There has been a proliferation of daily coupon vendors from Groupon, LivingSocial,
to local radio stations offering small business owners an opportunity to discount their goods or services to gain new customers. The daily deal model, offers a deeply discounted, one-time coupon with revenue split between the merchant and the daily deal site,
Last year these marketing companies were thriving, but a survey in October conducted by Manta, a small business listing service paints a different picture.
A Bloomberg Business Week story reports that many small business owners are re-thinking usage of these marketing tools.
Josh Neblett, co-founder and chief executive of online retailer GreenCupboards, a company with“eco-friendly” products is using inbound marketing to promote his company. He is using e-mail campaigns, Facebook ads, and joint promotions with suppliers. However, he is not using any of the daily deal coupons popular in 2011.
“We did three different LivingSocial deals last fall, and at the end of the day, it did not pencil out enough for us to continue,” says Neblett, who started the 55-employee, $15 million Spokane (Wash.) company in 2008. “The average net loss per order was significant, and the average customer we gain through our own marketing initiatives repeats business with us at a significantly higher rate.”
Josh is not alone. An October survey Manta conducted of 1,087 of its members reported dismal results for advertisers. The survey showed that 82 percent do not intend to run daily deal promotions this year. Only 3 percent said such campaigns have garnered them repeat business; 3 percent said they lost money on daily deal coupons. Groupon, the largest daily deal website, has reported very disappointing third-quarter revenue last week, sending its stock price to a record low. LivingSocial also reported a third-quarter loss.
Some companies have been happy with the coupon deals. If you own a service company that can afford to break even or take a loss on coupon discounts in the hope that first-time users will stick around they may be a good marketing tool for you. But for a product-based business with slim profit margins, inbound marketing may be a better alternative.
Many companies had customers who redeemed the coupons but did not return or customers who bought just the coupon amount and nothing else.
Daily deals may not be the best marketing tool, but smart marketers have found ways to incorporate deal coupons into their marketing plans that work. They use them sparingly to boost website traffic and raise their profiles but negotiate deals that allow them at least to break even on each sale. Combined with inbound marketing tools such as email marketing, blogging, and PPC marketing, coupons can deliver new customers and you won't have to lose a fortune.