You may feel that there is an inherent paradox in selling your daily deal website to successful merchants; why would merchants that are already successful run daily deals? They already have more than enough customers paying full price! For one, you can ask GAP, Barnes & Noble, The Body Shop, Fandango, Unilever, Subway, Pizza Hut, etc. why they decided to run daily deals with Groupon. Here is a thought: the number one strategy to run a successful daily deal website is to sell something that people want, and there is virtually no better way to tell that consumers want something than the fact that they are already spending a lot of money on it.

Of course, selling to McDonald’s, Nordstrom, or Starbucks may be intimidating and almost always a futile endeavor for a fledgling daily deal website with only hundreds of subscribers, but consider the fact that there are many small brick-and-mortar merchants who are already doing well locally but never had the time or expertise to reach a broader market online. Your busy local grocery store or the flourishing eatery at the corner of the street, for example, may be able to benefit from some online presence. Situations like this are what daily deal websites are made for; it is the raison d’etre of daily deal websites to bridge the gap between offline supply and (existing) online demand.

Daily deal websites do not exist to find a market for products for which sufficient market research was not conducted prior to manufacturing. You cannot sell a solar-powered flashlight no matter how good your marketing and sales skills are. You need to know that what you are selling is wanted by consumers before you do business with the merchant, and, if the merchant is not selling the product or service well now, you have to justify it. The most likely reason is that there is no market for what is being sold.

Selling daily deals on behalf of struggling merchants is a lose-lose situation; it is weakness feeding off weakness and the blind leading the blind. Again, one of the most likely reasons that the merchant is not doing well in the first place is that whatever she is selling is not in demand in the marketplace. As a new and inexperienced player in the daily deal industry, your best bet for survival is to partner with a more successful party to maximize your chances of success instead of being dragged down or suppressed by incompetent partner merchants. Doing business with merchants who are too easy to sell to (or, worse, merchants who come to you to sell their goods when you are still a very small daily deal website) is not a good business strategy.

In a way, our business growth as a growing daily deal platform hosting more than 300 daily deal websites also depends on hosting only daily deal websites that are destined to be successful. Daily deal websites that are destined to be successful are easy to spot – they have owners who are willing to invest a lot of time in the beginning to build up their following and a lot of money in the later stages to fund growth. In fact, one of the most effective ways to weed out non-serious daily deal website operators is pricing: by pricing our service slightly higher than what we would need to barely survive, we attract daily deal website operators who are willing to invest money in their ventures and to fund the development and maintenance of our platform to serve them better. We thus are able to markedly improve our software, which in turn helps our customers to grow faster – it is a win-win situation. Non-serious customers, on the other hand, are unwilling to invest money and time and are impatient about results, expecting over-and-above service (short of asking us directly to run their businesses for them while we pay them the profits every month) and placing fault on us when we have more than fulfilled our end of the bargain.

The same pricing strategy can be applied when you, as a daily deal website owner, are selling to merchants: charge a high commission rate to establish the image of an exclusive brand from the outset. That should weed out short-term-thinking, margin-hungry merchants who are simply looking for quick cash flow and not sincerely looking to expand their business online. If you sell to successful merchants, the chances of success is much, much higher, and that success would be attributed to you, even if only partly. Conversely, if you sell to struggling merchants, the chances of failure is much, much higher, and, worst of all, the blame for that failure will most likely be placed on you, even though you are not the limiting factor or the bottleneck.

We have hosted so many daily deal websites that sell dozens of deals with very few buyers; we also have hosted a number of daily deal websites that sell only a deal a week but always make thousands out of the deals. Do not just liberally sell deals for any merchant. Quantity is nothing compared to quality. If you want to build a respectable brand, you need to first respect your visitors’ time and attention by providing exclusive, high-quality deals.

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Do not purchase Groupon Clone or daily deal scripts that cost upfront (albeit one-time) hundreds to thousands of dollars, especially if you are new to the daily deal industry, or, worse, new to online marketing/selling generally. Doing so does not align the interest of the vendor with the interest of the daily deal website owner (you). Once one-time payment goes through, vendors have very, very little incentive (whether they do so is another question) to support and continually improve the product for their customers, because their revenue depends solely on the acquisition of new customers.

Anyone in the daily deal industry knows that starting a daily deal website from inception all the way to the generation of sustainable revenue takes time and effort. Vendors that collect a large payment upfront have very little interest in ensuring that the daily deal website’s entire business and technical processes are well-supported. Furthermore, there is no escape valve for 1) website owners who eventually realize that creating a daily deal website is hard work, way more than they were ready to invest, or 2) website owners who eventually discover a better/cheaper/more suitable solution out there. Human beings have the tendency to mull over sunk cost (e.g. “I've paid $1,000 for this script, I better use it and make it work.”).

Buying whole scripts and self-hosting it is like buying an 18-wheeler tractor to drive down to the neighborhood grocery store to buy a candy bar; a bicycle or cab ride would have been more than sufficient. Learning the ropes of the business does not need to be expensive.

I believe that people thinking of entering the daily deal industry should know of all alternatives when it comes to setting up a daily deal website. I am writing this article just to bring to your awareness the lesser known alternative of daily deal platforms, like ours, Zuupy CrowdDeals (http://www.zuupy.com), ChompOn, DailyDealWorks, etc. that either 1) charge a flat, low monthly fee, and/or 2) charge a percentage of your revenue, both of which are aligned with your interests. If we do not support your business well, you either 1) cancel your subscription and cut your losses or 2) make no revenue, lose no money, and thus the vendor gets paid nothing as well, respectively. Besides, we are reputed to be much easier to use; everything is already set up or at least easy to set up, and you will never need to worry about hosting and server issues.

I am even willing to promote our direct competitors above for credibility reasons; go ahead and compare us to the rest out there and decide for yourself a solution that is suitable for you. We who maintain daily deal platforms work extremely hard to provide a platform that is reliable, constantly upgraded, and capable of generating sustainable revenue for our customers, primarily because our financial interests are directly aligned with yours. We earn our revenue from our customers in the form of small monthly payments or commissions by delivering value day after day, not sell to you with vague promises until you are finally willing to part with hundreds of dollars, a one-time event.

I just felt the personal urge to share with anyone out there who needs to set up a daily deal website for the first time the possible risks of buying scripts that you may not even be sure works. All daily deal platforms, including ours, let you try out our software for free for 15 to 30 days, no strings attached. If I can say something on behalf of my company and our competitors, it is that we are sincere in building a long-term relationship with you and helping you grow, because our very livelihood depends on it.

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One of the most important factors that determine the success of your daily deal website is the size of your subscriber list. In fact, if you are not confident about building up your subscriber list rapidly to thousands of subscribers within weeks, you might as well not start a daily deal website. And building means building, not buying or transplanting.

There are two possible strategies to employ when building your subscriber list: organic and non-organic. Organic methods basically require the subscribers to actively type in their email addresses and click the subscribe button. Non-organic methods, otherwise known as spamming/cheating, basically involve spamming offers to people who never said that they even cared about daily deals, much less your fledgling daily deal website. If you are thinking about using non-organic methods, such as sending offers to your friends and family or buying a mailing list, just stop, unless you want to rapidly lose friends and money. It does not matter how big or promising your purchased mailing list is. You are a spammer. And no company has ever made spamming profitable. It will NEVER work. Or at least we have never seen it succeed, which says something, since we host more than 300 daily deal websites.

Now that we have gotten non-organic methods out of the way, here are some organic methods for your consideration:

1. Begin with a niche
It is surprising that many daily deal websites still dare to open shop and compete directly with Groupon or other big daily deal players. It is pointless – you will never win, nor will you even “barely survive.” The first step in getting visitors and prospective buyers to hand over their email addresses is to have a unique premise that captures their attention. There is a surplus of generic daily deal websites already; starting yet another is suicide. You need to differentiate your daily deal website in an increasingly-saturated industry by picking an underserved market segment: a geographical niche, a demographic niche, an industrial niche, etc. All things being equal, a generic daily deal website is much less likely to survive than, say, a daily deal website targeted at women selling health and beauty products.

2. Get impressions for your URL on the world wide web
People online are already too busy using Facebook, Twitter, YouTube, Reddit, and 9GAG to even care about your new daily deal website launch. It is your job to go out there and make them aware of your new website. That means posting your URL on forums, blog comment sections, Facebook, Twitter, and discussion portals, like Reddit, according to your chosen niche in part 1. For instance, if you are starting a daily deal website for pets, post politely (and, as best as possible, be contextually relevant) on pet care blogs’ comment sections and pet care forums. Here is a workable plan: 1) google a list of blogs and forums dedicated to your niche and open the results in new tabs, 2) find a way to post your URL – register usernames if you have to – and do your sales pitch, and 3) keep doing it until you have posted 50 or 100 URLs for the day or whatever target you think is necessary to bring in traffic, even for the short term. And do track your traffic using Google Analytics. There is almost no other way around this. If you are hoping that your website spreads like wildfire through viral marketing or even pay-per-click marketing like Facebook Ads, fat chance!

3. Run lucky draws and free deals, amplified by Facebook and Twitter
People are already inundated with enough spam and unwanted emails to know better than to simply give out their email addresses. When you launch, people have exactly zero trust in your new daily deal website, which is why it is important to start small and start interesting with a lucky draw or free deal. People want to be enticed to care about your daily deal website. The bad news is that, either way, it is going to cost money. The good news is that spending money to entice people to give you their email addresses is probably more sensible and cheaper than simply spending money to entice people to come to your barren, boring website, e.g. via Google AdWords. Giving out one iPad in a lucky draw costs you a few hundred dollars and can probably net you 1,000 opt-in email addresses. Google AdWords and Facebook Ads? Never!

4. Great deals – sell them
Many players new to the daily deal industry expect visitors to give up their email addresses when your deal inventory is pitiful. Of course, selling to merchants is hard when you do not have a big subscriber list – it is a chicken-and-egg situation – but you have to do both simultaneously, because they are mutually-reinforcing. The more interesting deals you have, the more likely that you look like an established website and the more likely that people want to give up their email addresses. The more email addresses you have, the easier it is to work with merchants to sell their deals. Here is a tip: attack the merchant side of things first. Sell deals for merchants even for free at the start (if you need to) to get your hands on a great deal. By the way, if you need a guide on what makes a great deal great, here are some characteristics of a great deal.

5. Get a few large deal aggregators to promote deals for you
This method will cost money in that you will need to hand over an affiliate commission for referrals, but it is one of the best ways to reach a broad audience, gain instant credibility, and get not only new subscribers but also new buyers, without spending any upfront cash. Some examples include DealSurf and AllTheDeals. How do you convince an established deal aggregator to list your deals? Simple, by following parts 1 and 4 above.

Finally, half of knowing how to get subscribers is knowing how not to get subscribers. Non-organic ways should be avoided like the plague, just as a recap, but it is also important to avoid broader fatal mistakes that will indirectly hamper your ability to get subscribers and build your mailing list (here is a list). Good luck with your daily deal website!

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Here is a plausible thought: it is possible to have a really great deal that is in demand and still have poor sales coming from it because of obstacles that exist along the way after your visitor has decided to purchase the deal, e.g. laborious checkout process, checkout surprises like large shipping costs (for shipped products), and, yes, ridiculous fine print – ridiculous in terms of quantity and nature. A good practice to adopt is to be a daily deal consumer yourself, especially for the goods and services that you already routinely pay full price for, and try to understand the mentality and behavior of daily deal consumers.

Consumers generally only start reading the fine print of a deal – which, needless to say, is a chore and a potentially-killjoy activity – when they have somewhat made up their mind to purchase the deal. If an item in the fine print is not essential, remove it. Expiry dates are common and understandable, but some of the most common party poopers are: 1) “weekdays only” or other time-limited terms, 2) minimum purchase required, 3) venue restrictions, 4) item restrictions (e.g. only applicable to certain menu items in restaurants), and 5) unreasonable “while stock lasts” restrictions. The more fine print a deal has, the less freedom and thus more stress the consumer has in using the voucher. In a way, it feels as if the merchant and the daily deal website are not sincere about welcoming new customers to try out their offering.

To instill some fine print discipline, daily deal websites can try sticking to some internal rules. For instance, a daily deal website owner can vow to only include a maximum of 5 fine print per deal or swear not to include a certain type of fine print (e.g. minimum purchase). No consumer likes fine print, and, to some extent, merchants do not necessarily reap a net benefit by having them. It may even serve as a competitive advantage; while your competitors are incorrigibly saddling their deals with an absurd, stress-inducing amount of fine print, you are making your deals easy to understand at a glance and also putting forth a sincere offer that is not ridden by terms that consumers may not notice before purchase.

Have we seen deals with a large amount of fine print do well across our network of hosted sites? Certainly. A low volume of fine print is neither a necessary nor sufficient condition for a deal to sell well, but it definitely is a factor in favor of increasing sales. The general rule of how to sell things is 1) sell something people want and 2) make it easy for people to buy it. Of course, if you are not sure whether something has demand, do not bother about tweaking the fine print etc.; it will not help. Sometimes, however, your deal may be so wanted that your buyers would be willing to tolerate a certain amount of fine print beyond the ordinary – use your judgment to decide whether your particular segment of buyers would be bothered by the fine print vis-à-vis the uniqueness of your offer.

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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!

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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.

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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.

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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.

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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.

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Customer feedback is important to any business, more so to new businesses. With an emerging glut of daily deal websites, daily deal websites that bother finding out what they can do better will stand out and build better customer loyalty. It is more important to engage those who have actually paid you money than those who have simply showed interest in your daily deal website. Paying customers are people who have been through the full process of browsing, purchasing, and redeeming deals on your website and thus have more credibility.

While Facebook and Twitter may be appropriate channels for feedback acquisition, one-on-one feedback channels, such as email or even Skype, may be better ways to obtain candid, honest feedback. Certain daily deal websites may resort to half-hearted, pseudo-big corp methods of acquiring feedback, such as inflexible survey forms, but the better daily deal website owners know that human-to-human interaction always results in the most effective exchange of thoughts and ideas.

Some ways to follow up include offering a gift voucher (or even purchase credits) for a 15-minute chat on Skype and interacting with customers on the pretext of something else (customer support, holiday greetings, newsletter updates, etc.). Anyone who is willing to engage with your business is providing insights for strategic decision-making. However, an important skill to employ is to analyze feedback prudently (whether a given piece of feedback is peculiar or representative of other customers) and then formulate actionable plans to address said feedback. In our experience, anytime we hear a piece of feedback twice or more times, we treat it as representative of a segment of our customers.

It is safe to say that not many businesses bother to follow up with customers further down the sales funnel, partly because of complacency, i.e. they are already paying customers! It is too easy to just focus on getting new subscribers and buyers onboard without sufficiently tending to existing customers who have been providing revenue for your daily deal website. Sometimes the bottleneck of your daily deal business may be that the user experience is just sub-optimal – and only people who have been with you for a while and purchased your deals would be able to tell you why and how to improve.

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The daily deal industry leader, Groupon (or at least its Chinese subsidiary), was recently accused of offering a fake McDonald’s deal, through which it sold more than 800 vouchers that McDonald’s said that it never agreed to fulfill. When even the biggest player in the space engages in fraudulent behavior, one has to wonder if consumers are beginning to distrust daily deal websites in general. After all, is there really a way to verify if the deal is real – and, if it is, is it worth it taking the risk that the voucher cannot or will not be used in the future (for whatever reason) by pre-paying for the voucher, sometimes several weeks in advance?

In real life, most goods and services are delivered on the spot, even if sold by agents or authorized representatives. To consumers unfamiliar with the daily deal model, the idea of pre-paying for a dubious-looking voucher that is to be stored in a smart phone or printed out for use during redemption in some future time at some third-party merchant may feel strange. Naturally, the higher the deal price, the greater the feeling of insecurity that it may be a fraud or that it may not be recognized by the merchant. How would consumers know if the merchant actually participated in that deal on said terms? There is no way to verify directly with the merchant.

It is by design that daily deal websites want to shield their visitors and buyers from the merchants. But daily deal website owners should also know that not all consumers have full confidence in newly-launched daily deal websites when deals more expensive than, say, US$50 are offered. There are fortunately some trust-building tactics that you can employ to increase conversions, in order of increasing difficulty:

1. Give them as much information as needed with respect to the deal.

2. Make it ridiculously easy to contact you – repeat your contact information redundantly if you have to. Always put up a physical address and phone number. And reply to queires promptly and without exceptions.

3. Have a no-questions-asked refund policy.

4. Display testimonials from your past buyers detailing their satisfactory experiences buying from you.

5. Create a community and let your members speak to each other.

The fact is that, if you are new in the daily deal industry, the odds are stacked against you. You will need to build up a community of members and buyers from the ground up and start building relationships with local merchants so as to get sustainable deal flow. Then there is the issue of trust, especially when you are new and relatively unknown and have no reputation whatsoever. Ultimately, the best strategy to build trust is to ensure that consumers can get independent, credible, and positive third-party opinions on you and your brand. That in itself can be a potent strategy not just for building trust but also for marketing and PR as well, so why not kill two birds with one stone?

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Last week, I have suggested that contests and giveaways may be one of the most effective ways to build leads and drive signups for new daily deal websites. While it is becoming an increasingly common tactic, running your own contest or giveaway can still help you collect email addresses, Facebook fans, and Twitter followers, if you can sufficiently differentiate your marketing campaign to make it engaging and inherently viral (we will talk more about virality). Today we should be focusing on sweepstakes/lucky draw contests, because they are relatively cheap to run and easy to manage; plus, they are also the most eye-catching form of contest and most easily understandable at first glance.

The keys to running a successful sweepstakes/lucky draw contest are 1) a prize people would otherwise purchase with money if not presented with an opportunity to win it for free and 2) rules and parameters that are in line with your business objective – to drive signups and enhance brand awareness. Without further ado, let us get down to the best practices:

1. Big prize(s) with smaller chances to win trumps small prize(s) with bigger chances to win
If I offered you two opportunities: a 5% chance to win $10 or a 50% chance to win $1, which would you choose? Most people would likely go for the former (do not just take my word for it – Wikipedia says so too), because the initial investments for both cases are equal (no risk) yet the potential returns are much bigger in the former; the risk-reward ratio is much lower in the former. Big prizes are always more eye-catching anyway – in a contest, the magnitude of the prize is the focal point, the odds of winning are often treated as some form of fine print, thus big prizes encourage both sharing and participation. If you are unconvinced with the big-prizes-small-odds approach, you can certainly try the hybrid approach.

2. Have a built-in viral loop for your contest
To run a successful sweepstakes/lucky draw contest requires mass participation, and mass participation is only possible if participants themselves are incentivized to share your contest with others, be it directly or indirectly. All online contests and related marketing gimmicks require some form of viral marketing to keep awareness high after the initial marketing push by the contest purveyor. One popular method that we have come across in the network of daily deal websites that we host is to tie draw events to a minimum number of participants or Facebook Likes: e.g. “10 iPhone 4Ss to be given out. There will be 1 draw for each 100 participants (or 100 fans on our Facebook Page) achieved before the deadline. Limited to the first 1,000 participants only!” Participants have the incentive to share contest to increase the chances of a next draw event, driving signups and participation.

3. Facebook Likes as a method of participation
A related tactic that you can use with tactic 2. above is to say that winners for your big prize will be drawn from the pool of last 1,000 people who have Liked your Facebook Page (a chronological order of people who Liked your Facebook Page is visible from your administrative dashboard of your Facebook Page). This parameter will ensure that sharing is compulsory and that sharing and participation go hand-in-hand. An added bonus is that some people may be perceptive enough to Like and Unlike your Page frequently in order to always end up as one of the latest fans, ensuring that a post about your Facebook Page stays fresh and high up on those people’s friends’ News Feeds.

4. Conduct draws at regular intervals
Instead of saying that a draw will be conducted at random once a certain number of participants or Facebook Likes is reached, say that a draw will be conducted for the exact 100th, 200th, 500th, or 1,000th participant or Facebook fan. Crafting the rule this way may not encourage participants to join in when they are far from the draw interval, but it will definitely drive people to share your contest and your brand so that they have a chance at using other participants to get closer to the draw interval, at which point they themselves would opportunistically put in an entry. However, when hundreds or thousands of people think this way, interesting things happen.

5. “Last participant at closing time wins the grand prize”
This parameter should only apply to sweepstakes/lucky draw contests where multiple participations are allowed. Of course, you would need to craft the rules in such a way that their last entry can only count if it is separated from their second last entry by, say, 5 entries not belonging to them – otherwise, their last entry will be bypassed in favor of the second last entry that fulfills the rule. This rule will not only increase participation but also somewhat force sharing.

As with all marketing tactics out there, your mileage may vary. You should be able to craft contests for your intended or existing audience to match their expected behaviors in terms of the prizes that they care about, their level of adventure, their Facebook savvy, their Twitter savvy, etc. Of course, never forget that you need to give an initial marketing push to get the word out on your newly-made contests; nobody can participate unless people know about it. Give these tactics a try today!

P.S. If you want to start a daily deal website and conduct a sweepstakes/lucky draw contest right away to build leads, you can sign up for a free, no-credit-card-required, 15-day free trial account at our daily deal platform: http://www.zuupy.com. Have a good weekend!

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...you cannot build a large, targeted subscriber list. The process of amassing a group of people interested in your business concept, whether they are email subscribers, Facebook fans, or Twitter followers, is non-negotiable and should always precede your launch. There are rarely any effective shortcuts for this process, including importing a list of email address from elsewhere, buying Facebook fans and Twitter followers, and promoting your new daily deal website to an existing community in which you already wield influence. Nothing beats building an opt-in subscriber list from the ground up.

The reason that most of the abovementioned shortcuts fail in converting “leads” into buyers is simple: a betrayal of expectations. No doubt you may be importing an email list that is an “opt-in” list, but consider the fact that one man’s opt-in list is another man’s bulk mailing list. If I opted in for newsletters from Her World magazine, I am not expecting (and would be quite furious) to receive offerings from Cleo magazine. Buying Facebook fans and Twitter followers to look credible is simply wasteful, because: 1) it is way too easy to spot fake fans and followers, and 2) nobody actually cares about the number – what they really want to see is that the brand owner is willing to and constantly engages her brand enthusiasts; the fan or follower count is a mere symptom of responsible brand ownership.

Occasionally, “expectation betrayal” applies to promoting deals to an existing community in which you wield influence, e.g. promoting make-up deals to your make-up tips blog readers, though we have seen mixed results when this type of promotion is done. One of our customers did very well with this (this one, in particular), but others have only seen mediocre results. If you already have access to an existing community that trusts and likes you, this tactic is worth a shot.

However, a genuine opt-in list almost always results in good sales, assuming that you have been talking to them personally and getting to know what deals they would want to buy. The biggest mistake when deciding what deals to sell is possibly selling deals based on what merchant-supplier relationships that you have (vendor convenience) rather than what deals your subscribers say they would buy (demand fulfillment).

How important is lead acquisition anyway?

As a growing daily deal platform that hosts hundreds of daily deal websites, we have witnessed time and time again how daily deal websites usually fail, mostly because of marketing failure, or, more specifically, failure in lead acquisition. Acquiring leads is hard. There are many products in the market that cost a bomb targeted at just acquiring leads using gimmicks like social media contests, e.g. Wildfire, Offerpop, etc. – people not only pay money but also pay good money to acquire genuine leads. (Coincidetally, our daily deal platform, Zuupy CrowdDeals, also offers this feature in the form of a free deal/lucky draw, which has already proven to be effective in acquiring leads in a fraction of the usual cost – a real-life case study will be coming very soon.)

So what is the right way to acquire leads for new daily deal websites?

As implied by the above paragraph, I am inclined to say that contests, lucky draws, and giveways are almost the quickest and most effective way to build leads for a new daily deal website. Invest some money into crafting an attractive lucky draw offering (like this one), and post it on Facebook, Twitter, forums, and blog comments regularly, and you should do rather well. As long as your offering is something relevant to the audience that you are targeting (e.g. shopping vouchers for women), your subscriber count should start to authentically go up, and so should your sales.

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Marketing is possibly the hardest part of running a daily deal website. There are two parts to marketing a daily deal website: 1) sourcing for merchants/deals and 2) getting subscribers and social media followers in order to build traffic. A great deal of the daily deal sites that we host are operated by owners who are aware that differentiating themselves from Groupon and LivingSocial is a business priority – and they are right. Marketing may be a good place to start differentiating.

The key idea that I am putting forth in this article is to market through channels that are less utilized by your established competition. The most obvious tactic is to use offline marketing more where online marketing has been used to death, and vice-versa. In other words, start thinking of ways to use offline marketing to reach your end consumers and online marketing to reach your merchant suppliers.

Using offline marketing tactics with your end consumers make sense, because, at any given time, a bigger proportion of them are likely to be at eateries, supermarkets, shopping malls, the streets, bars, etc. than behind a computer burning hours online. The product that you are selling is to be consumed offline anyway (by the way, the “product” is the voucher, not the underlying goods or services). So going directly to them may be an opportunity to see what they are like in real life, so that you can source for deals based on their consumption patterns. Heck, you can even talk to them to understand what they are like. That is something valuable that online marketing cannot offer.

Here are some offline marketing tactics that you can use with end consumers: http://www.bootstrappingblog.com/50-guerrilla-marketing-tactics-you-should-be-using/.

As for online marketing with merchant suppliers, one possible way to do it is to put up a page on your daily deal website that shows off your past successes in bringing in customers through the door by the dozens as well as the burgeoning size of your subscriber list. Selling to merchants is a B2B affair, thus ROI marketing needs to be your core strategy. You can then promote your page in forums in which your merchants participate, which would be easy to identify if you begin with a niche. If you do not begin with a niche, you are possibly committing a fatal mistake already.

What if you are new and you do not have past success stories on which to leverage (yet)? There is no silver bullet here, but working from within your current network may be a good idea. Offering a limited-time substantial discount may be another, sprinkled with the sweet promise that your subscriber base is “healthily growing.” Call me radical, but being a decent human being and asking nicely for a pilot deal may also be a viable strategy to employ.

As the saying goes, “marketing is a tax you pay for being unexceptional.” The fact is that marketing becomes a whole lot easier when you start with a compelling idea that it sells itself, i.e. niche targeting. When you claim to focus only on a certain geographical area, interest group, age group, or gender group, people within that niche feel special and are more likely to be captivated by your basic premise. The belief that niches are limiting is false and silly – nothing stops you from leveraging upon the success within your initial niche to enter another niche market.

Ultimately, marketing tactics may allow people to know about your business; getting people to care about it, however, starts earlier – much earlier. It begins at the conception phase of your business.

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Paul Graham, co-founder of Y Combinator, once said something to the effect of “you succeed when you avoid all fatal mistakes that you can make along the way;” success merely results from the absence of fatal mistakes and blunders. The same principle applies in the daily deal business. Drawing from our humble observations of how hundreds of daily deal websites are (and were) run on our daily deal platform, we have compiled a list of the key mistakes in order of fatality to avoid when operating a daily deal website:

1. Not selling deals that your subscribers want
This point may seem obvious, but a substantial number of inexperienced daily deal site owners tend to sell deals that they think their subscribers want, not what their subscribers actually want. In fact, some of the deals might as well not be sold – subscribers probably do not want them even if they were free. The only way to know what subscribers really want, as we have noted in the past, is to talk to subscribers. Begin with a basic premise for the daily deal business (e.g. beauty services for female working professionals), get the first few subscribers to stay in the loop with your business (e.g. providing an email address, following you on Twitter, etc.), and then regularly drop them a personal message to ask them what they want. The daily deal business is too competitive to carve out an offering based on hunches and untested hypotheses.

2. Not marketing the business and its deals prudently
The biggest mistakes always happen when daily deal site owners attempt to take marketing shortcuts by purchasing a non-opt-in mailing list and essentially spamming people with deal offerings or by buying Facebook Likes and Twitter followers to look credible from the outset. Tactics like these almost always fail – it is not worth the money, time, and personal morale to experiment. There are better marketing tactics, such as running free deals/lucky draws to garner opt-in email subscribers, Facebook Likes, and Twitter followers or using a referral program to mobilize your existing customer base. Providing relevant content via social media channels to existing brand enthusiasts, even if it is as simple as posting an article to a third-party website, can also work for well-defined niches (see content marketing).

3. Launching with niche and/or expensive deals
The first few deals need to be simple, general, and at a low price point, because consumers are still trying to learn to trust your daily deal website. The pilot deals that tend to do well include food and beverage deals and gift card deals. A price range that consumers can generally stomach for the first few deals probably lies below US$20. These starter deals tend to result in not only a higher number of transactions but higher deal revenues, at least in the infancy of your daily deal business. Here is a bonus point: they also serve as a great morale boost.

4. Not focusing on the bottlenecks of the business
It is better to have the different aspects of the business to be “good enough” than to have a few aspects to be “excellent” but many more to be “bad.” Knowing where the bottleneck of your daily deal business is is a crucial skill. For instance, some daily deal site owners insist on concentrating their efforts on design and look and feel, when the true limiting factor is that the existing subscriber base is just not large enough to sustain a business. If you plan a strategy based on rectifying major weaknesses instead of continually building strength, especially in the starting phase, your business has a better chance to survive and flourish.

5. Not having a brand identity or resorting to copying
Copying wholesale or even a substantial portion of another business rarely works, because different businesses have different resources, different customer bases, and different stages of development at any given point in time. The only thing that is prudent to “copy” is what your subscribers and customers say (even then, analyzing feedback is an important skill); be aware of what competitors do, but it is probably ineffective and unethical to copy their design, offerings, and business model. Related to copying is the lack of attention given to establishing a brand identity. As mentioned in point 1, picking a niche is absolutely necessary for subscribers to have any sense of identification with your brand, and picking an obscure or small niche is still better than not picking one at all. Not picking a niche is a surefire way of joining the thousands of daily deal websites out there and being just “one of them.”

6. Not launching the best deals during a weekend
This point is completely anecdotal, but our best-performing deals are all weekend deals. There could be something about the weekends that puts people into a buying mood. If anyone else has a contrary experience with deal timing, do comment below so that everyone can learn from your experiences.

7. Giving up and not putting in sufficient effort and resources
This point is not meant to be pedantic. Some daily deal site owners have illusions of making substantial revenue by working part-time on the business and letting it run auto-pilot. Automation is definitely an achievable goal, but this same class of daily deal site owners is also reluctant to invest money into developing marketing channels or outsourced workers to sustain this target state of automation. Unfortunately, online marketing is an activity that is increasingly impossible to solve with money alone; any successful business owner knows that hustle and toiling are necessary at the start, if not at the mature stage of the business.

The bad news is that almost all daily deal websites that we have seen commit at least one of these mistakes. The good news is that most of these mistakes are rectifiable if taken care of in time. Extract yourself from your daily deal business once in a while and do a diagnosis of what is wrong or what can be done better – that is a free yet scalable/high-impact activity that you can engage in to improve your business prospects tremendously.

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Every business has one or more bottlenecks that limit it from really growing. These are aspects of the business that will improve the business tremendously even if mildly tackled; these bottlenecks also mean that the business will only marginally improve when aspects other than the bottlenecks are relentlessly being worked on. For instance, focusing on marketing when the offering is simply not ready for the market is not prudent, neither is continuously working on the offering when the existing marketing channels are so under-developed and ineffectual.

How do we find out bottlenecks of a business? The easiest way is to visualize your business from stage to stage, most conveniently using an advanced web analytics tool like KissMetrics. An example would be to draw a conversion funnel for a given time space:

From the conversion funnel above, it can be seen that 60% of visitors visited the shopping area, 50% of visitors that visited the shopping area placed an item in the shopping cart, but only 10% of visitors that placed an item in the shopping cart made a purchase. There are thus two aspects that can be worked on: total traffic and conversion rate from the shopping cart to payment.

For a daily deal website, fortunately, there are two obvious keys of success: 1) the number and quality of subscribers (no, uploaded lists do not work; as a daily deal platform, we have seen how bulk mailing lists almost always fail across hundreds of hosted daily deal websites) and 2) the quality of the deals. The former drives traffic, i.e. the top of the conversion funnel, and the latter drives conversions, i.e. the bottom of the conversion funnel.

Working on obtaining high-quality deals while the subscriber count is pathetic will not lead to a noticeable increase in revenue. Similarly, working on increasing subscriber count and traffic without putting out high-quality deals for consumption is wasteful activity. The job of a daily deal website owner is to identify where the problem is. It is possible that both needs to be worked on, though usually one is more pressing than the other.

Here is a possible actionable test: if sending daily deal emails to, say, 2,500 organic, opt-in subscribers yields no sales, then the quality or relevance of the deal is in question. If sending daily deal emails to less than 1,000 subscribers yields one or two sale, then the subscriber count is likely the limiting factor. Daily deal website owners should focus their efforts on that one aspect that is crippling the business. Work on it relentlessly; you may be surprised by the inflection point that occurs. No business grows linearly after all.

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The daily deals industry is an interesting one, which attracts many players to it (some say too many), causing the space to be characterized by cut-throat competition. Crowdedness is not necessarily bad: it is arguably easier to stand out in a crowded market with no dominant player in your niche (e.g. handmade jewelry) than to stand out in a market sparsely populated by a few dominant players whose names are synonymous with the industry (e.g. search engines). As a daily deal platform hosting hundreds of daily deal websites, we have seen – more often than we can count – high-quality daily deals that are not fully-optimized and thus do not reach their full sales potential.

Assuming that you are selling something that your market wants, here are some suggestions for daily deal optimization:

1. Display more images and videos
One of the easiest ways to improve a daily deal offering is to display more non-repetitive images and videos. Images should show different aspects of the deal (e.g. a spa package might include a facial, a herbal massage, and a steam bath; include those individually). You can also show video testimonials as well as explanatory clips. There is often too much text and too little media.

2. Display images with people having fun
What is more enticing: a panoramic view of a theme park or a picture of a happy family riding a rollercoaster? Faces usually do the trick.

3. Inflate that purchase count
This practice is ethically questionable but less questionable when it comes to its efficacy in increasing sales. You can customize your website to show a fake “150 people have bought this deal” line to serve as social proof and encourage buying. (We give the option to our customers to use this feature or not, thus shifting the ethical dilemmas to them!)

4. Use a shorter active time period
Deals with, say, a 5-day or 7-day open window might as well not have a countdown timer. The shorter the active time period, the more urgent and scarce the deal seems, leading to impulse buying.

5. Minimize the number of clicks required to reach the payment page
Some daily deal websites require a subscription before bringing you to their deals. Others require registration. While it is controversial whether those tactics increase sales, they certainly do increase the number of steps required to reach the checkout page. Generally, that is not good. Why not let visitors check out as guests? Why not allow a quick checkout, i.e. require just one click to go from the deal page to the payment page – bypassing the shopping cart?

6. Make your deals affordable
Price is correlated to value, yes, but consumers often see things in terms of absolute dollar value without much regard to the intrinsic or even perceived value of the item in question. Making your deals affordable means that you start by selling low-ticket deals to build your reputation (and morale) and slowly working your way up to the three-figure and four-figure deals.

7. Engage your visitors by providing discussion/commenting outlets
As much as you would like to provide all the relevant information pertaining to that deal, your visitors might still often have questions of their own. Start the ball rolling by putting up a simple “talk to us and we will respond in hours” notice. Let them consult one another or publicly ask you, the daily deal site owner, questions. Be responsive when that happens!

8. Minimize the number of side deals
More often than not, less is more. An overly-large gamut of choices (anything in the 10-20 range, really) puts your visitors in a browsing or exploratory mood, not a purchase consideration mood. Focus can help to sell deals.

9. Avoid unprofessional design
It is needless to say that your logo should make anyone who sees it want to trust your company. Try not to use too many sharp edges in your design, use sans-serif fonts, avoid clashing or saturated colors, have a consistent branding throughout the website, etc. In short, recommend UX Movement (http://www.uxmovement.com) to your designer.

10. Market your deals often
This suggestion is obvious. Yet consistently marketing one’s deals is not a common practice, because most people are afraid of being seen as spamming or hard-selling. Others are afraid that they will never be able to recoup their lost marketing dollars the more they advertise. The only problem is that nobody will buy your deals – no matter how good they are – if they do not know about it.

Of course, these suggestions are just hypotheses, which can at most be used as bases for testing. The only practical way to know what works and what does not is to perform A/B testing. If you have experience running split tests on any of the suggestions above, do share your results and findings in the comments section; we can all learn something!

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Close Harbour Seafood serves Live Main Lobsters, Whole Belly Clams, Alaskan King Crab Legs, and other tantalizing seafood delicacies in Plantsville, CT, and, like all businesses in the F&B industry, has a need for a constant stream of new customers. Deals and promotions are traditionally the best way to get people to try out new restaurants, so Close Harbour Seafood decided that daily deals are worth a shot. They used Zuupy CrowdDeals, a make-your-own-daily-deal-website platform, and started familiarizing themselves with the processes: deal creation, deal marketing, and deal redemption.

The Goal

The goal of running the (experimental) daily deal is simple: to get a many deal buyers as possible in a short time frame and try to upsell them during their visits and retain them as repeat customers. Close Harbour Seafood saw the deals as a marketing cost and decided that it has to provide something valuable as bait for new customers. They finally settled for a 50%-off restaurant voucher: a general yet appealing offer enough to get people through the door.

The Process

1. Deal creation
Close Harbour Seafood knew that the bulk of the battle was having a high-quality, irresistible deal to offer. They went into their Zuupy CrowdDeals dashboard and created a deal, taking literally minutes to just type the deal terms, deal copy, and fine print, and to upload some captivating deal images. The deal looked neat and comprehensible, so the process was essentially done.

2. Deal marketing
Close Harbour Seafood already had a fan base of close to 2,000 people on its Facebook Page, so they decided to promote the deal on Facebook. After a few simple status updates on the morning of 23 September 2011 (EST), buyers started pouring in, and the tipping point of 15 buyers was achieved. People continued to buy until about 24 hours after, when the deal was schedule to close. Close Harbour Seafood ended up with 94 buyers for their $10 vouchers, giving them total revenue of $940 for less than an hour of active work and zero dollars invested up to this point (they were on a free trial). Not bad!

3. Deal redemption
Since each buyer will be emailed a printable voucher, they can use it to buy meals at Close Harbour Seafood anytime before their vouchers expire. Close Harbour Seafood had access to an integrated online voucher redemption system that makes the process easily trackable for analysis or accounting purposes.

Possible Take-Home Lessons

The quality of the deal and the existence of an active, enthusiastic fan base were instrumental in ensuring that the deal was a success. Close Harbour Seafood’s first daily deal was not meticulously crafted through painful hours of fine-tuning or buzz generation; it was made to be relevant to as many people as possible from the outset, while other considerations like design were treated as secondary (rightfully so). They also made use of existing social media channels like Facebook to not only promote the deal but also encourage other enthusiastic buyers to do the same.

Ultimately, it seems to pay off whenever any daily deal website operator decides to make sure what they sell is truly wanted by their subscriber or fan base before selling it. Close Harbour Seafood clearly had this principle in mind from the start – everything else was facilitative.

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Daily deals are a competitive business; you either differentiate or die. Operational costs are not exactly on the low side, and your sales may not be adequate for you to turn a profit. Below are thus some ideas for revenue generation:

1. Bait-and-switch
Use loss leaders for your first few deals and sell a good deal at way below market price. A good deal is one that is general and low-ticket enough to apply to just about anyone (e.g. gift cards). The aim here is to spark off some initial activity, short-term word-of-mouth marketing, and create awareness of your daily deal website. Your “losses” should be treated as a marketing investment; each subscriber obtained has a lifetime value after all that you can tap on to get future sales. Rushing to make a profit on the first deal may not necessarily be a good idea. Not many daily deal websites use bait-and-switch yet, so it might be a good idea to experiment.

2. Free daily deal vouchers
The only thing better than a 80%- or 90%-off voucher is a free one. Give away a few complimentary vouchers on good deals (see above) on a lucky-draw basis, but collect subscribers’ email addresses upfront in exchange for participation in the lucky draw. The classic “give us your email address so that we can notify you if you are chosen” usually works well.

3. Daily deal aggregators
Daily deal aggregators (see a list here) are websites that collect the best deals from a whole database of daily deal websites and collate them into one daily deal email. Certainly, your deal will appear side-by-side with your competitors’ deals, but, if your deals stand out, your competitors’ deals will be rendered as mere noise. Best of all, most daily deal aggregators are free to use and require no manual work, thanks to RSS/XML data feeds. The only pitfall is that most daily deal aggregators use a different XML deal format, despite the Open Deal Format movement. Fortunately, good daily deal platforms have capabilities to provide different feed formats for different daily deal aggregators. ;)

4. Referral program
Make your first few customers who are enthusiastic about your brand your voluntary sales force. Give them discounts for successfully referring a friend who purchases something; CPA is a better model than CPC. The key here is not to be stingy with the referral rewards. If increasing the rewards by 100% has the potential of increasing the number of referrers by 200%, the referral program is likely to profitable. The key is to see referral discounts as a marketing investment.
P.S. If you already are a Zuupy CrowdDeals customer, our referral program is coming very, very soon. We promise!

In conclusion, daily deal websites that want to survive must understand this growth sequence: awareness first, sales later. With no brand awareness or brand familiarity, people are unlikely to buy anything. Think of brand awareness as an initial-investment asset that can be exploited down the road to produce consistent sales. It is unlikely that a newcomer to the daily deal industry or, indeed, any industry, will be able to skip levels. The key takeaway is basically to do whatever is necessary to get considerable awareness first and then focus on profit strategies.

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Depending on the volume of sales that you target to make, the costs of starting and running a daily deal website can vary widely. Let us assume a small, growing daily deal website (low- to mid-6 figures in yearly turnover) for the purposes of this article.

1. Daily deal solutions and other software
The most obvious expense is the cost of building the daily deal website itself. There are three choices here: 1) build one from scratch, which costs a bomb (read: five figures) but is customizable to the bone, 2) get a daily deal script at a couple of thousand dollars and install it on your own servers, or, least overwhelmingly, 3) get started for a small monthly fee or a percentage of sales with one of the many daily deal platforms out there (including ours). The most recommended option for those starting out is obvious, so let us settle with that.
Cost: US$50-100 per month and/or 10-20% of sales

2. Subscriber acquisition
Subscribers are basically people whose email addresses constitute your mailing list. It is too naïve to assume that people will come to your website once it is set up without you needing to spoonfeed them your daily deals. There are two choices here: 1) acquire email addresses using traditional methods of online advertising (e.g. Google Adwords, Facebook Ads) and social media (Facebook and Twitter) by building a following and organically growing your list over time (the slow way), or 2) buy a list of email addresses (the fast way). If you go for the second option, beware.
Cost: US$300-500 per month

3. Email marketing software
Email marketing and deliverability is really an entire industry on its own. Your daily deal script or daily deal platform may come with an in-built emailing system, but, when you scale up to tens of thousands of subscribers, it is most prudent to start using email marketing software (MailChimp, SendGrid, PostmarkApp, etc.) that are built specifically to ensure that your mails are delivered on time and past the spam filters and that you can know what is going on (how many opens, how many unsubscribes, click-through rates, etc.).
Cost: US$50-100 per month

4. Design and creative expenses
Design and aesthetics are important and, most importantly, good design leads to credibility and increases trust and confidence (read: increased sales). One of the very first pieces of design work that you might need is a professional-looking logo. Then, you would need to create compelling graphics for other parts of your website (e.g. icons, banners, clip-art). If you are serious about differentiating your website, you would need custom-made videos for video marketing as well.
Cost: US$500-1,000 per month on average

5. Sales/Variable expenses
Even with a gorgeous website and a large mailing list, you will not get revenue unless you have sustainable deal flow, i.e. enough merchants who want to work with you to provide high-quality deals that are in demand. The cost of preparing for-merchant marketing collaterals should not be underestimated: business cards, brochures, data sheets, and agreements all cost money. After the deals are done, more expenses await you: the merchants’ revenue after your commission (which may include unredeemed vouchers), payment processing fees, refunds, etc.
Cost: US$5,000-10,000 on average

6. Administrative and miscellaneous expenses
Office supplies, utilities, and transportation all cost money. If you are required to incorporate your business for whatever reason, legal costs will also eat into your initial capital. Lawyers are notoriously expensive. So are PR firms. Do not forget other vital software which importance should not be discounted, such as analytics software (e.g. SEOMoz, HubSpot, ClickTale, Visual Website Optimizer). Also, let us not forget our obligation to pay our taxes dutifully as responsible citizens. And who exactly is paying for your living expenses, if you are working on your daily deal business as a full-time executive?
Cost: US$1,000-2,000 per month

There is obviously room for debate as to the range and magnitude of these costs, but the purpose of this article is not to provide an exact figure for budgeting as much as much as it is to provide a list of expense items to keep in mind when considering an entry into the highly-competitive daily deal industry. If there is any essential expense that I might have left out, do comment below and share your thoughts.

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