'Daily deals': friend or foe?
If you're an emotional investor who really believes, despite major losses and some core fundamental issues, your stock pick is a winner, maybe the Groupon IPO is for you. Long story short, Groupon lost $420 million last year. The company faces growing competition from other "daily deal" programs, both big and small. And since the Groupon IPO is a big "deal" right now, I figured why not talk about daily deals.These sites can only survive if they get merchants to sign on. The lure for the merchant is the "numbers." And don't get me wrong - I've heard about some huge home runs that have been hit with these programs, but those home runs come with a ton of strikeouts too.Some merchants reported major losses on the deal. This would be acceptable if a new client or customer with significant long-term value were acquired in the process. But a high percentage of merchants can't get the numbers to work in their favor. There are two problems.The first is the wrong customer. Most of the folks signed up to get these e-mails are really only looking for deals, and I can't blame them. Maybe they really need a massage, and getting one for $20 is all they could afford. But getting a massage on a regular basis is not in the cards. Some just hop from deal to deal and don't plan on becoming a "regular" with any business they check out because of the deals. Maybe their plans to dine out are totally dictated by what "deal" they're going to snag that week. A great way to sample a ton of restaurants on a shoestring budget!The second problem is the silly merchant: The other problem is not Groupon's or Living Social's fault. It's not the fault of the cheapskate deal hunter. It's the fault of the merchant who has no plan in place to turn the "deal customer" into a regular customer. Let's use two kinds of businesses to drive this point home.The massage therapist who had a bunch of deal hunters come in and redeem their $20 massage is now physically tired from rendering the service. She must reach for her last bit of energy and gather everyone's name, physical address and e-mail address. She has to stay in touch and do her own e-mail and direct-mail deals to increase her odds of getting repeat business.The restaurant that served up a bunch of discounted fare must have servers on a mission to recruit those customers in the restaurant's own "exclusive" e-mail or text message deal program. If their food is good and they can get the customer hooked, the restaurant can increase frequency and turn that one-time deal-prowling patron into a long-term customer who comes in once a week or so.Naturally, not all of these deal-hunters are going to stick around. But even if the merchant who runs the daily deal turns just a small percentage of them into long-term clients/customers it can be well worth it.Doing e-mail marketing is nothing new. Any business can do its own to increase frequency and communication. Unfortunately, most still go about it the wrong way. As for Internet deal sites, hyped-up IPOs and daily deal addicts time will tell.Mike Dolpies, an author, speaker and consultant, is co-owner of Cyberspace To Your Place, an Internet and mobile marketing company based in the Lakes Region. He can be reached at CyberspaceToYourPlace.com.