Are you a business owner or retailer that hasn’t jumped on the daily-deals bandwagon yet due to not knowing how effective they are at increasing the customer base and revenue of the companies that participate in them? We often hear this, and other concerns, from our clients.
Below we’ve outlined how these daily-deal sites work, how much they make off the companies that participate in their programs and have also provided some feedback from one of our clients who has used Groupon, Social Shopper and Deal Find to offer their own daily deal.
Perhaps the best known daily deals site, Groupon was founded in 2008 and generates $100 Million per month from its daily deal platform and has a membership base of 70 Million + subscribers.
Groupon takes a cut from retailers PLUS revenue from unused purchases; meaning if someone purchases the Groupon for your store, and does not redeem, Groupon still takes a cut. The retailer receives 50% from each Groupon sold.
The original daily deals site, but not as well known to its competitor Groupon, Living Social entered the daily deals space in 2007. The company currently generates $50 Million per month and is estimated to be worth $2.9 Billion. Living Social carved out the travel niche for daily deals, offering extremely discounted vacation deals through its daily deal platform.
The company takes a cut from each Living Social deal sold, however the retailer takes home more from each redeemed deal than what its competitor Groupon offers its participants with 60% going home with the retailer.
Social shopper has a commission rate for deals that range anywhere from 20% – 40%; giving them a competitive edge with their competition. According to Social Shopper, this lower commission structure is one of the main reasons they have built such a strong relationship with many of their vendors.
The company compares its daily deal as a low cost marketing alternative to traditional marketing channels like TV, radio, and print and guarantees new customers out of their marketing efforts on your behalf.
Results of Daily Deals for business owners
Our client, Kalev Fitness Solution, ran a daily deal on Groupon, Social Shopper and Deal Find for group training classes, Bootcamp and Classes or personal training classes. Below are some numbers from his experience with offering a daily deal for his business.
The number of daily deal(s) sold across all three daily deal sites for Kalev was 1460. Out of these deals, 893 were redeemed, for a redemption rate of 61%. The company ended up acquiring 76 new clients who signed on for additional services after the daily deal offer was completed.
This was in line with what the company had hoped to see from participating in daily deals, especially the amount of revenue generated from the deal(s). Sorry, we are not able to provide any revenue numbers!
When looking at each individual daily deal site, Social Shopper resulted in the most deals sold (612), as well as the most redeemed (381) for a redemption rate of 62%. This site also resulted in the most new clients gained for the company, with a total of 32. In comparison, Groupon sold 417 deals and 287 were redeemed. Although this redemption rate was higher than Social Shopper at 68%, Groupon only resulted in 20 new clients for the company and took more of a cut from Kalev’s revenue.
What worked for Kalev Fitness Solutions may not work for your company. It is important to consider your business model when considering daily deals and if you can really afford to hand over up to 50% of your revenue over to them. Also, consider the customer service you will receive from each one. All of these factors should be taken into consideration when choosing a daily deals site to work with.
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