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.

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!

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.

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.

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.

In the daily deals/group buying industry, any unredeemed voucher commonly creates pure profit for merchants. Unredeemed vouchers are more prevalent than one would expect, and there are, in fact, numerous highly-active secondary markets to buy and sell unredeemed vouchers. They are basically an industry on their own.

With Zuupy CrowdDeals, we have an integrated merchants’ area that allows merchants to indicate redemptions as they happen. However, merchants only have access to certain details of the sold vouchers and must enter the rest of the details from the printed vouchers themselves (specifically, the last three digits of the voucher serial numbers) to indicate a redemption. The core benefit of this feature is simple: merchants cannot fake redemptions, especially if your business model as a daily deal website owner is to only pay merchants upon successful redemptions:

The obvious idea in this article – apart from the fact that our daily deal platform can be used to handle voucher fulfillment in the manner described above – is to try to work with merchants on the basis of “payment only for redeemed vouchers.” Merchants hounded by daily deal salesmen will have enough bargaining power to say no, but, for the rest, they are unlikely to object, especially when they are not aware of the magnitude of the profit opportunity that lies in unredeemed vouchers. Whether unredeemed vouchers are beneficial in the long term is another question; the fact that they already happen means that you should not ignore it.

As a daily deal website owner, it makes little sense to pay a merchant for services they did not deliver. Neither should you.

Facebook Deals is history. Groupon is declining. Google Offers is not exactly going places. In short, the luster and explosive growth of the daily deals industry are finally waning; the industry may be approaching some form of maturity or stabilization.

As a daily deal website owner, you may be tempted to ask, “Is there still space left in the US$4 billion industry for me to survive and, heck, to grow?” The answer is probably yes, but a differentiating strategy is probably needed.

Here are a few suggestions:

1. Position your website as a way to learn about new places to have fun. It is sometimes an unwarranted assumption that daily deal consumers are cheapskate bargain hunters who will only buy if the item in question is sufficiently cheap. The term “cheapskate consumers” is an oxymoron; real cheapskates would rather save the cash entirely. Go for rarity and uniqueness; everyone has had enough of spa and massage or dinner buffet deals.

2. Content marketing is your friend. Groupon is often praised for “killer” copy that accompanies its deals. Deals alone are boring, but that is how most daily deal websites operate. Weave a story to go along with your deals. Frame deal details as a narrative instead of yet another set of bullet points. Give your customers ideas. Start a blog that makes your customers like you and that provides your customers with something else to do other than simply buy your deals.

3. Focus on some sort of niche market. We all love to sell everything to everyone, but the truth is we are probably more well-posited to serve one or a few specific markets based on certain geographical areas, age groups, genders, occupations/hobbies, etc. The benefit of serving a niche market is that your niche market will see you as speaking to them directly, because you are. It is also easier to brand your website and curate specific deals for a well-defined market that has unique characteristics rather than for a mass market that theoretically likes everything.

4. Get sustainable deal flow. Lack of high-quality deals is probably the number one reason that daily deal websites eventually die, because that is supposed to be their core competency. The daily deal website is simply a tool. It is not the focus. The deals are the focus. And high-quality deals are deals that consumers want.

5. Ramp up on customer service. Finding companies where you can just directly talk to their employees – in real-time or otherwise – is difficult these days. Communicating often with customers (and being ridiculously accessible) is one of the best ways to build trust and closeness with your customers. It is, after all, always easier to buy from a company you trust. “But how do I start?” Easy: just be available and proactively engage with your brand enthusiasts via email, live chat, Skype, Facebook Page, Twitter, blog comments, Facebook comments, etc. Use them voraciously. They are all free, so there is no excuse not to use them.

The good thing about a crowded space is that 1) the market is super-validated, and 2) it is relatively easy to stand out among the hoards of mediocre businesses. The overarching principle to remember is that there is no one principle that works for all markets; talk to your customers, find out who they are, what they like, and please them. You will be surprised how much strategic planning becomes easier and more directed once you receive constant input from your customers.

You have decided to run a daily deal site. The next step is to buy your domain name and link it up with a daily deal platform (like ours), a Groupon clone script, or a custom-built daily deal infrastructure. Then you start building up your following by collecting or importing email addresses as well as cultivating a Facebook/Twitter following. All is good and easy until you come to the part where you have to do actual work: finding deals to sell.

Most new daily deal site owners find it difficult to get merchants to agree to run deals, because merchants are usually skeptical of new, unproven marketing channels. Merchants either think that they are able to get new customers in themselves by running their own deals or do not want to go through the hassle of dealing with novel marketing processes.

Here are a few tips to help you get started:

1. Look at your existing mailing list and target businesses that are most likely to be relevant to your demographic. Mass marketing is okay, but niche/targeted marketing is way better. You need to push your unique value proposition and show off your big mailing list of, say, young female professionals in their mid-twenties living in or around Downtown New York City if you are selling to, say, a manicure/pedicure parlor.

2. Paint a rosy picture of acquiring new customers at a fraction of the usual cost and headaches by drawing analogies to newspaper ads and flyers. Most small business owners rely on offline marketing channels that most likely deliver dubious ROI due to the lack of tracking mechanisms. In fact, most small business owners have probably not even started experimenting with online marketing. Give them a low-risk, low-friction entry point into the online marketing arena based on a “we don’t get paid unless you do” model.

3. Undercut the competition by giving a big discount at first contact. Sweeten the deal by taking only a small commission for the first time. If you do well, you would have plenty of opportunities to earn back those lost commission dollars through repeat business. Your priority is to get high-quality deals first in order to start engaging your existing mailing list. No deals, no revenue.

4. Once you have successfully run a deal or two for other merchants, put together compelling sales materials based (solely) on your track record. Numbers (e.g. revenue increases, number of new customers acquired, number of coupons sold, number of impressions of brand name, etc.) and timelines are your best friends. Leverage on them to provide merchants with sufficient quantitative information to make their decisions. As with all marketing, never make big, unproven claims that only serve to destroy your credibility. Just state the facts.

The abovementioned points are just some tactics that you can employ when sourcing for deals for the first time. In fact, one of the best places to start is within your network: find friends, acquaintances, or associates who are willing to support you in the initial stages of your daily deal business by giving you the right business opportunities. If you prove to be a success, you can leverage on that success to hopefully bring onboard more merchants who are eager for you to replicate that success with them.

Consumers are easily blinded by discounts. Daily deals exploit precisely this weakness. However, there is a big difference between daily deals as well as normal ecommerce and real-life physical sales transactions: you need to expend additional effort to obtain your purchased goods or services after paying instead of having your item handed to you immediately over the counter or delivered to your doorstep.

Ergo, any method that delays or discourages redemption creates pure profit. Make the window of redemption smaller or conditions more stringent, and careless consumers temporarily blinded by price into thinking “the trouble will be worth it because of the ridiculously-low price” will probably buy without actually redeeming when the time comes. I suspect that certain prepaid services, such as companies selling airplane tickets, travel packages, and cellular phone credits, also profit considerably from exploiting this gap.

This technique is, of course, ethically questionable, but it is certainly not unlawful – freedom of contract governs all commercial transactions. It is a well-known fact that the further into the future the redemption event is from the time of payment, the lower the chances of said redemption event ever happening are. Memory, unpredictability of schedules, sunk cost mentality, etc. work exponentially in favor of the daily deal vendors as time passes.

Merchants certainly are already doing this in some form, yet very few have actually formalized it into an actual strategy. Why not?