Deal Sites: A great income generator or a race to the bottom?

July 16, 2011

As recession took hold, a new style of website has emerged for those chasing a bargain. Deal of the Day sites are mushrooming all over, with nearly all big media outlet launching one of their own. For the consumer this means the opportunity to get something at somewhere between 50 and 70% off. But is this good news for the business?

Essentially what these sites are offering is a platform for businesses to reach captive audiences. Consumers can buy vouchers for products or services at a fraction of the normal selling price.
The business gives a percentage of each sale (somewhere between 30 and 50%) to the Deal Site as payment for advertising their product.

There are pro's and con's to this new method of promotion for the business.

Firstly, the cost. If, lets say, a restaurant is offering a €30 voucher for €15 on a deal site. This means they have already discounted their meal by 50%. They then have to split the revenue with the site, lets say another 50%. So they are now selling a meal worth €30 for €7.50.
I don't need to have to explain the flaw, the accountants are already shaking their heads in dismay.

Promotions, by their nature, rely on businesses giving something to the customer to gain their custom. However, the manner in which these sites operates does not lend itself to any brand loyalty. They simply allow customers hop from one cheap offer to another.

While I am aware of a number of businesses who swear by them, quoting the amount of vouchers they have sold via deal sites, I just cannot see the long term value of such actions. In fact not only does it eat into your margins it also cheapens the brand completely.

Before selling your soul to the deal sites, why not look at value driven promotions which attract loyal custom and does not affect the status of your brand.

Eric Hennelly Flanagan, Six Degrees
Six Degrees is a marketing agency based in Galway, Ireland. It offers a full range of social media and marketing services tailored to suit the requirements of the client. We not only develop strategies to enhance and develop brands, but offer continued support and advice to maintain the momentum of any brand building exercise. Our focus is to deliver the maximum results to each of our clients, with a friendly personal service.