Daily coupon websites have exploded in Australia in the last year. Australian’s love of a good discount is obvious as evidenced by the sheer number of coupon websites popping up. Consumers love them, businesses love them, my Mum loves them – but are they good for the local businesses who are using them?
How they work…
At their core, coupon websites are good old fashioned direct marketing using traditonal marketing techniques. Instead of printing, posting, cold calling, faxing, or letter dropping, these websites instead use email, social media, viral marketing, affiliate marketing and pay per click advertising to spread their brand (and coupons) around the country.
The websites are broken down into captial city locations – Adelaide, Brisbane, Melbourne, Sydney etc and customers sign up to the mailing list for their relevant city to recieve the coupons for their area.
The bigger the database of customers, the greater value, potential profit and reach the website has (obviously!). Typically these websites employ an old school sales force who call a number of local businesses and sign them up to a coupon deal. It is a very simple but highly effective process. Once a business has signed up and agreed upon their coupon offering, the coupon website then sends out this latest deal to its large subscriber base who then can purchase the coupon, share with friends or ignore it.
Often times a local business sees its competitor on one of these websites and the number of coupons bought (often in the 100’s), they will then quickly call to sign themselves up as well. And so starts the downward cycle towards low prices (and low profits).
Typical rules of these discount websites:
- Deal isn’t on until a certain threshold have been purchased
- Once the deal is ‘on’, the coupon site takes a percentage cut of each sale
- Deal stays live for a certain period of time
- Customers pay up front
Why are they so popular?
Customers and businesses alike LOVE these daily deals websites. I know many people who purchase these deals for them or their family members multiple times per week.
Why customers love them:
- Huge discounts
- Impulse purchases
- Niche products
- Scarcity – limited time only!
- Pre-pay before using product/service
- Easy to share with friends via Facebook and Twitter
Why businesses love them:
- Access to huge local market
- Builds brand awareness
- Quickly make large number of sales without much work
- No advertising costs
- Guaranteed income even if people who purchase don’t turn up
- Low risk
- Easy to share and spread message virally
But are these coupon websites good for local businesses?
The answer to this depends on the market and positioning of your business. The risk of using discounting as a marketing strategy is that it can train customers to wait for the next promotion to visit your business or use your service. Whilst the coupons bring paying customers in, the profit margins can be thin and the customers rather fickle.
The type of customers that use these websites tend to be loyal to the coupon – not to the business. For example I have some friends who when organising a catch up for lunch at a pub or restaurant in Adelaide, they will keep an eye out on Scoopon for good lunch deal to come along. They then base their lunch destination primarily on where they get the coupon for.
For a new business starting out, these coupon sites can be a great way to spread the word quickly and get paying customers through the door. But tread carefully. You don’t want your business to be the “always on sale discount shop”! Higher prices are generally perceived as meaning higher quality.
What can local businesses do instead of discounting?
Building a brand around discounted prices is typically not the best strategy for most local businesses. Profit margins are usually very thin, which emphasises the need for building a sustainable and loyal customer base at a higher price (or higher volume).
There are a number of other marketing channels that a local business should be using to get customers through the door:
- Using your Google Places page to drive local customers to your business
- Email marketing – when a customer comes into your shop, capture their email address and save them in a database. Knowing who your customers are is extremely important. Don’t be afraid to ask! Once you have a list of email addresses, start sending them updates every so often with good deals and loyalty rewards. Build your own database instead of borrowing the coupon websites’.
- Facebook – set up a fan page for your business and engage with customers through there. Have them help you spread your brand for you!
- Pay per click – buy a few ads on Google and drive visitors to your website to sign up to your mailing list or contact you directly.
Most local businesses can find value in using these coupon websites at any stage of their life cycle. However, if you want to build a long term sustainable business, it is better to build your own customer database and communicate directly with your own customers. Consistently discounting your products or services can damage your brand, lower your percieved value, and train your customers to wait for the next special. To build a sustainable local business you must gain customer loyalty through quality, service or a unique customer experience.
Be remarkable – and your customers will keep coming back .