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Deal-aware?: Marketing via online deal sites gets mixed reviews in Delaware

For some, it's become as much a part of their morning routine as the morning newspaper or that first cup of coffee. They go right to their inbox or smart phone to check for it. And when it comes, they excitedly tell friends about it.

It’s the deal of the day, delivered to subscribers’ inbox from companies such as LivingSocial and Groupon, two of the largest coupon sites. One day you may find three laser hair removal treatments for $99, regularly $150. Maybe it’s a pay-$10-for-a-$20 voucher to a wine store. Or it could be 50 percent off at a restaurant. Deals on clothes, handyman services, teeth cleaning, artwork, facials, pedicures, pizzas and car detailing have all popped up in the morning e-mail.

Groupon’s website boasts more than 50 million subscribers, 22 million Groupon coupons sold in North America, and more than $980 million saved in North America, as of January 2011. LivingSocial now has 39 million subscribers in 21 countries. These days, it’s hard to find someone who hasn’t purchased at least one offer. “We’ve been really pleased, and check it every day for options,” said Majorie Mundy of Wilmington. Her husband purchased a massage for her for Christmas, and they’ve bought restaurants vouchers. When they travel, they use sites to search for deals in other cities.

Michele Walfred of Lewes first heard of Groupon through its Super Bowl commercial. Soon after, a friend tweeted that Agave in Lewes was offering a $50 coupon for $15. “I jumped on that [the deal] since we love the restaurant and appreciated the savings,” she said. She’s also bought a teeth whitening kit valued at $299 for $29.

Tabitha Trent knows both sides of the equation. For $7, she bought a $15 voucher to use at Ryan's Wine & Spirits in Independence Mall. “It introduced me to a place I had passed a million times, but never actually stopped at,” she said.

As manager of Basia Gifts, a clothing, accessories and gift store in Fairfax, Trent has also offered a LivingSocial deal: $12 for a $25 voucher. “It brought us a lot of exposure, and even if people didn't buy the voucher, the LivingSocial e-mail blast put our name in front of about 50,000 people,” she said.

But not every Delaware business owner or manager is enthusiastic about the concept. If you factor in labor, time and overhead, they may lose money. Critics of daily deals complain that instead of new customers, they’re attracting coupon cutters, who will switch products—or vendors—depending on the deal. Business owners also worry that offering items or services at half-price gives the wrong perception.

Daily Deal Sites Grow in Popularity

In case you were living without Internet access for the past year, here’s a recap. Internet-based Groupon and LivingSocial deliver shopping deals to consumers via e-mail, smart phone applications or their individual websites. When users register, they specify their city or area. Wilmington residents may elect to get deals from Wilmington and Newark, Philadelphia and the Philadelphia suburbs.

The services’ popularity has prompted others to launch similar programs. In June, Google Offers beta debuted in Portland and quickly expanded to New York and San Francisco. DailyCandy, which delivers news about shopping, dining and restaurants to subscribers, often has a 50 percent off DailyCandy Deal.

Delaware businesses are also coming on board. Consider The News Journal’s DealChicken, an offering from Gannett Co., the newspaper’s parent company. Already in such cities as St. Louis, Des Moines and Phoenix, DealChicken in Delaware is garnering subscribers in preparation to launch Aug. 2. Delaware Today has the Deal of the Day.


Learn more about Delaware's online deal siteshere


Some Businesses See Benefits of Daily Deal Sites

In essence, deal-of-the-days are another marketing tool for businesses, says Justin Silva, social media manager for The Archer Group, a marketing agency in Wilmington. “You do billboards, local ads, maybe a Groupon deal,” he said.

But unlike in the case of an ad, businesses don’t pay a bill per se. With a deal-of-the-day, the business generally receives half the purchase price. So, if the deal is $20 worth of food for $10, LivingSocial and the restaurant each get $5 from a customer’s purchase.

Most companies do the deal to get new customers. “You can’t get repeat business until you get them in the door,” said Joe Van Horn, operating manager of Chelsea Tavern in downtown Wilmington. He acknowledges that the restaurant’s Market Street location presents challenges. Suburbanites still hesitate to venture downtown after dark.

Chelsea Tavern has twice offered $40 worth of food for $20 on LivingSocial. The first time, the deal landed 340 offers. The second time, 997 people purchased it.  Between the two offers, about 70 to 75 percent of buyers were new customers.

“The value is getting your name in front of people,” said John Ryan of Ryan’s Wine & Spirits. He asked coupon users for their zip code and learned that up to 70 percent were in his zip code area. That’s a plus considering people tend to frequent liquor stores close to home. “I couldn’t be happier.”


Learn what advice a local social media expert has for businesses looking to use online marketing dealshere


For Some Business Owners, Daily Deals Have Drawbacks

Dr. Susan Kirchdoerffer, who owns Reflections, a medical day spa in North Wilmington, is less pleased. She’s offered a discounted package of three laser hair removal treatments on LivingSocial, which contacted her back in fall 2010. “We were just coming out of a slump in the recession and needed a bump,” she said.

She did get new customers, but many declined to get another treatment, even when Kirchdoerffer offered to give it to them at the LivingSocial rate. (Laser hair removal typically requires about five treatments.) Customers told her they would simply wait for another deal to post.

In fact, some went to Via Medical Day Spa in Trolley Square, which has also offered a laser hair removal deal. “They bought three from me and three from Susan,” said owner Terri Kerner. The inability to upsell the customer is an issue when you’re dealing with high-priced equipment. “These laser machine payments are like mortgage payments,” Kerner said.

Salons can face other problems. A Via spray tan offer landed a customer who only gave a $3 tip. “Everybody is just bargain shopping,” Kerner said. “They’re not tipping, and they’re not spending more.”

Customers tend to spend more when they’re in a restaurant or retail situation, experts agree. Few voucher buyers dine alone; they take friends who pay full price. A customer who bought $20 worth of wine for $10 at Ryan’s most likely spent an extra $20 on additional wine.

Xavier Teixido, owner of Harry’s Savoy Grill in North Wilmington and co-owner of Harry’s Seafood Grill on the Wilmington Riverfront, is not convinced. “It doesn’t work for our restaurants because the cost of delivering the product is so high,” he said. “This is not pizza. I don’t want people walking in here thinking they will get 50 percent off every time.”

That bargain basement perception also concerns Kirchdoerffer. “It can downgrade the value of the service,” said Kirchdoerffer, who often does the procedures herself. “We do a quality job.” She says she will “cool it” for a while with the deals. She may do one more in 2011.

Meanwhile, customer interest in such offers continues to rise. It’s easy to see why. “It takes the sting out of trying a new product or visiting a new place,” said Walfred of Lewes. “I just got an e-mail today for a salon in Greenville. With a wedding coming up in North Wilmington, that’s a tempting offer. Keep 'em coming Groupon!”