Is a Daily Deal Right for Your Local Business?

This week, T-Mobile announced the launch of a social buying aggregator.  The More for Me app, which is already available on the Android marketplace, will come pre-loaded on all T-Mobile phones. Facebook launched their own daily Deals service in late April.  And despite Groupon's recent admission that the company is losing money and dire warnings of an impending "social buying bubble," their much-awaited IPO offering is drawing big investor attention.

Daily deals, social buying, coupons 2.0: no matter what you call it, the trend seems to show no signs of slowing down.  But is it right for your business?

Maybe, maybe not.  As with nearly any marketing tool, it depends on your goals and objectives.  Before you jump into a daily deals campaign, ask yourself some questions.

Can you afford it? Most of the time, deals are structured so that you will likely take a loss on all business directly generated by the campaign.  If your cash flow is running lean, you may not be able to afford a "successful" campaign that generates a high number of unprofitable sales.

Is your customer experience ready to generate excellent word-of-mouth? A daily deal campaign is mainly about attracting new customers who either have a higher lifetime value in repeat business or referral business value than the  cost of the campaign. A good daily deal campaign will drive trial among consumers who may not have considered your business before, but if you're not in a position to convert them to repeat customers who refer their friends, then don't bother.

Are you in an industry that has a track record of success with social deals? Typically, the travel industry, hospitality and restaurants do well in social buying.  Certain service industries like spas, salons, and automotive maintenance--businesses who have a frequent repeat and referral business--perform well.  If you're not in one of these industries, you may ask the social deals rep if he or she has any examples of successful campaigns in your vertical.

Social buying and daily deals are red hot right now. Make sure you think through the potential complications, though, or your business could get burned.