The Top 10 Hidden Costs of Daily Deals
If you are thinking about holding a daily deal on Groupon or a similar site, think again. Many businesses have been terrorized after creating these discount deals and have quickly learned that they are not worth it in the long run. Here are 10 hidden costs of daily deals that prove why you should never consider them.
1. Redemption Times
20% of customers who purchase daily deals will redeem their deals within a month. This rush of customers will rush your staff, annoy your regular customers, and disappoint your new customers. Afterwards, when the coupon is about to expire, you will see the same results all over again. Due to this rush, Groupon recommends their merchants to add an extra phone line, a separate email address, a full-time employee to deal with online discussion boards, five times the website capacity, and 10 times the inventory.
2. Dealing with Old Customers
Groupon doesn’t target its deals to new customers, meaning that you will be giving your discounts to customers that would have been willing to spend the full price. In fact, according to a survey, it was found that 69% of daily deal buyers are not new customers.
Daily deals involve a lot of time going through lists. It takes an extra 3 minutes to accept and verify a Groupon, meaning that if you sell 2000 deals, 6000 minutes or 100 hours of employee labor will be spent on verification, and not on giving a positive and memorable customer experience.
4. Harsh Ratings
On average, a Groupon customer that rates a merchant on Yelp will give a rating that is nearly one star lower than non-Groupon customers. The effects of this reputation damage results in 8% of lost revenue for each star lost, according to Harvard Business School.
5. Staff Training
Groupon gives you a list of 11 steps you need to cover with your staff before running a daily deal. These steps involve placing your staff on group discussion boards and spending more time over the phone, which can result in losing time that can be better spent dealing with customers and giving them the optimum experience.
6. Pushing Loyal Customers
Groupon customers often push aside your already loyal customers by taking up their seats. This results in the frustration of your existing customers and will cause you to lose their business as well.
7. Low Tips
Discounts on meals encourage lower tip rates. On average, a daily deal buyer will give 9% of their effective tip.
Merchants that hold Groupons are either unaware or too busy of the fact that customers can easily print and reuse copies of their coupons. In fact, there are a number of websites that have been created to inform people on how to cheat a Groupon.
9. Lost SEO Reputation
Even after your daily deal is over, your Groupon will continue to haunt your searches. Every time someone Googles your business, your Groupon page will be placed in clear view.
10. Daily Deal Eternity
Groupons never expire, meaning that the deals you have created today can come back to bite you five years from now as well.
Daily deals can bring problems to your business that you previously would not have even imagined. They require more work and time, and can cause you to drive your loyal customers away.