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Let’s Make a Deal?

Never before has a marketing tool kit been so full of options. From Facebook ads to promoted Tweets and deal sites, the ways to tell the virtual world about your business are plentiful. So, how do you know which ones make sense for your business? Understanding how each marketing option works is the best way to determine which ones you should be using. Here is what you should know about deal sites.

By now pretty much everyone has heard of Groupon, the first big deal site that put this promotional tool on the map. In fact, it has been such a sensation that there are now more than 5 competing national sites like LivingSocial and TravelZoo, countless regional and local versions and big names players like Amazon and Google are in on the game

How it works

Deal sites are unique among marketing tools primarily because they require no upfront money. The cost of the marketing is the deal itself, which is typically at least 50% off the regular price, and receiving half of the collected fee. The deal site collects the fee for the service upfront and gives the customer a voucher. The business receives no money from the customer at the time of the service, instead the deal site gives the business half of the money collected from the customer. So the cost of the deal is essentially 75% of the revenue for each customer from the deal site.

Who should use it

Because of the no upfront fees and draw of a great deal, this type of marketing is well suited for new businesses. It is an easy way to get your name out quickly and draw in a lot of first time customers. Service businesses are more likely to benefit from this type of marketing as the long-term benefit is building up repeat clientèle. While deal sites don’t usually make sense for established businesses, it might be considered to stay in front of customers that might be drawn to competitors or if a new competing business has recently run a deal. Overall, deal sites

are good for getting new customers and spreading awareness with no upfront costs, but can be costly per customer, especially if they don’t turn into repeat customers.

Potential pitfalls

The most common issue businesses have encountered with deal site is the inability to service all the customers who purchased the deal. This has given many a business reputations a black eye as the point of using a deal site is to get new customers, but if their first encounter with a business isn’t good, then the marketing has not only failed, but had the opposite effect. Be sure to carefully consider your capacity when creating a deal and take care to structure it to make sure your first time customers become repeat customers.

The other consideration is choosing your deal site partner. There are many options out there, but if your business is local, you certainly don’t want to do a national deal. Additionally, there are as many closed deal sites as there are operational ones, so do your homework to ensure that your partner is going to be around to give you your half of the fees when the deal is done.

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