Technical & Websites, Top Tips, Hints & Advice

Daily Deals sites: Top Tips for Local Businesses using Pay-on-Performance Marketing

Written by Ann Stanley on 9th June 2011

Daily deals sites are quickly becoming one of the best ways for local businesses to market themselves online. You may have heard of Groupon, the biggest of the daily deals sites in the UK, but have you heard of its competitors? And more importantly, do you know how you can market your business and gain new customers with these daily deals sites?

Daily deals sites such as Groupon and Living Social are a fast growing industry, with millions of people logging on to them each month. Daily deals sites are beginning to gain an offline presence too –  KGB Deals are currently advertising on TV and Living Social are planning a huge offline marketing campaign in a bid to overtake Groupon this summer. For local businesses, especially small businesses looking to market themselves online, these sites can be a fantastic, cost-effective way to gain new customers.

So how popular are daily deals sites? Well, figures provided by ComScore from April 2011 show Groupon to have an incredible 2.39 million unique monthly users. Competitors Vouchercodes.co.uk and Living Social have 2.03 million and 1.08 million respectively. These people are all looking for deals from businesses in their local areas, so this is a great place for small, local businesses to market themselves to new customers. In this blog post we’ll cover some of our top tips for using daily deals sites to market your business.

What are Daily Deals sites and how do they work?

There are many daily deal sites in the UK, but we’re going to concentrate on three: Groupon, Living Social and KGB Deals. Groupon is currently the market leader in the UK with Living Social close behind. KGB Deals is smaller and newer, having only launched in March 2010, and is run by KGB, the same company who own the number 118 118 (and its equivalents in half a dozen other European countries).

Daily deals sites, essentially, are a marketing tool for local (and national) businesses wherein you provide an offer – usually 50-90% off the usual price – that is advertised on the website, and in daily emails sent to subscribers, with the aim of encouraging new customers to your business. You won’t make money from it, but you are likely to gain a reasonable amount of exposure and of course, every offer that is redeemed is a guaranteed customer.

Deals sites tend to be very social – Living Social, for example, offers deals for free if a buyer then refers 3 friends who also buy the same deal. Similarly, Groupon promise exposure by only activating the deal once a certain number of people sign up for it, thereby encouraging people to share deals with their friends. This means you get a lot of exposure, but also that it is good quality exposure – people are more likely to trust a referral from a friend than an advertisement telling them how good something is.

Top tips: What should you know before using daily deals sites?

Deals sites can be a very useful marketing tool for local businesses, however, it is a marketing tool and not a directly profitable way to sell your products and services. Don’t expect to make money directly from the deals. Instead, look at it as a form of advertisement.

When choosing which daily deals site to market your business on, you should consider these factors:

  • The amount of commission charged by the deals site. Typically, this could be around 50% of the price of the voucher (plus VAT), although it varies from site to site. Groupon only pay on redemption of a voucher and keep all the monies of unredeemed vouchers. KGB and Living Social pay you the whole amount due to you within a month of the deal closing.
  • The information provided by the site – some sites such as Groupon only provide you with the codes of the vouchers which have been bought, whereas others such as Living Social and KGB also provide the names of the customers.
  • The market share of the site in your area. If the site has only just launched its service or does not have many deals in your area, then it may not be as useful as a site which has been offering deals there for longer.
  • Don’t expect 100% of the vouchers or offers to be redeemed. Especially for lower-priced deals or bigger reductions, you’re likely to find that some people simply forget about the deal once they’ve bought it. Ask the company to send out a reminder email about a month before the vouchers expire to remind customers to redeem their vouchers. Purchase of the vouchers is only the first step – ideally, you want to turn them into loyal, returning customers.
  • Remember the purpose of all this is to get new customers in order to convert them into returning customers. You aren’t making money on the first visit so you want them to be blown away, go and tell all their friends and then come back for more. It is important therefore to make sure you can cope with the extra numbers of customers and still give a really excellent service. With this in mind it’s important to make sure the vouchers don’t expire very quickly after the offer is purchased as this will cause a huge rush of customers and make it difficult to give great customer service to each one.
  • Pay attention to the contract. We have heard rumours that some sites may ask you to agree to an exclusivity clause, preventing you from advertising on other deals sites. Ask questions and make sure your happy with all the small print before you sign.

As with anything, it pays to shop around and see what the competition are offering. Be aware of the type of people who use each site (Groupon even have a handy demographics page), the types of customers you want and how this will help you increase your business.

This month Ann Stanley, our MD, is giving a series of free presentations on Pay-on-Performance (POP) Marketing, which will include daily deals sites as well as other methods and techniques. The events are free of charge and can be booked online here. For those who can’t make it to an event, the presentation can be downloaded here.

by Jon Potter