August 31, 2011

Are Daily Deal Sites A Good Idea For Your Business?

As you undoubtably know, Daily Deal are a large part of our commerce landscape these days thanks, in part, to the “Great Recession” which turned everyone into a bargain hunter.  The question that small food business owners face though is whether theses deal sites can be helpful or hurtful to your business.

The benefit of these sites to food entrepreneurs is that these promotions can drive significant traffic at no upfront cost unlike traditional advertising.  However, in addition to offering a deep discount to be featured, businesses must also pay a percentage of the deal’s sales to the daily deal site.  That means that if, for example, a food truck offers $20 worth of food for $10, the daily deal site may take as much as 50% of the sale as their percentage so the food truck would only be making $5 on each sale but must provide $20 worth of food.

For businesses, such as food businesses, that incur a lot of variable costs associated with each sale, these daily deal sites need to be carefully considered before signing up.  Though these sites may be a good way to bring in immediate revenue – since you are paid based on how many people purchase the deal and not how many people actually redeem the deal – you need to determine whether the amount you will be making off each sale is profitable to you given your costs.

You also need to consider the impact a daily deal will have on your brand and on your customers.  If your deal is a success, it may lead to longer wait times at your establishment which could upset new and returning customers.  You’d hate for them to take their business elsewhere and share their negative experience with friends, on blogs, or on review sites like Yelp.  The other big risk of daily deals is that it could start to train your customers to expect that you’ll discount and make them unwilling to pay full retail price for your food in the future.

At the end of the day, there are pros and cons to deciding to run a daily deal – just make sure you weigh all of them in advance!