Understanding Daily Deals: You Probably Have It All Wrong
DM CONFIDENTIAL – Last week we spoke with an interesting startup. Without meaning to sound contrarian, they certainly sounded so — that is, if you believe what the mainstream media says regarding the daily deal space. They say that it does not work for merchants. They say that deals are a disaster that only bring in deal-hunters with no loyalty. What if, though, you had insights into the actual profitability of the deals? What if you could see exactly what those who bring in deals spend in comparison to those who do not? What if you knew the real deal as opposed to self-reported information that might be ever-so-slightly biased, because the merchants and the staff expect those who come in with coupons to be subpar customers? That is exactly the information that this startup provides, and so far for 90 percent of the restaurants that have analyzed their deals, the numbers come in far better than they would have ever guessed, as in profitable.
Not every restaurant will run a profitable deal, and chances are that the restaurants using this software are among the more advanced, given that they are even thinking along the lines of analyzing data. As a result, they are perhaps not quite representative of all restaurants. Even taking that into account, by analyzing the point-of-sale information from restaurants, we have a much truer picture — one that is no longer a guess based on observation. Just imagine trying to run an offer without knowing the conversion amount. All you see is impressions and clicks, and because they come from a high volume source, you automatically assume they do not perform like your other customers. It might not, but to assume it doesn’t just because you receive more of them at one time than your typical customers is an unjust and arguably incorrect assumption.
Members of the mainstream media are not the only ones who have misunderstood the daily deal space. The performance marketing community has, too, but because of a different bias. We in the performance space have been trained to look at the daily deal companies as advertisers. They are the ones who so resemble the beloved email submit, that thinking of them in any other capacity poses challenges. Now that the vast majority of deal companies have cut back on their spend, those in the performance space have started to change their minds and discount regarding their value as a relationship. It is a completely understandable but entirely incorrect assumption, one that we tried to touch upon earlier. Now it’s time to hammer home the point. Those in the performance marketing space should absolutely stop thinking about the typical daily deal site as a potential advertiser. Think about it as a publisher.
Ever heard of a small company called QVC? Is it an advertiser? No. It’s a publisher. Advertisers go there to sell stuff, lots of stuff, in a short period of time. The same holds true for the daily deal sites. They might have needed to acquire lots of people, but that is not who they really are. It’s easy to think of them like that, when that is the impression they made so strongly. But, thinking of them like that misses out on their long term opportunity. They are a distribution source. Just as QVC used new media of the time to influence purchasing behavior, so too do daily deals. People like to buy. The brains behind Instagram, Facebook, Google and so on might not, but they are not the vast majority of the population. The vast majority of the population shops at Wal-Mart, at Target, on flash sale sites. People like spending (um, Apple, anyone?). Deal sites are simply a vehicle by which people can discover and shop. They are the QVC for the internet age.
For performance marketers, this is a major shift. We have to not see ourselves as the user acquisition engine, but as the movie studios that provide content to Netflix. We are the people who leverage platforms. We are the ones who come in early and figure out how to master platforms. Daily deals are such a platform, and so long as the emphasis is on using other platforms to help them get more users, we are missing out on the real opportunity.
Interesting article! I agree with the fact that daily deal sites are like distributors! We help companies get their name out there!