In these times of economic upheaval, when companies are focused on survival first and profit second, how does the GroupOn style promotional offer fit in to the scheme of things? It’s actually a broader question, focused on understanding your end-to-end business model and defining your timeframe for strategic planning. If you’re running month-to-month and happy that way, then it’s probably not worth reading on. But if you’re thinking about building a profitable growing business that keeps expanding after 2, 3, 5, 10 years then there’s more here for you.
Pouring the foundation for loyal customers
It’s a cliche but it’s true: loyalty isn’t built in a day. But its foundation (or lack of it) is determined largely in your earliest interactions with new customers. In particular, the nature of your business relationship is usually defined in some way relative to price. What’s key is that your company manages its development deliberately — because it’s extraordinarily difficult to change later.
Daily deals are a tempting tool for several reasons:
1. They often come with prepayments — so they give an immediate boost to cash flow (at the expense of future revenue)
2. They can create a sense of momentum in a business that is struggling to grow — a bit a ‘drug’ for the morale of the team
3. They bring a lot of new prospects to the mix — and they experience your product or service rather than just doing a ‘fly-by’.
The problem is that, for many companies, the items above deliver more ‘ foam than soap’ — their perceptive impact far exceeds real marketing value. And they leave a trail of financial debt (in the form of redeeming vouchers) that sometimes hurts companies for months to come.
From the loyalty perspective
Is your company establishing a long term pricing parameter with a deeply discounted promotional offer? How does that play into the long term loyalty relationships you have with your clients? We’re not big fans of companies creating their own problems (as if there aren’t enough for a company) and then spending all their time solving those.
We’re big believers in laying down the value equation early and then using things like free trials or samples to prove you can deliver that value. The point: if someone was happy with your GroupOn promotion, what were they actually happy with? The deal they received or did they get a sense of the value proposition enough to buy at normal pricing.
We tend to see these types of daily deals as a very aggressive maneuver and in some cases as a last resort for companies — particularly those which have longer term business mindset.