We have all seen them - incredible deals on electronics, holidays, restaurants through daily deal websites such as spreets.com.au, livingsocial.com.au, and the big one, Spreet.
While for many industries this type of advertising may work, more recently the daily-deal advertising model has started to receive negative feedback from businesses and consumers alike.
As James Hood from website Consumer Affairs puts it, "If it sounds too good to be true, it
Daily deals seemed like the answer for fledgling brick-and-mortar businesses. The business signs up, offering to provide their products or services at a substantial discount, but still at a slight markup. The deal company gets a cut of each transaction it brings in by offering the deal on its website. Over time, the deal website becomes a platform that consumers associate with good bargains, which garners more traffic.
It seems somewhat risky for businesses, but most small business owners would agree that offering a reduced rate (but not netting negative) in exchange for exposure is just a cost of the trade. Spreet pioneered this business model and within months there were many new upstarts in the market. But interest in daily deals from businesses has clearly died down significantly.
If daily deals result in exposure for the business, savings for the consumer and profit for the deal company, what’s wrong with the model? Well, after analyzing the outcomes from a number of daily deals it becomes clear: companies like Spreet and Jump on it take far too much from businesses. And sometimes the problem areas of a daily deal agreement don’t seem all that apparent.
Here are some of the factors a business might not immediately think of, but could definitely result in one of the many daily deal horror stories we hear of so often these days. Here are the top three factors that can cause a daily deal to go awry for businesses:
A Large Influx of Business can Upheave a Business Model – Take the case of a British bakery who offered cupcakes at a 75% discount. A huge amount of orders came flooding in, and the business was forced to scale quickly. Unfortunately, scaling without a careful expansion strategy frequently leads to disaster. This bakery had to produce 102,000 cupcakes. To accommodate such a colossal request 21 extra bakers had to be hired. When all was set and done the figure was a net loss of about $19,500.
Payment Processing Charges – Many smaller businesses aren’t equipped to process credit and debit cards, or don’t factor in the costs from a payment system, which ranges from 1-4% of every transaction. An amount like that may seem trivial, but when a business is already slashing their margins in exchange for publicity, a few percent can offset the fragile balance that’s holding its financial viability together.
Bargain Savvy Customers – Services like Spreet don’t attract consumers from all demographics and market segments equally. On the contrary, they catch the attention of a very particular type of customer. These people tend to be bargain savvy: knowing the exact cost of competing products, which means they often judge businesses without making a full and fair assessment.
Online Reviews – Perhaps the worst of the factors are online reviews on sites like Google+ Local and Yelp. Imagine a scenario where a business provides an exceptional product with well above-par service. They sign a daily deal contract and are flooded with interest at certain peak hours. Their operations can’t handle this sort of a load and parts of their model begin to slip: customer concerns can’t be addressed in a timely manner or there’s just not enough time to test the quality of all products. What happens? Angry and web-savvy customers go online and obliterate the business’ reputation—forever (or at least until the business relocates, changes its name or develops a costly strategy to manage their reputation).
Now we’ve painted a bleak portrait of the daily deal industry here, and it’s a portrait congruent with the data, which shows a prominent decline in the demand for and support of daily deals.
While this is all true, we do believe there’s still a place for certain categories of deals. Innovative eCommerce products find a home on the design focused product deal site Touch of Modern. Software deal sites like Mighty Deals and StackSocial can be extremely beneficial to those selling SaaS products or standalone software resources.
Because these use-cases don’t involve the overhead of maintaining a storefront, there’s much more room for profit and much more need for exposure, because on the Internet passerby’s aren’t source of traffic and interest.
So what does all of this mean for a dentist? Put simply, when a dental clinic is offering services such as fillings, root canals, even cleaning, at a very low price, they need to make up the money somewhere else. And that somewhere else will be found in your mouth. A $10 filling will all of a sudden also require a $3000 treatment for something else.
Here at Pain Free Dentist, we have heard this story many times before, where a simply clean resulted in thousands of dollars of work that was only "found" once the clean began.
We pride ourselves on offering professional services at affordable rates, and our customers reviews speak for themselves.
Will we give you a filling for $10? No. Will we try and upsell you once you are in the chair? No. We spend a lot of time ensuring we know the cause of any issues you may have, and we aim to fix them in the most efficient, most pain free, and most affordable way every time.