Businesses weigh pros and cons of daily deal websites

Special deals and coupons are hard to pass up, and smart business owners know how to use them to their...

A romantic evening with wine and chocolate in a corner suite at the Chrysalis Inn & Spa would normally set you back $389. But what if, for today only, you could get that for $189 and schedule it for anytime this year? That’s a 51 percent discount. Would you buy it?

If you happened to be on, a daily deal website, on Thursday, March 24, that deal could have been yours — that is, if you were one of the first 500 people to pull the trigger.

“(The deal) started at midnight and it sold out by noon,” said Chrysalis general manager Sandi Robb. “We had people calling that morning making reservations. It was a very busy morning.”

This wasn’t the first time that the Chrysalis has offered special deals, but it was the first time it had done so through a daily deal website. Dozens of these websites have popped up in the last two years with all kinds of names: Groupon, Living Social, Daily Deals, Daily Steals and Woot, just to name a few.

While they may be the hot new thing online, one-day deals and coupons have been around a long time and come with a list of pros and cons that every business owner should consider.

First, the bad news. Coupons can be addictive, for both customers and business owners, said marketing and public relations specialist Taimi Dunn Gorman. If a business runs coupons too often, customers may wait for the next coupon before visiting again.

“People may not come to your (business) unless they have a coupon,” Gorman said. “Businesses can coupon themselves to death if they coupon too much.”

To avoid these pitfalls, Gorman recommends that businesses specifically target coupons to new customers. Deals such as “half off your first visit” or “bring a friend and get 50 percent off” can help bring in new customers. The important part, Gorman said, is wowing them enough to turn them into repeat customers.

The good news is that special deals, if done right, can bring in a lot of business. For Joseph Anderson, owner of local mountain guiding company Peregrine Expeditions, Groupon deals have brought in enough new customers this year to necessitate hiring extra help for the summer.

Anderson started Peregrine Expeditions three years ago with his wife Michelle. Until this year he spent part of his time guiding for other companies while building up his own client base. Now he has enough business to keep him busy the rest of the year.

“This year is the first year that I’m doing nothing but this,” Anderson said. “It’s these group buying sites that made it so that I can just focus on my business.”

Back in March, Anderson offered a Groupon deal for a beginner outdoor rock climbing class at Mount Erie in Anacortes. The class is normally $155 — the Groupon deal offered it for $75. Anderson had 140 people purchase the deal, and exposure from the deal generated more interest for other trips.

“It’s brought us business. People have signed up for other trips in the mountains,” he said.

While Groupon did drum up a lot of business for Peregrine Expeditions and The Chrysalis Inn, the jury is still out on whether it will pay off in the long run.

Both deals required purchasers to make a reservation before the end of the year. For Anderson, this could create a bit of a logistical problem during the summer, when most people want to go climbing.

In order to make each climbing trip profitable, he has to limit the number of spaces for Groupon customers. So far, only 10 percent of Groupon buyers have made reservations, meaning there could be an overload of coupon-carrying customers this fall.

“I’m more than happy to take everybody rock climbing, but I’m hoping to spread it out over the summer,” Anderson said.

At The Chrysalis, more than 20 percent of Groupon customers have made reservations for their stay, Robb said. And since Groupon sells the deal, they collect the money from customers and then give The Chrysalis its cut of the cash before most customers redeem the coupon.

“So we have the cash before the last coupon is redeemed,” she said.

Still, Robb and Anderson are both uncertain whether they would offer another Groupon deal. Since it will take the rest of the year for the remaining coupons to be redeemed, both are waiting to see if this big experiment works.

“The jury is still out on whether we’d do it again,” Robb said.

Tags: , , ,

Related Stories