Flash deals are a powerful tool. So are chainsaws, and for both it's a wise to know how to handle the tool before you start swinging it around.
A while back I helped the owner of a local restaurant, Los Comales, set up and run a Groupon deal. This starter guide derives from my experience working on that project.
1. How Groupon works:
Groupon displays your flash deal to its network for 24 to 48 hours, and if your deal launches Friday it will last the entire weekend unless you give specific instructions otherwise. People buy vouchers on the Groupon site. Groupon then takes a 50 percent cut from all sales, plus a 3 percent handling fee (this can be negotiated), and then sends the merchant three checks. The first check comes as soon as the deal closes, the second at about three months, and the final check after the vouchers expire -- minus any returns. (Customers can return their Groupons for a refund before they expire).
2. Groupon is a stress test.
The initial volume of traffic will expose every weakness in a business. If the staff isn't up for the challenge, for example, or if items aren't priced correctly, these issues will rapidly become apparent. At Los Comales, I discovered that the owner had priced more complex dishes, or ones that cost more to make, the same as easy meals such as burritos. There was also one night when we had only the least-experienced staff member available early on, and she wasn't able to handle the volume. This led to some poor reviews later that week.
3. Follow-up is critical.
You need to have follow-up mechanisms in place before the flash deal begins. Deal-specific signs, QR codes, and other connections to follow-up media (Twitter, Facebook, email) will be important, as will creativity. Ideally, a business will have someone dedicated to customer follow-up during the initial launch and in the last month before the vouchers expire.
4. Be prepared.
Not only do the best staff need to be available, but cashflow is a major consideration before launching a flash deal. I highly recommend that a business employ a marketing or business consultant before and during the flash deal, as everyone on staff will be busy handling the deal itself.
5. The return on the flash deal won't be seen for months.
Groupon vouchers get cashed in during the first and last months they are active. The lasting value of the deal comes from exposure and new customers trying out the business. This means two things: A business gets two chances to make a first impression, and the results of a flash deal can't be measured until several weeks after the expiry date.
6. The flash deal will go beyond the basic network.
Aggregator sites online collect all the deals being offered -- from Groupon, LivingSocial, and countless others -- and display them all on one site. While this maximizes exposure, it can also mean that the deal is shown to a larger number of customers, whose only interest is bargain-hunting, than you might desire. (The sites themselves don't make any money directly off the flash deals, they are supported by advertising.)
7. It's all on the owner.
The owner's attitude will greatly affect the success of the flash deal. If the owner looks at flash deal customers as "no sales" or "costing me money," then this will in turn impair the flash deal through lower service quality or too much focus on up-sell. (In reality, each voucher is more like a click on pay-per-click advertising -- it's up to the staff to ensure that the desired customers convert.) Additionally, there will be many customers who don't follow any instructions associated with the flash deal. It will be up to the owner to decide how strictly to enforce the rules, balancing the loss of potential new customers against being too busy to accommodate regular paying traffic.
Flash deals will deliver fresh customers through your door. But like any marketing, they will offer only limited returns unless there is a good strategy in place and follow-up after the deal.
— Scott Kinoshita was originally a computer programmer, who retrained to marketing after realizing his big dream was to make online marketing that didn't stink.
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