Group-buying local deals site fever

Team HuddleEver since Groupon started making a big noise in the US, and Livingsocial moved into the one-day sale market, similar sites have cropped up around the globe.

There are the blatant rip offs in Russia and China to the more subtle US based me-toos and German-backed startup MyCityDeal, now acquired by Groupon. Other UK and European competitors like KeyNoir and Groupola and more show that the market is big enough for a number of players. Even Prague has a Groupon clone: Slevomat.

How it works

Merchant approaches/is approached by deal site to be featured for a day.¬†Merchant sets a price for their deal they want to charge, compared to the original price, and a minimum (and optionally a maximum) quantity of the deal to be sold. The customer is motivated to get the deal to ‘tip’ so that they get it, so they are very likely to share the deal with friends on social networks. Once enough people have pledged the cash, the deal site takes the payments, sends the purchasers their coupon/voucher and tells the merchant how many were sold.
How much the featured merchant gets from the total varies from site to site and even based on product or service category. Numbers reported from Groupon are as much as 50%, so if a deal is offering $150 worth of service for $75, the merchant can be making as little as $37.50.
If you’re considering using a deal site to promote your business or product, here’s a short list of the pros and cons:

Advantages

  • Reach a lot of potential new customers
  • Business when you might otherwise be quiet, especially if bookings are required and you’ve set the expectation that your busy times are excluded from the offer
  • Search engine link juice – a link from a fairly high pagerank site – the previous deals pages hang around for a while
  • Able to set minimum and maximum quantity, overall and per person
  • No initial cost outlay

Disadvantages

  • Unless you can turn those customers into repeat business you may be losing money on each one
  • Need to give a large discount to capture attention
  • Deal site may keep a large percentage of the sticker price
  • Might have to wait a while to receive payment from deal site
  • Can’t be overdone or you risk undermining your revenue permanently

Questions to ask

  1. What’s the revenue split?
  2. How soon is the money transferred to me?
  3. Do I get the customer’s email addresses (or have to acquire them myself)?
  4. Do you have any data on whether deal customers become regular customers?
  5. What percentage of businesses have expressed an interest in running another deal?

For consumers, this is a good list of caveats.

Have ¬†you tried one of these sites for your business? How’d it go? Care to share in the comments section below?

Just looking for a global list of daily deal sites?

image credit: Megan Soh via Creative Commons on Flickr