Daily Steal: Does Daily Deal Marketing Help Or Hurt?

by Shannon F. Pretty much everyone is familiar with sites like Groupon or Living Social. With product offerings ranging from half-price restaurant meals to impossibly cheap vacations, these daily deal sites are a great place for consumers to try something new with decreased financial risk. But if you’re in the dining, entertainment, or hospitality business, you probably have a love-hate relationship with daily deals. We’ll break it down for you and help you figure out whether this marketing strategy should be part of your business plan. How daily deals work A business participating in a daily deal offers their product or service at a discount, usually around 50% off. For example, a consumer might purchase $100 worth of food at a restaurant for $50. The daily deal site typically takes half the profit, which means the restaurant only gets $25 out of the deal. However, each daily deal has a required minimum number of buyers (putting the “group” in Groupon), in order to guarantee a certain amount of revenue to the business running the deal. If the restaurant in the above example requires 100 purchases in order for the deal to go through, they are guaranteed $2500. Otherwise, the deal is off. Do restaurants lose money on daily deals? In some cases, yes. Operating expenses are often high for restaurants, and profit margins tend to be narrow. In a recent study, over 26% of businesses lost money from running a daily deal, and about 18% reported just breaking even. There’s […]