Are You Considering Using A Daily Deal In Your Food Business?
Daily Deal sites like Groupon and Living Social have been around for a few
years now. You've probably heard many arguments as to whether these
programs are good for the independent food business owner. I admit that
there are many pros and cons for using these and other types of coupon-ing
or discount deal methods to attract customers to your business. I also think
that the success or the benefit of using these programs depends on the
preparation taken before you sign on.
The costs for taking part in a daily deal can be overwhelming for food business operators. Basically, if
you choose to offer a daily deal, you will pay at least half of your sales to the Daily Deal companies.
Then you must add-in any extra employees (yes, you may need this because many buyers will wait until
the deal has almost ended before showing up-that could add up to a lot of extra customers in one or
two days). Of course, you have your food cost to take into account as well. When you look at these
numbers, you could view the daily deal method of marketing as a losing venture.
Do Daily Deals work for food businesses? It has been proven that you will increase the number of
customers who will walk through your door. If you are not prepared for this onslaught of coupon-
waving deal participants, it could be devastating to your business (as seen on the video).
So, is it a good idea to do the Daily Deals? That depends on how you look at things.You need to go
into the daily deal market with a plan. Start by realizing that you may not make money with this method
of marketing. With the deal companies taking half and the cost of doing business; you should consider
methods to capture information from the buyers of your deal. Some of
the buyers may be discount hunters; but not all of them are. If you had
2000 people who took advantage of your deal and found that 20 of
them stayed on to be regular customers, would you consider your deal
to be a success? Put another way- take some time to estimate the
value of one customer.
"The simplest way to estimate lifetime value: Plug actual or estimated
(if you're in the planning stages or just starting out) numbers into the following equation:
(Average Value of a Sale) X (Number of Repeat Transactions) X (Average Retention Time in Months or
Years for a Typical Customer)
An easy example would be the lifetime value of a gym member who spends $20 every month for 3 years.
The value of that customer would be:
$20 X 12 months X 3 years = $720 in total revenue (or $240 per year)
Now you can see even from this hypothetical example why many gyms offer a free starter membership
to help drive traffic. Gym owners know that as long as they spend less than $240 to acquire a new
member, the customer will prove profitable in a short amount of time."
Once you figure your customer's lifetime value, you will know how much that customer is worth to your
business. How do those 20 customers look to you now? On a smaller scale you could easily have 600
customers who come through to redeem their deals and end up keeping only 60 or even 6. The point is
to use the daily deal marketing method to your advantage. Don't expect to make money on the
coupons. Aim to make money after the fact; on the few customers that you gain.
Plan mini-events throughout the daily deal period- Have contests (that don't involve too much extra
work) that will make customers complete an information card in order to win. Setup an email marketing
program that keeps in touch with these customers. Touch them more than once. Don't send one or two
email messages and give up if you get no response. It is said that it takes at least 7 'touches' before a
customer buys; don't quit after just a couple. If they opt out of your list, it's ok.., you still have others
who are interested in what you have to say.
An article written by Rev. David Ciancio on Foodandtechconnect.com states that, "84 percent of
restaurant operators consider restaurant-specific marketing emails to be effective in increasing revenue
for their restaurants, and 78 percent of consumers said an email from a restaurant would motivate them
to go to that restaurant. In addition, 63 percent of restaurant operators say they plan to use such emails
in the next year."
Develop an effective follow-up plan as a part of your daily deal venture. This technique will ensure that
you get the most bang for your buck out of the whole deal.
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