Here are some great resources that you can bookmark to learn about how the daily deal industry works along with tips and tricks for you to successfully run your own daily deal business. We ourselves frequently visit these resources to improve our knowledge of the industry. If you have not started a daily deal business and are strongly considering starting one, sign up for a free trial account on our website and use the following materials to support your learning:

http://www.quora.com/Deals-Daily-Group-Other

http://www.reddit.com/r/dailydeals

http://www.dailydealmedia.com/

http://ecommerce-news.internetretailer.com/nav/cat2/socialmedia/cat1/marketing/0

http://www.getelastic.com/

Bonus: http://blog.asmartbear.com/

Happy New Year in advance!

Daily deal sites are about discounts and the best offers, which in turn imply that they exist to bring to consumers the lowest prices and the biggest savings. Ergo, it may be intuitive that, to be the market leader in a niche, a daily deal business may need to undercut its competition with margin-suppressing price cuts. The problem with this mentality is not only that it almost always results in less revenue (one might find that economics principles do not always apply in real life; the buyers do not necessarily make it up in numbers) but also that the retail pricing of deals is never the sole decision of the daily deal business itself – the merchant has a substantial say (sometimes whole say) in the pricing details.

The fact is that the customer of any daily deal business is the merchant, not the end-consumer. The end-consumer is the customer of the merchant. The end-consumer basically acts as a supplier to the daily deal business, because they aid in the acquisition of merchants as customers. Revenue is collected first by the daily deal site, yes, but that revenue is in effect passed on in whole to the merchant, who then passes a cut to the daily deal business in the form of a commission.

Pricing in the business model of daily deal businesses thus refers to the commission percentage that the daily deal business is willing to work on. Dropping your commission percentage to unhealthy levels may seem like a good idea to undercut the competition, but consider the fact that daily deal sites may be Veblen goods: their perceived value drops with their pricing. When you drop your pricing, you not only give up revenue unnecessarily but also create a negative perception impact on your offering.

The obvious solution is to start at a higher pricing; aim to be a premium daily deal site servicing local merchants with a higher-than-average commission percentage. The only thing better than cheap is good. When no merchant buys at your ideal price point, do not make your offering cheaper; make it better. Provide a range of value-added services, such as faster payment timelines, customer retention strategies, super-strict lead qualification, generous collection and sharing of buyer data, etc. Merchants do not actually want to work with the cheapest daily deal site, which probably does not even bring in enough revenue to provide meaningful value – merchants simply want to work with daily deal sites that can do their job, and do their job well.

It is not a stretch to say that the existing daily deal sales model is broken. Consumers are expected to spend money upfront for a printable piece of voucher that is to be redeemed in some distant time in the future and that has no guarantee of validity or authenticity. This model places the onus on the buyer to remember to use the voucher according to all of its many terms, failing which it would create pure profit for either the merchant or the daily deal website in question (if the latter manages to negotiate with the former to transfer payments only on redemption). This situation seems advantageous at first glance for merchants and even daily deal websites (who act as a gatekeeper for all funds coming in) but less so for consumers who bear the risk of not using the vouchers according to their terms and thus having their payment forfeited.

Some consumers have arguably come to recognize that this situation is sub-optimal for their interests. The mother issue is actually that for most goods and services, consumers are used to paying on the spot and getting their goods or services at the same time – the window of risk is indeed much smaller. The daily deal sales model – pay now, get goods or services much later – is a stark departure from mainstream practice. Over time, it has become clear that many consumers are simply plagued by the following problems:

Problem 1: redemption in the future creates the risk that the voucher will be unused.
Solution: let consumers pay only a small initial payment online to minimize risk exposure. This initial payment should preferably be equal to the daily deal website’s share of revenue to minimize administrative work. This increases the probability of a sale happening because: 1) should the buyer fail to redeem the voucher by the due date, he loses only a small(er) amount of money, and 2) the smaller initial payment makes it much easier to stomach at first glance. Consumers are irrational, after all.

Problem 2: consumers are apprehensive of the prospect that the deal is bogus.
Solution: offer free vouchers. With rampant fraud in the daily deal industry perpetrated by irresponsible sellers (need we say more), consumers are finding it harder to trust daily deal websites. The solution is to simply provide free vouchers (meaning consumer pay nothing upfront and only pay the discounted price during redemption), and then either charge a flat monthly fee to merchants for promoting their goods and services or depend on the merchant for your share, much like authors depend on publishers for royalties. Free vouchers are increasingly popular, because they require no upfront investment on the part of the consumer; yet it still drives people through the doors of merchants. This model is also well-suited for markets where online payments are just not common.

Problem 3: consumers dislike having to print vouchers or expend additional effort to get the discount for which they have paid.
Solution: focus on SMS/mobile redemption. While mobile redemption is already a common practice in the industry, what needs to be done is phasing out the very idea of printable vouchers. Consumers should be able to redeem their deal just with a unique voucher code in hand (which can be delivered via mobile phones or email), much like how prepaid cards for cellular phones work. The whole printable voucher system seems to be a relic of imitating traditional coupon clippings that is truly an anomaly in the age of email and smart phones.

The truth is that pleasing the customer is the best long-term strategy to generate sustainable business (in our case, it would be pleasing our customers’ customers). When everybody’s interests are aligned, everybody wins. The current model is still disadvantageous to consumers, thus new sales models will eventually and inevitably emerge to rectify the imbalance, since, after all, consumers are the ultimate source of revenue in the daily deal industry.

Customer support and, in a broader view, customer service can be considered a “make or break” factor when deciding whether to patronize a brand or company; they are important. These days, however, good customer support is lauded and placed on the pedestal too much, ignoring the fact that the best customer support is actually customer support that is not needed. Most people just want to find out the information they want or do what they came to your website to do without having to contact anyone, no matter how quick, effective, or friendly the person on the other end is.

We run a young daily deal platform where the only way we can improve our product is to have constant feedback from our early customers so that we can build something that is wanted by the market. We thus treated customer support queries and customer feedback as reasons to be happy – people are interested in our product, people are engaged with our product, and, now that they have made first contact, we can even show them how quickly and effectively we solve problems for them! The truth is that having to contact anyone on anything is an absolute pain. Quick, effective customer support is simply the best apology that the vendor can offer – a weak compromise – for providing a product, service, website, ebook, game, etc. that basically does not do what it is supposed to do (hence the need to shoot off an email or make a phone call to the vendor).

There are really two broad strategies that a company can employ with regard to customer support: 1) accept that customer support is inevitable, a norm, part and parcel of running a business, and focus on offering the best customer service standards, and 2) treat customer support queries as anomalies or bug reports (preventative customer support), where preventive action ought to be taken by rectifying the “bugs” that precipitated the customer support queries in the first place. Of course, to say that customer support is an anomaly is far-fetched – big customer support departments exist even in the most successful companies out there, e.g. Google, PayPal, Amazon, etc. (though note Amazon’s actual stand on this issue – founder and CEO Jeff Bezos said that “[o]ur version of a perfect customer experience is one in which our customer doesn’t want to talk to us. Every time a customer contacts us, we see it as a defect. I’ve been saying for many, many years, people should talk to their friends, not their merchants. And so we use all of our customer service information to find the root cause of any customer contact.”) The best customer support strategy, in our view, is, unsurprisingly, a hybrid – cure the “bug” that precipitated the customer support query in the first place while being quick, effective, and friendly.

Some companies (deliberately) misinterpret the concept of preventative customer support by making it laborious and difficult for customers to contact them, with methods including hiding email addresses, forcing customers to use a customer support portal ticket system, making the abovementioned process long with many fields to fill up, etc., and then concluding that the lack of customer support queries means that the product is relatively faultless. This form of fake prevention will only cripple the company in question in the long run, because crucial learning points are blocked off and filtered out by an intimidating customer support process. The best way to know if the offering is good is to make it ridiculously easy for people to contact you and at the same time getting a very low number of customer support queries (“you guys are awesome” emails do not count). That way we know that people are not contacting you because there is no need to, not because it is a pain to do so.

Customer support is not a good thing, all in all. It is a glaring symptom of a poorly-made product. People are buying a product after all, and the overwhelming majority of people would choose a good product with poor customer support over a poor product with good customer support (because, really, a good product does not need customer support). Ultimately, customer support is a means to an end – it is a qualitative system for product testing and feedback that should be used to improve the product until, ideally, no one has any more bugs to report.

P.S. I made a distinction between customer support and customer service, because the former is the activity of providing help to a customer who asked for it, while the latter is really a spirit, a culture that is embedded in everything a company does (of which customer support is a small part). Needless to say, good customer service should always permeate throughout any organization that wants to succeed.

Groupon’s extraordinary growth as a daily deal website is truly enviable for any actual or potential competitor. In fact, it would be seriously tempting to copy any externally-observable tactic employed by Groupon to try to replicate just a fraction of its phenomenal success. Interestingly, one may even say that our daily deal platform, Zuupy CrowdDeals, exists solely to service hundreds of individuals and small businesses whose raison d’etre is to clone Groupon itself.

The truth is that Groupon can get away with a lot of things because of its deep pockets and humungous (read: 9-figure) subscriber list. It can afford to experiment and implement a number of different things, including having a gigantic sales force to hard-sell merchants, having less-than-attractive/tired website designs, producing over-enthusiastic copy, and actively running deals across a ridiculous number of cities. Groupon is like the Amazon of the daily deal industry – it might not necessarily be wise to copy their every move given how different their circumstances are.

Just as you would not run a minimart the way Walmart or Tesco runs their hypermart, you should not run your fledgling daily deal website the way the market leader runs it. You can certainly draw inspiration, but it has to be backed by sound justification – and the only sound justification is really your subscribers/customers saying that they want whatever you intend to copy. Copying blindly without any indication or evidence that the demand for whatever you are copying exists is a waste of time, money, and resources. Find out what your subscribers want by talking to them. When you are small, you probably cannot do things autonomously and get away with it (a la the way Facebook frequently changes its layout and breaches its privacy policy); you need to bend over to some extent to the miniscule number of people who miraculously even care about your daily deal website.

The truth is that all Groupon did was validate the business model (and even then, how validated the business model is remains to be seen given the infancy of the industry). Copying the business model itself may be prudent – after all, if it has demonstrated a clear path to profit, it would be not prudent not to copy it – but copying its design, branding, marketing, and even deal inventory may not be effective, because you have a different set of subscribers with different demographics who have different wants and needs. You probably do not control the eventual make-up of your subscriber list (assuming they are opt-in subscribers, which they better be), as much as your positioning hopes to achieve a certain demographic composition. Design, branding, and copywriting follow who your subscribers and customers are, not vice-versa.

If you are going to copy Groupon with no additional innovation whatsoever, you will not succeed, not even marginally – because Groupon will always be a better Groupon than you can hope to be. You need to be better in some aspects, be they pricing, customer service, value-added content, or niche targeting, in order for consumers to even consider patronizing your daily deal website. Would you rather buy from Groupon or BestSuperSavingsDailyDeals? I know that Groupon will be the safe choice, and, unless BestSuperSavingsDailyDeals can offer something Groupon does not have, I would be better off sticking to Groupon. So would millions of others.