Social discounting sites like GroupOn, Living Social, Facebook deals, etc. are all the rage. Consumers love a great deal and businesses get more traffic. Win win, right? Maybe. Have you thought about how more traffic might affect your current customers? What about the costs of the extra traffic? And what message are you sending to your customers about the value of your products? Before you decide to use one of these sites to drive short term traffic to your business, you should consider some of the long term effects…
Degrading Value
Remember when the car companies used to offer 0% financing on a new car? Consumers got used to that offer and would refuse to buy from companies that didn’t offer something similar. When the car companies tried to raise their rates, their sale went down. Consumers expected the same value at the lower price. The same may be true if you use a discount or coupon to get people in the door. If the deal is too good, they may expect it all the time because they expect full value for the lower price.
Reduced Service
Getting too many people in the door may seem like a problem every business wants to have, but you also have to consider the level of service you’re able to provide with that many people. If you pride yourself on customer service, if your current customers come to you because of that level of service, how will future sales be impacted if you provide less than your best because there are too many people?
Effects on Loyal Customers
There is a yoga studio nearby that has a great reputation for being a good place to go to study yoga. They recently did a social discount and have been flooded with new customers. The new customers are happy about the discount, but unhappy that the place is crowded — doesn’t seem like a good place to relax. Meanwhile, their current customers are also annoyed by the large crowds, it’s not a good place for them right now either. Yes, the discount may have brought in a lot of new people. But what’s the overall effect for the long term? Did you lose a lot of loyal customers? Did you gain more new ones than you lost? Did any of the new customers become long term customers?
Consider the Full Impact
As with any marketing endeavor, take a look at both the short term and long term gains and losses before you decide whether a new tactic is a good idea. Also take a look at how that tactic works with your long term strategies. Just because there’s a lot of press doesn’t mean it’s right for your business. If you are considering a new tactic, it may also be helpful to talk to other businesses who have used it to get insights into what worked and what didn’t.
What do you think?
(photo by Picture Perfect Pose, on Flickr )