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Do Deal-of-the-Day Offers Grow Your Customer Base?

Posted: July 1, 2011, 1 p.m., EDT

It seems like everyone is getting into the "Deal-of-the-Day” business. The popularity of Groupon has grown like a virus and companies with similar type business models fill my email inbox everyday with amazing offers for local restaurants, retail establishments and services.

Several months ago, I signed on with "Seize the Deal.” If you’re not familiar with how these deals work, here is a summary. Each day, the provider will send an email announcement to its subscribers, describing the deal-of-the-day in your area. If the customer likes the deal-of-the-day, then they purchase an electronic coupon directly from the provider using a credit card or PayPal account. The customer prints the coupon, takes it to the restaurant or store, and redeems it for commonly double the value they paid. In my case, I offered $20 of doggie goodies for $10. Normally, there is a 50 percent commission paid to the provider. So in the end, I offered $20 of product and received $5 from the provider for each person who took advantage of the deal.

So, as a retailer, why would you want to do this? Well, most of these providers have built up a motivated customer base that likes to spend money, especially if they are getting a good deal. Ideally, you should enjoy a big rush of new customers—many of whom spend much more than the face value of the coupon.

My experience was not exactly what I expected. While I did get some new customers, many of the people who took advantage of the deal were existing customers. However, some of the existing customers did take advantage of the deal to purchase higher ticket items (e.g., beds, backpacks, dog carriers, etc.). In addition, there is a finite time period the customer has to take advantage of the deal. About 10 percent of the people who purchased the deal did not redeem the coupon. In this case, the retailer still gets his/her portion of the customer purchase price, making up for some of the lost margin on the origin deal.

The thing I found attractive about "Seize the Deal” was the radio component of it. The company that offers "Seize the Deal” in my area owns four different radio stations. On the day of the deal, the radio disc jockeys at the four radio stations talked about my business throughout the day. A few of them had been in to my shops and provided personal anecdotes about something they purchased for their dog. In my opinion, the radio exposure I got from offering this deal more than made up for the fact that I was offering products for essentially 75 percent off.

If you can find a company that has more than just an Internet component to its business model offering this type of deal of the day in your area, I suggest giving it a try. Hopefully, you’ll gain customers for life.

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