Daily deal sites not producing for some small businesses

Many small business marketing plans are now including Groupon or some other daily deal website that offers services from businesses at a discount to promote the company. While this marketing plan has proven to be successful for some companies, others are reporting mixed results.

The share price of Groupon recently decreased to a new low on August 20 before bouncing back to normal levels, but consumers are becoming cautious of how helpful these businesses actually are.

According to a recent survey conducted by Utpal Dholakia, a professor of management at Rice University's Jones Graduate School of Business, only 20 percent of the people who purchase deals that the website offers actually come back to the company to purchase again. Higher success rates were found among photographers, education services, health and fitness services, retailers and other outlets.

"Daily deal sites are a double-edged sword, and unless they are structured properly, they’re likely to produce more harm than good," said marketing expert Charles Gaudet, CEO of PredictableProfits.com, a small business marketing site. "It’s important to realize that the daily deal customer purchased a coupon for your business based upon the price of the product, not because they have an intention to continue doing business with you. Once the daily deal customer redeems the coupon, it’s now the business owner’s job to convert them into a repeat purchaser and a lifetime buyer."

Groupon doubled the number of subscribers it had in 2011, but only 20 percent of the subscribers were found to regularly make another purchase. The website now has more than more than 120 million subscribers and the average person spent $18 in the first half of 2011, which is down from $21 in 2010.