront and clear about how long the offer is good for. We suggest a coupon be good for at least one month, but ideally three months to give people plenty of time to find and redeem coupons.
2. Clear and Concise: No need for paragraphs. People like their information quick and easy to understand. Your company name and logo, contact information, a quick description, any “fine print” (see the don’ts for this), and of course, the offer are all musts to put on your coupon. DartzDeals will advise you on the best way to display your coupons to appeal to consumers.
3. Promote: Take advantage of social media, email lists and paid advertising to promote your coupon. This will increase traffic and make your efforts worthwhile.
4. Research: Many companies overlook the importance of tracking their coupons beyond how many people redeem the coupon. Who are the people using the coupon? Where do they live? How do they use the coupon? Coupons are a great way to find untapped markets and new ways to enrich your business.
1. Tons of Fine Print: You want your customers to be able to use your coupon most of the time. If consumers feel that they cannot use your coupon or, worse, they try to use it and are not successful the efforts of your coupon may backfire.
2. Use Lots of Colors: Simple is best. Using lots of colors distracts the consumer from your coupon’s content and they may skip over it entirely. Stick to two or three colors that are consistent with your logo.
3. Skip the Math: Do the math to make sure your coupon will be profitable over the entire life of the coupon. The last thing you want to do is discontinue the coupon because of lost profits. Doing the math will ensure happy customers and a profitable campaign.