“The daily deal industry is the new American West of the Internet.”
“The real purpose of daily deals is customer acquisition — to bring in new customers, not target your existing ones.”
These quotes, typical of the buzz generated by the “daily deal marketplace,” piqued our interest enough to take a closer look at how online marketing channels, which almost sounded too good to be true, could benefit archery businesses.
The “daily deal marketplace” includes Groupon, LivingSocial, Amazon Local and similar companies that create programs for client businesses selling discounted offers via the Internet. Although the programs’ discounts and participation fees often erase most of the profit for the businesses, they do create value in generating scores of new clients.
Start A Program
Because Groupon seems to be the most popular deal-of-the-day website (“deal-of-the-day” has become a misnomer, as most programs run longer), I contacted Groupon merchant support technician Tyler Ramone. He shared the typical steps in a Groupon campaign.
“Step 1 would be to contact Groupon Merchant Services (888-582-4354) and arrange a conference,” Ramone says. “My associates and I will talk to you about your business and how to best make it fit in our program. We will address any concerns and answer any questions you might have about our operation. When we reach an agreement about numbers, pricing and fine print, we will send out a contract.”
According to Ramone, it takes two to three weeks to get your offer into the system and make your Groupon available after reaching a deal and finalizing the contract. Once that is done, Groupon actively showcases the coupon on groupon.com, the mobile Groupon app and search engine websites. The offer will be continuously targeted to customers who fit your target profile, so you can expect to see purchases build up over time. If your offer does well on groupon.com and the Groupon mobile app you may have the opportunity to promote your business to Groupon subscribers through the company’s email blasts.
How Many Deals?
What goes into your contract? You will need to determine how many discount deals to offer in your program and what they will be. That will depend on several factors, such as facilities or how many new customers you and your staff would be equipped to handle in a month. For archery pro shops, the vehicles for online offers are most often “hands-on” promotions, such as archery lessons, equipment rentals and range time.
Groupon prefers deals that start at 50-percent and go as high as 90-percent off the normal retail price, which doesn’t leave much profit after Groupon takes its cut. However, this is about recruiting new business. You can sell merchandise once you get customers in the door. A Groupon featuring service and range time makes the most sense. Ramone points out that there are no up-front costs to run a Groupon program.
“Set your monthly cap at 50 vouchers per month to start, but most merchants sell fewer than 10 vouchers in the first 30 days,” Ramone said. “If your offer does well with our customers, a snowball effect could begin and you could sell out in a hurry. We will let you know via email and through your Merchant Center if you’re close to selling out. If and when you do sell out, you have the ability to increase your deal caps at that time.”
The Sales Process
Groupon writes and designs the online offer. “We’ll send you a confirmation email before we launch your deal that will include a link so you can review your offer,” Ramone says. “We are constantly experimenting with different eye-catching graphics to engage customers. We use what we think is most appropriate, but options are available so you can change what we have if you don’t like it.”
Once your offer is online, Groupon makes it available until it sells out or until its client business asks to “pause” it. “We ask that you do give your deal at least two months before requesting any changes,” Ramone advises. “If your deal sells out, it will not be available for purchase again until the following month.
“We work on a revenue-sharing plan that depends on cost and volume. The amount will be determined when we put your campaign together. When the customer buys a Groupon online, we collect the revenue generated by your deal and deduct our agreed-on percentage before we pay you.”
Groupon processes payments on the 1st and 16th of every month for the Groupon vouchers that have been redeemed at your business since your last payment was processed. This also holds true for those who have just started a campaign and have yet to receive a payment. After your campaign launches, you can always check your payment information by visiting your online Merchant Center.
There are many “Daily Deal” sites comparable to Groupon, including Living Social and Amazon Local, that conduct their business in much the same way. Groupon is the dominant site, doing 75 percent of the “Daily Deal” business, but Living Social and Amazon Local deserve some attention. The less popular sites tweak their deals a little to set them apart from Groupon, but as of now, they pay about the same and at the same time. Their services don’t vary much and the dealers had no complaints with any of their responses or policies. Groupon is clearly the go-to site, but you should keep in mind the ever-changing dynamics of the daily marketplace.
Discounts, pricing and market share fluctuate and could change, possibly to your advantage, at any time. Groupon is at the top now, but Amazon, the No. 1 retailer, won’t stay down in the rankings for long — and there are rumors that Google will also be participating soon. If that happens, a lot will change about how “Daily Deal” business is conducted. Google has already mentioned a higher percentage of payback to the dealer. The number of potential customers you can reach and the immediacy of your proposals make the daily deals marketplace an exceptional promotional opportunity for archery pro shops. If you have the staff and the facilities available, these sites are definitely worth looking into.
Does It Work? Archery Businesses Weigh In
Jeremy Hall, owner at the Archer’s Den in Franklin, Tennessee, notes the pros and cons of his first experience with the Groupon program.
“I put an additional 1,500 people who never knew I was here through the store in a month, and this is a good thing,” Hall said.
However, because of missed communications regarding performance capacities and deal limits that got out of hand, Jeremy was still trying to fulfill obligations in August that were supposed to conclude on the last day of June.
“Groupons don’t generate many direct dollars,” Hall said, “but there is no telling how many tabs and gloves and arm guards I sold, not to mention starter bows and arrows. Groupon is a great promotional tool. Once we fulfill the vouchers that were oversold, we will probably start another program. The next time we will require a more specific binding agreement and a more realistic cap on the amount of services to be delivered.”
Richard Gardner, manager at KC Performance Archery in Olathe, Kansas, has used and continues to use Groupon, Amazon Local and LivingSocial to recruit customers and promote new business. Gardner believes it is very effective once you learn how to write the deals. He had this to say:
“You have to be sure to target your customer base and understand that it is almost impossible to sell product on the deals. After you discount your price by half and then give Groupon their half, nothing is left. To compensate, we learned to sell lessons and range time. The response has been good. We get a lot of new customers, and I’d say 75 percent of them have never picked up a bow before. They just want to give archery a try to see if they like it. Around 45 percent of the newbies will continue for at least one more lesson. If I can keep the new customers coming, I’ll be happy with those numbers.”
David Oborne, assistant manager at Velocity Archery in Columbus, Ohio, said his shop uses Groupon, LivingSocial and Amazon Local in an end-to-end arrangement. When the deal runs out on Amazon, LivingSocial is just kicking in, and down the line it goes. He says they are well satisfied with the response so far and will continue to participate in the marketplace as long as the numbers hold up.
“Ninety percent of the folks who purchase the deals have never touched a bow before, and of those 90 percent, 45 percent continue for at least one more session,” Oborne said. “We get about the same service from all three companies and are well pleased with the results so far.”
Jessie Smith, owner at Barefoot Archery in Charlotte, North Carolina, says he might have “pioneered” archery Groupons. “I got on board when it first became available, and I’ve been there ever since,” said Smith. He works with Groupon, LivingSocial and Amazon Select at different intervals and stays out for a couple of weeks between campaigns.
“Groupon is our most productive,” he said. “We sell an ‘archery experience’ for our Groupons instead of a beginner’s lesson. We get more repeat business by instructing them for 15 minutes – just enough instruction so they don’t hurt themselves – then let them have 45 minutes of range time to themselves. I’d say 90 percent of our deal buyers are new to archery. Most tell me it’s something they’ve always wanted to try, and about 45 percent come back for further instruction. Some of them even buy bows, and I’ve even had corporate events generated by Groupon deals. Once I get new customers in here, I show them what I have and tell them what I do and it builds from there. What I like best about the daily deals marketplace is it keeps my range busy. I don’t like to see it empty, and Groupons keep it full of new faces.”
Know Your Capacity And Customers
All the dealers above used ranges and lessons as their “daily deals” offer. Some threw in equipment rental to bump the price a little, but no merchandise was involved in any of the deals because of the discount restrictions. They all agreed that targeting the right customer base and not over-selling the store’s capabilities were important. Some had higher percentages of repeat business than others, but all were pleased with the response they got from the websites. The Internet is opening new and exciting methods of promotion, and with the renewed interest in archery, new customers are just a keystroke away in cyberspace.