How to Make Daily Deals Work for Your Business

THE LOCAL BUSINESS GUIDE TO DAILY DEALS from thedealmix 4 MUST HAVE ELEMENTS TO DESIGNING A PROFITABLE DEAL Daily deals can be beneficial to local business if done right. Key considerations to structuring a deal. Set the last day of your deal to a slow day (likely not Fri/Sat) Length of deal should be long enough so everyone doesn't come at once (> 1 month) It should not last forever – utilize breakage (i.e. users who don't redeem; < 8months) Know the capacity limits of your business. Ask the deal site for total # of users and % of purchasers on average for your category If your deal sells out, exposure can be as valuable as a purchase. A sold out deal seems desirable and you can usually run it again. EXPIRATION QUANTITY DATE $$ TERMS / PRICE RESTRICTIONS Decide what your goals are: Immediate profit vs. Long term customer value Determine the minimum price to cover costs Know the average customer spend, set value of offer below this to maximize overspend Negotiate terms if goal is short term profit. Only offer deal during slow times (i.e. lunchtimes, weekdays, non holidays, etc.) Offer deal for new customers only Limit number of vouchers one can purchase CASE STUDY: MAKING DAILY DEALS WORK FOR YOUR BUSINESS Avoid the daily deal horror stories. Here are the must have rules to making daily deals profitable. Case Study: Cupcake Shop CHEAT SHEET: A Profitable How to Make Deals Work Solution Know Cost of Goods Sold (COGS) and Average Customer Spend (ACS) OFFER PRICE = $10 COGS = $12.5 $10 - $12.5 < $O! (high potential for loss) HOW TO OFFER PRICE = $15 PRICE RULES: $15 – $12.5 > $0 1. Offer Price - COGS > $0 OR 2. ACS – Value of Offer + Price > COGS Offer = $15 for $35 of Goods Batch of Cupcakes (ACS) = $40 Overspend = $40 - $35 Total income = $15 + $5 Total Profit = $20 - $12.5 > $O WHAT TO Maximize Overspend Offer = 1 Batch of OFFER RULES: Cupcakes For $10 1. Overspend = ACS – Value of Offer 2. Value of Offer < ACS (Originally $40) Know Your Capacity Purchased = 8,500! Cap at 1000 Offers MANAGING % Utilization = X%, Customers / month =Y Average orders/ month = 100 Assume capacity = 60% Set Expiration = 6 months CAPACITY (8.5x average monthly orders) RULES: 1. Quantity Available (per month) < Y/X 2. Cap on Offer =( Y/X)*(#of Months)