This Idea of the Week is to try to shed a little light on all the daily deal advertising opportunities, such as Groupon, that are popping up more and more. Quite a few of you asked our opinion about whether or not this is a good advertising channel at the recent Corn Party, so we thought we’d share the feedback of a few folks who tried it out last year…
How These Daily Deals Typically Work
In many communities, there can be dozens of these daily deal advertising channels popping up. Some are through nationwide companies (like Groupon, City Deals & Living Social Deals), others are local and are often through local tv stations and newspapers. They can be a very attractive channel for reaching customers without a lot of "out of pocket" cost, but may not be right for everyone. Though each is unique, they operate largely the same way.
1. Each has a list of customers they email “local daily deals” to that can only be purchased through them directly. They collect the money and then give a percentage back to the local company providing the deal.
2. The offer is almost always 50% (or more, but rarely less) off a local company’s regular ticket or product price. Thus, if your regular ticket price is $10, they’d want to sell it at $5 to the customer.
3. In some cases, the deal can only be purchased that one day, and in other cases, it can be purchased until the allotted number of tickets/vouchers has been sold. Either way, you will be expected to honor the voucher throughout your whole season, unless you negotiate differently.
4. The daily deal advertiser (i.e., Groupon) will typically propose a 50/50 revenue split. Meaning they keep half the revenue and you get the other half. Since the deal price is already cut in half, that means you would get 25% of the original price. If you are an “in demand” event in your community, you can typically negotiate this revenue split to something better. We’ve seen splits as good as 70% going to you and 30% going to them.
5. Even though their sales rep will tell you that you don’t have to pay anything to participate in this program, you really do through the revenue you give up to them and the 50% discount you give to the customers.
Take a Look at Some Research
To view the results of a Rice University research study on the effectiveness of Groupon promotions,
follow this link and then click on ONE CLICK DOWNLOADS.
Opinions from a Few Who’ve Tried It
Jim Lowe; Farmstead Festival; Meridian, ID
Last year we used Groupon and also ran a similar deal with a radio station in exchange for a radio ad schedule. Late in the season we also ran on a smaller, local site.
1. Was it good? Yes. We felt like Groupon definitely generated some buzz. The radio deal was good for us because we got a full week of heavy on-air promotion in exchange. The local site was a disaster and did nothing for us.
2. Would we do it again? Yes, with the right terms and conditions. After our experience last year, we will make our plan ahead of time and stick to it. Where we got into trouble was trying to take last minute opportunities that didn't end up fitting the rest of our marketing mix.
3. What would we do differently?
- Make a plan and stick to it. -- don't try to be everywhere.
- Negotiate a more favorable split on the revenue. We have established that we are a significant draw-- they want us!
- Offer something different than a general admission ticket. (Season Pass)
- Run very specific limited times (pre-opening) and possibly limited quantities. (we discovered that one of our advertising partners put our tickets on "clearance" after the promo was over-- right during our peak season!) Make sure you have everything put in writing.
Larry Emerson; Dewberry Farm; Brookshire, TX
We didn't get off on the best foot with Groupon initially. We were not aware until after our Groupon offer ran that Groupon kept half of the proceeds. We were discussing the program with Groupon during the very busy late summer time and the sales rep kept telling us we did not have to pay anything out of pocket for the program. What they didn't tell us was that they kept half the money from the sales, so, technically we did pay them. The other surprise was that I thought we were limiting sales to 5,000 tickets but it was actually limited to 5,000 units and since it was a buy one get one deal, we sold 10,000 tickets. So, you can imagine my state of mind when I realized we just sold $120,000 worth of tickets with only $30,000 going into our pocket!! It was simply a matter of us not taking the time to read the contract closely and that the way the contract is written is confusing.
After the initial shock of what just happened passed, I began to realize the tremendous "buzz" the Groupon sale created. We were all over the internet with other mom's groups and coupon chasers spreading the word. Google analytics showed we had 9,000 website visits the day the Groupon ran while our previous high day was around 6,000 during our busy season. Even more impressive was that about 95% of the web visitors were first time visitors.
One of the reasons we decided to do the Groupon deal was we thought it would be a good way to steer some customers away from our busiest weekend. Groupon did not want to limit the ticket use at all, but finally agreed to our request to not have the pass be valid on our busiest weekend. And it did help to spread the crowds out.
After analyzing what effect Groupon sales had on per cap sales, I compared two consecutive Sundays that had almost the same attendance of about 5,000 customers. One Sunday with no Groupons accepted and the other with about 600 Groupon tickets taken at $3 per ticket versus $12 per ticket full price. After I pulled together all the data, I found to my surprise that per cap sales on the Groupon day was $24.13 compared to $23.20 on the non-Groupon Sunday. I was expecting post-gate sales to be way down.
I think Groupon works better for a venue like Dewberry Farm that has a lot of extra-charge activities than an all-inclusive one-price venue. I have seen in the past when we let the Girl Scouts and their families in for half price, that at the end of the day, per cap sales will be almost the same as a normal day. Evidently, customers that feel like they got a bargain on the admission ticket are willing to spend more money on food and activities. Another surprise about the Groupon tickets was that only 7,000 of the 10,000 were ever redeemed.
One way to figure benefit is to multiply those 7,000 tickets X a conservative $20 per ticket per cap sales and add the 3,000 tickets not redeemed X $3 per ticket. That totals $149,000 that we received for that $120,000 worth of tickets that we initially received only $30,000 for. How many of those 7,000 customers would have come to the farm anyway with no Groupon program? I don't know, but I have to think, that with 95% of the website visitors on the Groupon day being new to the website, that a lot of the Groupon buyers had never heard of Dewberry Farm. Without doubt, Groupon was a good way to reach a lot people we would not have reached otherwise.
Do we plan to use Groupon again? I think so, but I would like to restrict ticket use to the month of November if we can get Groupon to agree. We are always trying to find ways to move customers from those busy October weekends to the slower November weekends.
Kamille Combs; Cornbelly’s; Lehi, UT
After being contacted by 7 or 8 different “daily deal advertisers” last year, we decided to try a couple just to test the concept and see if we could attract new customers. In addition, we liked the idea of having some guaranteed revenue, whether we got a rainy season or not. We were pleased with the results, but are not sure we'll do it again as we don't want to create an atmosphere where customers will only come with a discount. Based on our experience, following are a few tips and lessons learned:
1. Definitely try to negotiate your revenue split to something better than 50/50. We were able to negotiate a 70/30 split with the ones we did and those who weren’t willing to negotiate, we didn’t pursue.
2. We chose to offer the deal on our highest priced ticket, which was our $25 season pass. In previous years we’d sold less than 100 of them. This year, due to the daily deals promo, we sold nearly 2,000. With the half-price customer discount and the 70/30 revenue split, we pocketed $8.75 per ticket sold. Given that our normal one-day ticket was $10.95 and there was typically some discount taken off of that, we figured we were pretty close to making what we’d normally make off a new customer. In addition, the fact that they had a season pass meant that they’d likely be returning beyond their initial visit to make additional purchases of food, pumpkins, etc.
3. Play hard to get and don’t be shy about negotiating any restrictions you feel are necessary. You’ll probably hit resistance to this because the advertiser wants this deal to be as attractive to the customer as possible, but you should definitely feel like you have the bargaining power. This advertiser called us because they wanted us! Thus, we negotiated a cap on the number that were sold and we also negotiated exempting our busiest weekend from the deal.
4. Make sure that you get to give final approval on the artwork of whatever they are emailing out to ensure that it markets you in the best light possible and is consistent with your usual advertising “look and feel”.
5. One thing we didn’t try to negotiate until afterwards was that the advertiser would send out a survey link to all those who purchased our daily deal ticket. We wanted to measure whether or not the deal was being purchased by existing customers or new ones. Because we didn’t request this until after our season, only one of the advertisers would do it for us. If we had asked for it up front and made it a requirement for us to participate, I think the others would have agreed as well. In the one survey we were able to do, we were pleased with the results. It showed that 55% of the purchasers had never visited us before (even though 45% had, they hadn’t purchased season passes before) and that 96.4% were likely to come to our event again in future years as a result of their experience.
6. Since we were selling season passes through the deals, we obviously had more season pass holders coming to the ticket booth than we were used to handling. In hindsight, we’d have done more planning to give them their own line and handle them quickly and efficiently. As a season pass holder, they expect the privilege of getting their own VIP treatment up front and not having to wait in the same line with everyone else. We tried to catch up with the problem and do the best we could after the promo had run, but it’s tough to train all the ticket takers mid-stream and we would definitely have planned better for it prior to the season starting.
7. When approached by numerous advertisers, be sure to compare their mailing list sizes and see who's going to offer you the best advertising reach.
