Why the daily deals(coupon) model should be avoided

Online deals websites encourage customer to visit and try out local businesses through incentives aka offers/deals.

For a customer, an offer from a local business enables fulfilment of a need at a discounted cost.

For a merchant, an offer should be the last method to try on your marketing list (or not try at all). In case the business is trying to offload inventory on a urgent basis, choose couponing but understand the long term losses.

Here’s why

I will divide this post into 3 parts: merchants, customers, relationships.

Part 1 : Merchant

Every business which lists itself online (either to buy or sell or both) is a merchant. Every E-commerce company out there needs bucket loads of merchants, each of whom can then (potentially) offer bucket loads of services to be listed and sold on the website. Sounds simple, isn’t it. Here are various scenarios:

Objective To get customers to try out the product/brand, you floated a coupon offer. Here are the possibilities:

A. Several new customers try out your offer at a discounted cost/bargain. They are happy with the service/product. However, they have subconsciously attached the discounted price with the offering. Good luck selling the product at its original value later to the same customer! Also, you are now a discounted brand.

B. Several new customers try out your offer at a discounted cost/bargain. They are not happy with the service/product. Either because: The business got inundated with too many customers to handle/ the merchant cut down on services or quality due to discounted offering/ the product was bad at the first place.

Well, the customer experience was bad- which is the polar opposite of what you were hoping for.

C. Several new customers try out your offer at a discounted cost/bargain. They are happy with the service/product. They see a better offer(from another brand) the next day on the same website, they avail that offer and you lose the customer (and the customer acquisition money spent). The customer are subconsciously attached to the offer and not to the brand. Depth of purchase is not possible from coupons (generally speaking). But you still need to get more customers and you float another offer- the cycle continues.

D. Costs of promotion: You sell services worth Rs. 5000 at a bargain price of Rs. 3000 through coupon. The portal takes a 20–40% cut, resulting in your final discount upwards of 50%. Also, many of your regular customers (who used to pay full price or MOP) now avail the deep discounts. Also, many traders can use these discounts to buy products which they latter sell at original prices. Think about the overall costs before using your marketing funds for coupons.

For a merchant, coupons should easily be the last time to check on the marketing list (or not check at all). In case the merchant is trying to offload excess inventory on a urgent basis, you may choose coupons but understand the long term costs attached.

Part 2: Customers

A. You saw a great deal(coupon) and brought it. Great! The good part is that you have hunted that deal and you deserve a good bargain. The bad part?

- You might have overlooked the fine print (terms & conditions). Many customer forget to realise that the deal might only be valid on weekdays, before 7 pm.

- You might need to give prior notice for scheduling and appointment. Thus, the free choice of choosing a restaurant when you feel hungry is gone- you need to carefully plan in advance. Rescheduling might cost more.

B. Lack of quality/service: Businesses floating coupons often end up getting a lot of customers- all of whom want to avail the service within the same time period. Result: Merchant not able to provide the same quality of service which it used to. Many customers often complain of decrease in quality of service/product when availed through coupons. WYPIWYG applies here (What you pay is what you get).

Part 3: Relationships a.k.a Relationship between Merchant and Customer:

Most of the merchants want to have a long standing healthy relationship with their customers. However, coupons provides a temporary quick-fix to get customers to your doors.

Instead, businesses should focus on long-term relationship building with their customers who turn loyal and provide actual gains over the long run. Customer loyalty cannot be brought by Monday afternoon discounts.

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Coupons as a method of marketing, use sparingly, if.

External Links:

https://marketoonist.com/2011/01/social-coupon-bandwagon.html