Small Business Tips

The Pros and Cons of Selling on Deal Sites

If you’re a small business owner you’re undoubtedly aware of various deal sites that allow you to essentially sell customers a discounted (50% off or more) gift card to use at your location. While the height of sites like Groupon, LivingSocial, and other local offerings may have passed that doesn’t mean they aren’t still popular options for consumers and businesses alike. However, at the same time, such services have been controversial.

On the one hand more than a few customers have bemoaned either failing to redeem their deal in time or having issues getting businesses to honor them. Then, on the entrepreneurial side, running a deal site campaign can be a pricey investment that doesn’t always pay off. So are these deal sites really so great for your small business? Here are a few pros and cons to consider.

CON: Deal sites will charge you fees to use them

From the customer perspective, they might assume that their deal purchase goes directly to the merchant and that’s it. Sadly that’s not the case. Just like any business, Groupon and LivingSocial need to make money and they do this by charging businesses marketing fees and taking other commissions on the deal they sell. The specifics on these costs aren’t readily available but speaking with a site representative to set up your deal should shed some more light on just how much you’ll be spending, allowing you to crunch numbers before deciding if it’s worth it.

PRO: Building your brand beyond sales

One of the forgotten elements that come with offering a deal on a coupon site is the number of people you may be reaching. Thanks to e-mail blasts, site browsing, and social posts from others, your business has the potential to get in front of a good number of people even if only a small percentage of them end up buying your deal. Obviously this impact is a little harder to track but it’s worth keeping in mind when assessing how successful your campaign was.

CON: Some couponers are one and done

Perhaps the biggest complaint entrepreneurs have about deal sites is that some of those who purchase the offers only come in once and never return. This is a real possibility and one you should be prepared for. You should still try to upsell and suggestive sell as much as you can (without being annoying or pushy) but some folks just won’t have it.

PRO: You could bag a new loyal customer

On the other hand, if a guest has a pleasant experience at your business, they’re likely to come back even if they do have to pay full price. This brings up another important point you should keep in mind: don’t look down on people redeeming their deals. While the frustration you may feel towards people who are never going to return may taint your attitude or perception, treating deal buyers poorly as a result could only serve to turn off potential fans.

CON: You could lose money on the deals redeemed

The whole point of deal sites is that you’re giving something away to entice people to come in. Unfortunately this could also mean a hit to your bottom line. You can help prevent this by carefully considering how many deals to sell in the first place, how much you make your deal worth, and how you plan to make up those loses once the guests come in.

PRO: Unredeemed deals are extra revenue

While you shouldn’t count on people neglecting to cash in on their deal, it does happen. Most deal sites will only give customers until a certain date to redeem the full value of the deal. After that expiration date they’re still entitled to use the amount they originally paid but are no longer getting a bonus. This could actually be a win-win if the customer still comes to your location but isn’t getting anything for free. But, if you really want to be a hero and potentially win a customer, consider honoring their expired deal — such a gesture could pay dividends in the long run. 

What’s a good deal for customers isn’t always so sweet for small businesses. However the continued popularity of deal sites would suggest that entrepreneurs do see some benefit to advertising and selling on such platforms. Ultimately you should carefully weigh the pros and cons as well as ensure that your couponing guests have a great experience worth paying full price for in the future.

Other Articles by Jonathan Dyer