Deal sites, offering discounted prices on goods or services, are based on the concept of collective buying whereby a group of interested buyers enable the collective buying power to demand a greater discount of an item or service for offer.
How deal sites essentially work is an advertiser fronts up with either a product or service at a discounted rate, for example, a movie theatre offering a 50% discount on movie tickets. The ‘deal’ is put in front of an audience – some of which will take advantage of the offer. Although the deal is on offer for people to purchase, it is not actually available to give out until an ‘activation point’ is reached – the activation point being a minimum quantity sold before the deal is given out. Often this is determined by the seller. This is where collective buying comes in.
How Does it Work?
Using the example of discounted movie tickets – if the activation point, set at a minimum of 500 tickets (units), was not reached (i.e. only 470 tickets were purchased) before the deal expires then the deal is cancelled. All those who purchased the deal would not be charged therefore making it a no deal deal. If, however, the activation point is reached then buyers will be charged and the deal is given out. From the advertiser’s perspective, having an activation point helps to ensure that the deal offered is more likely to return profitable.
But what about the deal sites – how would they profit from the movie ticket deal..? As you may suspect, normally they will charge a commission on each discounted ticket (unit) purchased which normally can be anywhere between 20-50%. Often this negotiated between the seller and the deal site which can be determined by a number of factors including; extent of the discount (larger discounts are more exciting to users driving more traffic to the deal site therefore lower commissions), good or service on offer (i.e. high demand product vs. low demand product), company profile (i.e. big corporate national vs. small town private) in addition to other factors.
With the number of deal sites cropping up in all sorts of verticals and niches, this post focuses on what advertisers (dealer) should know when engaging with a deal site.
Summary of Findings
For the purposes of this post we selected five of the more popular New Zealand focused deal sites and reviewed their advertiser pages. Below is a table that summaries our findings.
|Q & A||Yes||Yes||No||Yes||No|
|Cost||Com||Com||Com + other||Com||–|
|Share||FB / # / @||FB / # / @||FB / # / @||FB / # / @||FB / # / @|
|Promote||FB / # / @||FB / @||FB / # / @||FB / # / @||–|
- Frequency: how often are deals rotated.
- Email list: does your deal go out to an email list.
- Q & A: does the deal site offer a question and answer feature for the promoter and interested buyers to communicate.
- Cost: what types of cost can the advertiser expect? For example negotiable commission (Com) costs.
- Share: does the website allow people to share the deal via their social networks such as Facebook (FB), Twitter (#) and/or email (@).
- Promote: does the deal site promote deals on Facebook (FB), Twitter (#), and/or email lists (@).
- Website link: does the deal page include a link to your website.
- Map: does the deal site include a map to your business location(s).
- Activation point: is this required for all deals.
- Gifting: deals can be gifted.
How they Promote Themselves
We contacted each of the sites with a raft of questions requesting information an advertiser should know. Unsurprisingly, each deal site has its own USP to entice sellers to run the deal with them. The following provides a brief summary and a closer look at each of the deal sites in question and highlights any potential risks and unique benefits of each (Information provided by each site, First Rate has not independently researched claims – Ed.).
- Launched in 2010 and owned by IdeaHQ, Grabone is operated by the same group who also manage New Zealand web properties sella.co.nz, flicks.co.nz, getfrank.co.nz and adhub.co.nz.
- Prefer to disclose information directly to client.
- No reply.
- Operated by the same group who manage Trademe.
- Spreets which are primarily aimed at urbanities looking for fun and unique experiences in their location are owned by Yahoo! 7 which allows them to showcase daily deals on the homepage of Yahoo! Xtra.
- There are no costs involved in running a Spreets promotion. They simply take an advertisers feature and market this to their members and share in a percentage of the revenue that’s generated. This means there is no risk to the merchant meaning the advertiser pays only for results.
- The client setup involved is minimal. The Spreets editorial department writes the ad copy and sends for approval.
- Customer service was good. Feedback to our questions within 24hours by email including a phone call and sent a deck of slides for the Yahoo! Xtra homepage audience stats.
- Brand Developers Ltd (trading as Yazoom) are New Zealand owned and operated. They are also the company behind the “TV Shop” of which they claim to have 1.6 million active shoppers. With no upfront costs, larger advertisers can benefit from TV coverage over 4 channels (One, Two, TV3, and Prime) ranging between 15-20 advertisements nationwide between 5pm-8pm. An advertiser’s offer is promoted to TV shop customers.
- If the promotion is unsuccessful and no purchases are made, Yazoom do not charge – making it cost free to the advertiser.
- Offer a team of writers and designers to build your campaign at no charge.
- Yazoom administers and manages all coupon sales, receipting and securing all monies and provides advertisers with details regarding purchases and clearance codes at no charge.
- Advertisers are assigned account managers to provide on-going consultation during the promotion.
- Prefer to disclose information directly to client.
- Groupon is the largest of its kind valued at $6.4 billion and projected to generate $3-$4 billion in revenue in 2011. They have only recently established their presence in New Zealand. From an advertiser’s perspective, however, we did not hear back from them.
Tips for Advertisers for NZ Daily Deal Sites
- If you’re going to offer a deal – make it a ‘big deal deal’. People aren’t interested in small deals, or even ‘good’ deals. People these days want big deals. The better you can make your discount the more interested and motivated people will be to take advantage of it.
- People interested in your offer are going to ask questions. Therefore during the life of your offer on the deal site make sure you have someone dedicated to being online to answer all questions in a timely manner. Unanswered questions can equal a lost customer.
- It’s important to note that the deal that you offer is only the beginning. When people purchase your deal on offer and walk into your business, whether you’re a movie theatre, restaurant, or goods store THIS is your chance capitalise on your promotion and up-sell to your new customers. Of course if they have a good experience with your business this too will encourage them to come back.
- When promoting your deal make sure there are minimal restrictions on the deal – or in First Rate CRO speak – “improving the ease to conversion”. Quite simply, make it as easy as possible for people to click the “buy now!” button. This one is more for the deal sites than the advertiser.
- Finally, it is imperative that the advertising campaign performance is measured, quantified and put in context of all marketing activity. What does the cost per sale look like compared to other channels? What about repeat sales from this channel? How many customers were added to the email database post campaign? As always, a tool like Google Analytics will help answer these sort of questions.
Below is a list of questions an advertiser should ask before engaging with a deals site. First Rate recommends starting with these in addition to the information presented on the website when screening deal sites.
- How long does the deal last for?
- When does the deal start and when does it end (time)?
- How much will running the deal cost?
- If it is activated?
- If it is not activated?
- What payment structures do you have in place?
- Is there a setup fee?
- Is there a success fee?
- On average, what % of deal vouchers are purchased but not used?
- Who will see my deal?
- How many people on your email list?
- If you have a Facebook page do you post deals to it? – How many people do you currently have on your Facebook list?
- If you have a Twitter account do you post deals to it? – How many people do you have following you on Twitter?
- On average, how many unique people are visiting your site deals daily?
- How does one moderate the Q & A section of the deal page?
- How much control does the seller have to moderate the questions from interested customers?
- What options are available to the seller to moderate the questions i.e. answer back, delete questions etc.
- Can you provide an analytics report on how well the deal performed?
- How many people viewed the deal page?
- How many people clicked through to the purchase page?
- What percentage of people submit their payment details?
- What types of payment does your site offer?
- ie. credit cards, debit cards, bank transfer, Paypal etc.
- What unique benefits does your site offer that will help better promote my deal?