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Over the past year, small businesses have had the opportunity to acquire more exposure and customer traffic through online mass discounting services. Upon being confronted with the option of utilizing advertising dollars on mass discounting sites like Groupon or Livingsocial, businesses often question whether or not mass discounts are "right" for them-whether this will "pay off" and be "worth it" for the business. While there is no one answer to this question, it essentially boils down to the business, the product, and the company's overall goals for success. Mass discounts have their pros and cons, so it's important to weigh whether or not it will benefit a business' or product's growth. Below are some reasons for, and against mass discounting strategies for small businesses.

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Pros:

  • Attracts new traffic that may not otherwise enter your business or buy your products.
  • Leverages the contact database an online service provider offers in order to reach a broader demographic and higher population of people.
  • May assist in shifting slow-moving inventory or services.
  • If the service and quality of the brand/product is strong enough, discounting can garner a population of customers that will ultimately convert into loyal clientele.
  • Potential to generate revenue for those with low-cost or fixed-cost structure. For example, a gym with existing equipment can generate more income with added traffic, with no change in operating costs.
  • For new businesses, discounting can be used to publicize an opening and/or the existence of your product/service.

Cons:

  • Discounts can be associated with being "cheap," which presents the possibility of diminishing the credibility and stature of the brand/product.
  • Can ultimately attract "bargain seekers" or a "frugal" clientele base that is only interested in the next "deal."
  • Discounting could generate a low conversion rate of repeat customers that will not enter the business or use the service again.
  • There's the potential that a profit may not occur, since some mass discounting service providers take up to a 50% share of revenues with the coupon deal.
  • Is your deal good enough? And, are you using the right platform to promote the deal? For example, should you use Livingsocial or Groupon? It's an important decision to make that is subject to the nature of the business and the product or service offered.
In the end, when considering if mass discounts are an effective tool for your business to gain more revenue, there are almost an equal amount of reasons FOR as there are AGAINST using such a service. The most important thing to remember is BALANCE, and that there will ultimately be some drawbacks and some achievements. After looking at the pros and cons and measuring if your small business can employ more of the pros listed, it may serve you well to try mass discounts. If you choose to do so, here are some supplemental tips to help increase your chances of success with mass discounting:

Tips:

  • Make an offer low enough so that customers need to spend money out of pocket when they arrive for their "deal."
  • Create a promotion and deal that will entice the customer, but that will also increase the conversion rate for repeat consumers.
  • Ensure that the product/service is reflected at its highest quality to increase brand loyalty and potentially encourage the consumer to come back and buy.
  • Do not over-utilize the service-the deals you offer should be "special." The more frequently a consumer views online deals that are similar in nature, the less likely they are to utilize them.
altstrategies.com
article by: DANIEL LARA
marketing coordinator & social media director