Deal Site Economics Shift Back Toward Small Businesses

For years entrepreneurs and daily deal sites like Groupon have had a complicated relationship. With an abundance of pros but an equal number of cons for small businesses to consider, the tidal wave of deals began to recede on such sites a few years back. However, as the Wall Street Journal reports, it seems that businesses are slowly returning to Groupon and others as the economics of deal partnerships has changed.

While deal sites have proven effective for driving traffic to stores, restaurants, and other businesses, a spike in coupon redemptions didn’t always materialize into monetary gain for the business owners. In fact the Journal notes that Groupon’s 55% cut and demand for deep discounts hit many businesses’ bottom line hard. But, as the popularity of Groupon and other daily deal sites has waned some since the heydays, such deal sites have reportedly grown more flexible when it comes to crafting offers. For example small businesses can now arrange to offer discounts in smaller amounts and choose to run their promotion for shorter periods of time. Because of these changes, many small businesses are now returning to deal sites.

Winning customers and promoting perceived value

When it comes to making the most of deal sites, the ball isn’t just in Groupon or any other site’s court — small business owners must also do their part to make the economics work for them. One tip, in particular, is to ensure that guests redeeming deals have a positive experience that will encourage them to return. As consultant Symon He told WSJ, “Most of the work from a Groupon deal starts after customers get through the door. A lot of businesses think this is a one-and-done thing.” On the contrary, earning the loyalty of new customers is what helps businesses come out on top after a deal promotion.

Another helpful tip that He suggests is offering packaged deals that promote secondary products. A prime example is a spa offering a massage, champagne, and chocolate for the price of a regular massage. He explains that this method adds perceived value to the deal for consumers, while not costing entrepreneurs that much more.

Converting coupon customers

Kickboxing studio owner Michael Parrella also shared his deal site “hack” with WSJ, explaining how he encourages follow-up visits. First, when customers purchase lesson packages on Groupon, they are assigned to a specific trainer who becomes their point of contact and helps welcome them into the facility. Once their deal expires, Parrella says he offers clients an additional package at a discounted rate before inviting them to become full-fledged members. Parrella claims that, as a result of this technique, he turns 40% of his Groupon customers into facility members.

Knowing when to walk away

Even though many small business owners are finding success on deal sites once again, some still have concerns. Marketing manager Alex Graziano says his company originally used deal sites to spread the word about their business. However, after some time, they decided that consistently offering discounts on Groupon and other sites may have hurt the brand’s image. Instead Graziano says the company now focuses on other types of marketing.


So what can be learned from the rise, fall, and apparent re-rise of Groupon-style deal sites? For small business owners, it shows the importance of adaptation. Just as entrepreneurs like Michael Parrella found a way to make Groupon’s process work for them, the site itself seems to have learned the value of flexibility. As a result, small businesses may want to consider daily deal site promotion once again.

Author

Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded DyerNews.com in 2015 to focus on personal finance and the emerging FinTech markets.

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