How To Price Your Products or Services On a Daily Deal Site

Pricing your products or services is a difficult thing to do.  In fact, it’s one of the factors that puts many companies out of business.  Pricing your product or service for a daily deal offering is even tougher.

I was just reading today about a company that did a daily deal offer with one of the big deal sites and it put them out of business, simply because they got overwhelmed with orders and didn’t put enough focus on the price point and maximum quantity available.  The company got overwhelmed and couldn’t fulfill all the orders, filed for bankruptcy and then was taken over by a competitor who, to her credit, honored any client who had already set up an appointment.

This story just goes to illustrate how your daily deal price point is extremely important to the continued success of your business.  Running a promotion on a deal site can be a huge success for your business, but you need to be sure you properly plan for the deal.

We’ve also heard recently how some of the big guns in the deal space have been inflating the ‘regular price’ of the merchant’s offer in order to show a greater percentage to be saved.  This is not a very honorable, or even legal, way to operate a deal site and in the end will eventually cause more damage to the site and business than revenues generated; in bad press or lost customers…

So how do you as a merchant go about setting your price point to be a great deal, while at the same time driving new customers and increasing your long term revenues?

Well, the first obvious step is doing some due diligence research about the deal site and finding the answers to a few important questions:

Q. What is the estimated redemption rate that buyers typical redeem coupons?  In other words, out of 100 sales, how many customers might I expect to not ever redeem their coupon before the expiration date?

Q. What is the estimated amount of traffic and exposure that I can expect my offer to receive?

Q. What would you say is a average amount of sales that we might be able to plan for and accomplish?

Q. What type of offerings have some of our competitors run on your site?  What were their price points?  How many coupons sold?  Do you have any testimonials from them?

This information is an estimate because conversion rates and traffic depend upon various factors such as the email blast that is used, type of offer, offer copy, how great the offer is, what site is running the deal, and a myriad of other external components that add variables to the equation.

 So, what are some ways in which to set up great offers without going bankrupt?

One way is to partner with another vendor nearby for more of a value-add offer.  For example, a restaurant could partner with the frozen yogurt store next door to offer a great deal on a package. This would allow both merchants to provide smaller percentage discounts in return for the value add of providing a bundled product that appeals to the repeat customer as opposed to someone who has never heard of either merchant because they don’t live anywhere nearby.

Another way would be for you to bundle a couple of your products together in order to provide more value and raise the price point.  *Do not inflate your price points just for a deal promotion.

Most deal sites will come to you and simply suggest taking 50%-90% off of your product or service.  Take into account the cut that the deal site takes, and your margins are dropped down to next to nothing.

Before diving right in, you need to first crunch some numbers and visually map out how this offer will effect your business.  Figure out a maximum number of coupons or vouchers that you are willing to sell.  Figure out your actual costs involved in selling the product or service and go over many “what-if” scenarios.

Selling coupons of your products and services up front can be appealing because you are making money before delivering anything, but beware.  This is not free money and you need to be prepared to fulfill the deal with excellent service, because as you know, if people have a poor experience visiting your business they are much more likely to discuss their experience with their friends, Yelp, and social networks.

The last thing that any business wants is to run an offer on a deal site and end up plastered all over the news because your business is shutting down because you sold 11,000 coupons and have no possible way to deliver the product or service.

Marc D. Horne
Daily Deal Builder