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Deal sites appeal shoppers and businesses alike
Question of the Day
“It’s really important to us that people still know each other’s faces and names,” says spokeswoman Julie Mossler, who has been with the company since 2008, when it had 120 workers. It now has 7,000. They include hundreds of former publishing professionals and journalism grads who write the clever blurbs to promote each item. A recent offer for half-priced family portraits started this way: “Ideally, every family would have a group mug shot to display above the mantelpiece; unfortunately, many of today’s families are too busy to commit crime together.”
Some subscribers find the emails entertaining enough to read daily, even when the deals miss. The need for staff with both marketing chops and the ability to write snappy copy makes finding the right people difficult. Mike Rothman, general manager of Thrillist Rewards, which targets men with offers like the $50 “Strip and Strip” (a strip steak at a gentlemen’s club), says he is posting jobs faster than he can fill them. He currently has a dozen openings.
“Our biggest challenge is getting more people on board,” Rothman says. “One of the positions we’re recruiting for is a recruiter.”
Daily-deal sites are thriving because they benefit both merchants and consumers without requiring tech savvy from the former, says Opus Research analyst Greg Sterling.
Some companies have gripes, though. They say that the sudden influx of customers overwhelms staff or that Groupon demands an unfair cut. Groupon responds that it has no shortage of willing partners and that businesses have the option to cap the number of vouchers sold.
The deals work better for some businesses than others. If you’re running a hotel and some of the rooms were going to sit empty anyway, it makes a lot of sense. For restaurants, where the profit margin is tiny to begin with, it might be less appealing. (Plus customers tend to tip on the discounted total, making servers grumpy.)
Some merchants don’t do the math before they run an offer and wind up getting burned. Businesses hope shoppers will spend more than the coupon’s face amount. Other companies are prepared to take a loss, seeing it as a marketing cost. Each of the six business owners interviewed for this story by The Associated Press decided to run a second or third deal after trying it out.
There are hundreds of copycats willing to accept lower commissions, but many merchants prefer to partner with Groupon and LivingSocial because they reach more potential customers. While the business model is here to stay, many of the smaller players will be bought or die, Kerner says.
Facebook has the potential to dominate because it already has 600 million users, dwarfing Groupon’s 85 million subscribers, and many businesses already have a presence on the social network.
Small businesses have jumped on the daily-deal model as a way to hook new customers in the digital age. Old ways of advertising no longer pay off, while new ones can be vexing. Newspapers are losing readers, especially young ones. The Yellow Pages is a doorstop. Google search results are unpredictable. Facebook pages are easy to set up, but then what? And reviews on third-party sites like CitySearch can hurt as much as they help.
“We’re better than anything that’s been out there,” says Tim O’Shaughnessy, CEO of LivingSocial.
When Chris Young and his partner started a kayak-tour company, San Francisco Kayak & Adventures, last March, they knew they would need a marketing blitz to get the business off the ground. But a coupon in the San Francisco Examiner didn’t produce a single sale. So they decided to try a less conventional form of advertising and ran a Groupon. They were inundated with calls.
Bess Wyrick, creative director at Manhattan floral design shop Celadon & Celery, is thrilled with the results of three deals she’s run for flower-arranging courses _ a low priority for recession-scarred consumers. The offers brought in more than 1,000 students, who may be inspired to come back for more. But she’s not convinced it’s a long-term advertising strategy. If you continue to run promotions, she says, “How many of your clients are going to want to buy at the regular price?”
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