10 Questions Local Businesses Should Answer When Considering Online Deals

If you’ve followed headlines about the online deals industry over the past year, you might wonder if the phenomenon has lost its appeal. The coverage often goes something like this:

Major players in the space are restructuring. The addition of hundreds of redundant and niche sites have saturated the market. Local businesses are moving on after being burned by offering steep discounts that failed to generate repeat business. Consumers are fatigued by the onslaught of deals by email offer services not relevant to them.

Yet, while the young industry faces its challenges, both local businesses and consumers continue to see promise in the medium. In fact, consumer spending on online deals (including daily deals, instant deals and flash sales) is projected to grow 23% in 2013, reaching $4.4 billion, according to a BIA/Kelsey report released last year.

Further, more than one-quarter of small businesses surveyed by BIA/Kelsey said they were “very likely” (15%) or “extremely likely” (11%) to participate in a deal in the next six months, while 24% said they were “somewhat likely.”

These mixed messages about the viability of online deals leave local business owners asking, how can I make the online deal work for me?

Ultimately, determining whether the online deal is right for your business is anything but a simple process. Here are 10 questions to consider when deciding whether the online deal makes sense for your local business:

1.  Does Your Business Category Generally Succeed In The Online Deals Space?

Restaurants, retail stores, salons, spas, movie theaters and other highly trafficked businesses usually fare best in the general online deals space because consumers regularly use them and are willing to consider new options.

But, less frequently used businesses like an electrician or plumber, or even a car dealership or bridal shop, likely won’t see a great return, since the average consumer isn’t regularly looking to sample those services or products.

That said, ready-to-buy consumers are likely more open to considering online deals. For example, a niche deals site specifically targeted to those buying cars could be a great place for a car dealership to post their deal as most subscribers are in the market with plans to make a purchase in the near future (More on niche deals sites later – see #7). 

2.  Is Your Business In The Right Geographic Market For An Online Deal?

Consumers living in urban and high-tech markets like Seattle and San Francisco are significantly more likely to purchase an online deal than those in cities like Detroit or St. Louis, according to a 2012 data from Slice, a smartphone app that tracks online purchases. Slice data from the first half of 2012 found that 13.7 deals were purchased for every 10,000 residents in San Francisco, compared to just 4.0 deals for every 10,000 residents in St. Louis.

Local businesses should do research to determine the popularity of online deals in their market, and which business categories are making the biggest push, to see whether they envision success in the space. Otherwise, the time and effort for setting up the online deal may be better spent on other local search tools.

3.  Does An Online Deal Promote Your Business Goals?

Local businesses need to evaluate their business goals to determine if an online deal supports them. Online deals can help businesses achieve objectives ranging from generating high foot traffic to relieving overstock merchandise.

If a local club is set on getting as many young adults in the door as possible with the goal of being known as “the place to be” in town, then a deal on door entry may help them achieve that. The same goes for a local pizza shop, where production costs are low and high customer volume increases profitability. A retailer with extra winter merchandise can initiate a deal that offloads product to new customers, while generating visibility for their regularly priced spring apparel.

Online deals can also help a local business achieve its objective of improving its online and mobile search visibility, not only on daily deals sites but also on popular local sites and search engines. For example, Yelp Deals allow local businesses to offer deals that appear in a prominent position near the top of their Yelp business listing, in addition to being highlighted in listing search results.

Yelp users even have the option of searching specifically for businesses offering a deal, raising the business’ exposure among the host of other competitors’ listings.

4.  Are Your Business’ Reasons For Initiating An Online Deal The Right Ones?

Local businesses should view online deals as a way to introduce themselves to the market or build on an existing, strong business flow, since the costs associated with the effort are high. Online deals should be viewed as an investment in a business to grow or build on success.

Online deals should generally not be used as a last-ditch effort to keep a struggling business open. In those situations, time and dollars are usually better spent on finding ways to improve the actual business, product or service so that it’s attractive on its own to a regular base of customers, without the appeal of a discount.

One reason for a new or growing business to invest in an online deal is to build and maintain its long-term SEO presence. The prominent appearance of online deals in search results often extends beyond the life of the deal. For example, Dangerous Guitar in Dallas is currently offering a Groupon deal on one year of online guitar lessons.

For those searching the phrase “Dangerous Guitar Dallas” on Google, both the current deal and a previous deal from January appear among the top search results.

Furthermore, when the description for an online deal references a business’ website and key product or service offerings, it can help the business significantly boost its presence among key related terms in search engine results. Links backs to the business’ website from a popular online deal site can help bump up its placement in search.

Additionally, users searching a general term like “Guitar deal in Dallas” will now find Dangerous Guitar’s deal among the top five search results. Such strong placement in search results can give a new or growing business the boost it needs to get found and generate additional business.

5.  How Will An Online Deal Impact Your Business’ Reputation?

While online deals often generate excitement about a business (everyone likes a discount!), there is always the chance that the offering can impact the business’ reputation among both new and existing customers.

For example, is your business in a category that consumers expect will offer discounts? While consumers likely would not be surprised that a restaurant would offer a deal, they may have reservations about their personal physician putting one out, since doctors are often evaluated on quality of care rather than cost.

Additionally, businesses should consider what existing customers will think about new customers receiving an online deal. Existing customers may wonder if the business is worth the cost they’re paying, or whether they too should look for similar deals from competitors.

However, for businesses that believe online deals will positively impact their reputation, they are a great way to generate the word-of-mouth endorsements those businesses are most looking for. Online deal purchases often make their way into users’ Facebook and Twitter feeds, where like-minded friends are exposed to the deal and may decide to purchase it for themselves.

Customers who redeem their deal and enjoy their experience are more apt to talk about the business on their social media pages and visit and “like” the business’ Facebook, Twitter, or Pinterest channels. Additionally, customers who enjoy their deal experience are more keen to leave positive online reviews for the business on local sites, which can help the business place higher in search results on popular local sites.

6.  Is The Timing For An Online Deal Right For Your Business?

Seasonality is key in the online deals space, and it’s often a delicate balance. While businesses want to encourage sales of in-season items, consumers may be willing to buy without the online deal. For example, a local florist may want to attract new customers with a deal around Valentine’s Day. But would the extra business the florist receives from an online deal outweigh the cost of the discount given that consumers are often more willing to spend in the final run-up to the holiday?

The key is for businesses to promote products and services through deals during the off-season and on-set of the busy season, while taking advantage of other advertising options during the season itself. In the off-season, online deals can be used to help businesses maintain a steady stream of customers and offload extra merchandise. In the run-up to the regular season, online deals can expose customers to a business so that when the peak season hits, they will already have an established shopping pattern in place and be more willing to pay full price.

It’s also important that local businesses work with their online deal partner to better understand their partner’s subscriber habits and landscape. This includes which day of the week will attract the strongest response to the deal, and among what other offerings their deal will appear. The last thing a business wants is for a similar offering to be featured by the online deal provider within the same immediate time period of their deal.

Additionally, online deal providers like SuperPages.com offer special sections tied to holidays or other special events, such as Black Friday. Depending on the business, there may be advantages to ensuring an online deal is included in one of those sections.

7.  Which Online Deal Partner Makes Sense For Your Business?

Determining whether an online deal partner can deliver the quantity and quality of new customers a local business is looking for is one of the biggest considerations in this process. It’s important that local businesses meet with a variety of online deal operators to evaluate their offerings, audiences and success rates.

First, can the business practically afford the discount and revenue split with the operator, or is the cost actually damaging to the business?

Second, does the online deal partner offer the right audience for the business? Will the type of deal fare better if distributed to a large base of general subscribers, or will it benefit from being shared with a smaller, targeted group that has demonstrated a particular interest in what the business is selling (i.e., niche deal sites or operators)? In what ways will the deal be shared – via e-mail subscription, online, social, and/or mobile?

Third, the business should evaluate the projected success rates for promotions. What past client case studies can the operator provide to convince the business it can make an online deal worth its while? How can the operator improve the business’ online and mobile search visibility, both in the short- and long-term?

8.  Have You Negotiated The Deal Offering That Works Best For Your Business?

In this process, businesses should not feel pressured by the terms they receive from an online deal operator. The deal and the terms of the arrangement need to make sense for the business, or in the end the promotion will not be successful. Therefore, businesses should be ready to negotiate deals that best generate visibility on all platforms important to them.

9.  Does Your Online Deal Encourage Repeat Business From New Customers?

Will the projected rate of returning customers justify the discount, or would the business likely do better attracting a smaller base of new customers without the deal?

The purpose of the online deal is to encourage customers to return to the business and pay full price. It is important that local businesses ensure that they are ready to handle the level of volume that an online deal can drive, so that new customers are not disappointed by the quality of service or the length of wait time.

Businesses should also invest additional time and effort with new customers so that they feel welcome and walk away with the impression that they have found the right business for their needs. Additionally, local businesses might consider offering a loyalty program or future discount codes to encourage new customers to come back.

10.  Is An Online Deal The Best Way To Maximize Your Marketing Budget?

Ultimately, the question becomes whether the online deal is the best way a local business can advertise to its customers, or if there are more efficient and less costly ways to get consumers in the door.

While there’s no surefire way to know unless its tried, going through this process will help a local business determine whether entering the growing online deals space is worth the risk and the potential reward. Local businesses should also not discount the benefits that daily deals also have in boosting their digital and mobile search visibility and social media conversation related to their brand.