Discount Sites and Promotions: A Retail Strategy That Works
Discount sites like Groupon, the former LivingSocial (acquired by Groupon in 2016), and niche markets like Restaurant.com are popular with consumers, allowing them to pre-purchase gift cards for local services and activities at a cut price. From a business owner’s perspective, though, what’s the advantage of promoting your brand on such a site? Is it actually profitable? Though these services might seem like they only fuel loss, they actually can fuel sales in these three ways.
The primary way in which gift card discount sites support your business is by increasing your brand’s exposure. A big site like Groupon, which offers many products and experiences, along with gift cards, had over 49 million users in Q3 of 2017 alone. That’s a serious footprint, with minimal effort on your part, but you’re competing in a crowded pool. On the other hand, much smaller gift card-only sites like Gift Card Granny have a million visitors a month, plus a long list of subscribers who are exposed to your brand through the site’s newsletter, push notifications, and social media accounts. For your company, then, partnering with targeted gift card discount sites yields benefits just based on views.
Another way that gift card discount sites benefit companies is by enhancing your brand’s ability to upsell or cross-sell. In other words, once people have a gift card in hand, they rarely spend precisely the amount the gift card holds. Instead, as Kamron Karrington of Repeat Returns explains, gift card holders either use their gift card toward a larger purchase, spending more on top of its value, or they don’t use the entire value of the gift card and never return, leaving what’s termed “breakage” or unspent value on the card. Most of the time, however, research shows that people will try to use the entire gift card and will end up exceeding it, but the overall sales patterns affiliated with gift card use all end up benefitting businesses.
Use the Rules
The most common complaint companies have about using discount websites to sell gift cards and other deals is that they often take a loss as part of the promotion. On Groupon, for example, the site takes a 50 percent cut of every deal, which can drag your margin down. If you’re smart about how you structure your deal, however, you can minimize the amount of loss and turn the deal so that it works in your favor.
When creating a gift card or service deal offer for these websites, consider adding usage regulations, such as limiting the sale to new customers, setting a short-term expiration date of 120 days for the promotional value (after that, the deal is only worth what the buyer paid for it), or developing a deal that requires two visits, ensuring that customers will have to return and build an extended relationship with your business. These restrictions make it more likely your company will profit on the deal, and they’re common on such discount sites.
Don’t let the potential for loss scare your company away from using gift card discount sites. Instead, do your homework and play it smart. Choose the right sites, select value options wisely, and set the terms in your favor. Consumers only see a good deal; your role, though, is to structure that deal for growth.
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