Thanks to that brand new daily deal you offered, the waiting room at your music school is jammed with new customers. It's standing room only as a new crop of aspiring musicians and their parents jockey for position between the guitars, the violins and the occasional cello. The schedule is now stacked and the instructors are busier than ever.
But look carefully between all the newcomers, and what do you see? Regular customers who have been the backbone of your business feeling pinched not only by the crowd but by the cost of paying full price when the newcomers get the deal. What can you do to keep from driving them away?
Do Dollars Saved Make Cents?
Begin by knowing your business and the deal you're about to offer. Daily deals are a popular marketing strategy that can also be expensive. "Daily deal sites require businesses to discount services by at least 50 percent, and then they take a 50 percent cut of the deal revenue," says Misty Clark, owner of M Dance & Fitness in Manhattan. Clark also says she offers daily deals two or three times a year that are always for new customers.
"I would go out of business if I extended the deals to my existing customers as well," Clark says.
Klaus Sonnenleiter, president of PrintedArt, a collection of fine art photography, says he never offers a deal without extending it to his current clientele. "If you are offering a deal for new customers, you have to offer it to your existing customers as well," Sonnenleiter says. Sonnenleiter also says while he has offered a few deals in the past, he has declined many more.
"The promise of many daily deal sites is that creating a subsidized incentive makes sense since it brings in new customers that will turn into loyal customers," Sonnenleiter says. "But it doesn't hold up in real life."
A 2012 Edison Research and Arbitron Survey found that 23 percent of daily deal users tried a business or service for the first time because of the deal and became repeat customers while 30 percent tried the business for the first time because of the deal and never returned.
Appreciate Your Existing Customers
Clark says while it's too expensive for her to offer the daily deal to all clients, she doesn't lose sight of her existing clientele. "I always offer them a special deal as well and, although it's not as deeply discounted, they appreciate the gesture," says Clark. "They also appreciate that their deal comes in advance of the new customer deal so they can get a jump on signing up for classes before all the new customers start reserving spots."
That helps to ease the transition when new customers descend on a business.
Pros and Cons
The Edison and Arbitron survey found that one-sixth of Americans older than 12 are registered with at least one daily deal site. Putting a daily deal in front of an audience that size can translate into great exposure for your small business. But here are some things to consider:
- How much can I afford to lose so new customers try my business?
- Am I working with the best daily deal site for me? Different companies offer different revenue splits, so it might be time to reevaluate.
- How will I retain new customers who come in strictly for the deal?
- Will the deal alienate my current customers, and what should I offer them for their loyalty?
While a daily deal may be an aggressive and risky marketing strategy, Clark says excellent customer service will keep your business healthy before, during and after.
"I am totally open and honest with my customers about why I run deals and why I can't afford to extend them to everyone," Clark says. "They like that I take the time to include them in my thought process and they completely understand the rationale. It's absolutely possible to run daily deals without jeopardizing your relationship with existing customers."
Read more about daily deals and how they can impact your business.