Fourteen tips for launching a daily deal program

The basis for the daily deal is a simple idea "you have only so many hours before this offer expires, you only get the deal if enough people buy the same thing on the same day."

And the formula for media companies is equally simple: "schedule great deals" and create a brand. The technology partner typically supports the back-end sales of deal vouchers, typically for around 10% of the 50% of deals that the media partner "keeps" from the sales of vouchers.  The real key to the program is finding and creating great deals, which, with a little work, most advertisers are only too happy to supply, especially since they have already heard of Groupon.

Revenue streams for local media companies are immediate and significant, easily tracking six figures by the end of year one. However, these programs require significant promotional real estate and thought. 

These top fourteen tips were  written in collaboration with Deal Current's CEO Patrick Dilllon, CEO of Deal Current which researched former and existing Groupon clients extensively and has launched dozens of partnerships including very small media companies,in the past year. We've scaled these rules to fit large and small markets.

1. Don't worry about having a deal every single day; worry about having great deals
 A daily deal program can launch with just a single great deal a week (see the case study on DiscoverSD.com's Insider Hook Up, a great launch that started off weekly). The key is to be consistent and have a set day each week. Later you’ll see that your customers will ask you to increase the deal frequency, and with the formula down pat, your program will have only the best deals - and brand - in the market.  On other hand, once you decide to go daily, don’t miss days. You can't go back!

2. Line up clients in advance
Lining up clients in advance poses less strain on the organization. Have some media companies "run out" of clients and missed a day? Yes! It takes some resources to get back on top of the program, and you risk having your daily deal customers ignore your program because it’s inconsistent. If you’re running a traditional daily deal program, 5 days a week, Monday through Friday (Friday's deal goes through the weekend), you should have at least a month lined up before launch. Some media have gone up to three months in advance.

3. Focus on building your email list
As one media company executive noted here, the metrics is: Quality deals times reach equals cash. So focus on building the email list. If you are a small media company, consider giving a cut to other media companies such as radio stations or brands who do significant email marketing in return for use of their email list or other promotional value. If email affiliate partnerships are a possibility for your company, make sure the daily deal software provides a way to identify and split revenues (Deal Current has this ability, which is one reason we like them).

4. Plan to support the program with a dedicated person
The champion of your daily deal program can be doing other things in the beginning, but only one salesperson should schedule and "be in charge of" acquiring fantastic deals. This avoids deal conflict. If the whole team is pitching daily deals, they all focus on low hanging fruit to get quick deals not get the right deals - and to monitor what deals the team is pitching is next to impossible. Since this is an accumulative program - ie customers have to like it, opt-in and come back - the "wrong deals" can cause the program to lose its "fizz" and be less profitable. A full-time sales person trained to schedule fantastic deals solves this problem.

5. Yes you can create excitement and mystique even in a hyper-competitive market.
Some markets like San Diego, Chicago or San Francisco, may have as many as 30 daily deals running at a time. Even smaller media companies in hyper-competitive markets, however, can differentiate themselves by going after niches that match brands they own, such as nightlife or sports. We are used to seeing the Daily Deal as a massively broadcast discount, but it is really just a new form of crowd-sourced advertising that can be expanded into different niches. Think in terms of email lists you own as well as just overall traffic. Here's one case study of uniquely branded launch by a lifestyle site in San Diego.

6. How to compensate the sales force
A typical sales commission for the dedicated person on the media side is base plus 10 to 15% of the deal, which they split with any account executive who shares the deal. So allign the base with your market, but plan to offer a substantial commission that rewards  "killer" deals. Note: The split with the AE is not problematic, since the sales rep only stands to gain by referring out the business.

7. Prioritze advertisers by geo-density
Geographical location - and especially density - is really important. Downtown areas do better than suburban areas. The bell curve starts about a mile away from the city and drops quickly. Look for email groups that match dense areas. Multi-location companies also have a distinct advantage.

8. Prioritize advertisers by quality of business
How do you know what companies are "hot"? Look for businesses that have a lot of pent up demand - ie people want to buy this, but limit themselves because of their budget. A poor business will not get a big response, and this is one reason why you want a specialist, rather than sales people, scheduling the deals. One very minimum criteria is having a web site; typically a web site is searched when customers are researching a deal so it they don't have one the deal won't work. An even better way is to look at the Yelp reviews, a company with a lot of strong Yelp reviews is an ideal candidate - it shows that it already has a buzz in the marketplace.

9. Prioritize advertisers by category
It is important to see that the program is selling a lot, 50 to 100 deals a day in the beginning of the program (weekly deals should aim higher). So it is a good bet to start only by focusing on restaurants and then sprinkle in other businesses such as yoga, spas and massage . After the program has legs, it can be optimized for revenues.

The number one revenue category by mean revenue is city tours, (the most popular item in the brief history of Groupon is a $25 ticket for a Chicago - Groupon's hometown - architectural boat tour that sold for $12. In May Groupon moved 19,822 tickets in eight hours and split the $238,000 with the tour operator).

As a revenue winner, tours are followed by hair removal, spas and facial, golf, massages and yoga. Yippit, daily deal aggregator, is a great source to look at category offerings, and serves as a kind of Neilson ratings for daily deals. This is especially interesting if you are going after a niche or set of niches with your program. Here's a link: http://blog.yipit.com/wp-content/uploads/2010/07/Mean_Revenue_DD.png

10. Train on a new kind of sales approach
Sales people who present the daily deal need to explore - that is get used to asking direct questions about - both the acquisition cost per customer, and the net cost of the product or service. Then they present the advertiser with a break even proposition. The idea is "if its a break even, its your job to keep them coming back." This means that the sales person will become adept in discussing loyalty programs that the advertiser has, or could have in place, that will be the real value of the program, and the average value of an annual new customer. Make sure your vendor provides substantial sales training, and remember the real key is one dedicated person!

11. Consider some flexibility in pricing deals, and tiered commissions
One thing advertisers didn't like in surveys Deal Current conducted of Living Social and Groupon customers before launching their own start-up is the "too much success" phenomenon. "When my deal did really well, it really hurt my business... I'm replacing my old customer s with people who are not paying as much." So the lowest price isn't always the best one. Use prior experience to optimize pricing and stay flexible. This can your company an advantage over Groupon's inflexible 75% off criteria.

When competing with Living Social and Groupon one of the big advantages can also be starating with a smaller cut of the deal (instead of 50% that Groupon takes) or tiering the price to by number of sales, ie your percentage goes down to 40% after 200 sales is a model offered by some programs (see model on the right).  There is evidence thatGroupon is now going to market with a willingness to match the cut of the deal against other daily deal companies in some cases, but having the lower percentage from the beginning is a major advantage.

12. Key areas to check with choosing a company
The daily deal software is not highly technical - hence the 200 companies vying for market share. So the number one most important area to check from a company is the amount of support. These programs are more complicated than print or broadcast sales and need hands on support. Is there live support for your organization during business hours? Support for the advertisers? Questions come up about credit charges, "where's my voucher" and other issues and your partner should have a live person fielding these inquiries. Call the support numbers yourself and see how calls are answered. Also look at the roadmap - will they be able to keep up as Groupon evolves? Do they have plans to add opt-in customer loyalty programs in the future?

Make sure that the "what can I do on my own" on the back-end includes creating and launching a deal and report writing (some company's platforms rely on the software company to push each deal live, adding additional, sometimes costly, delays).

Finally check into the background of the company, most companies are new but many have other similar products under their belt. A full list of questions is here.

13. Avoid 50% off
There's a special place in daily deal hell for 50% off programs due to the number of "half off" programs in most markets. From a perception standpoint, there is 50% off, and then there is the Daily Deal which Groupon has effectively branded as a fantastic deal, ie more than 50%, even if its 51%. A 50% off program is me-too program, "I've seen before". You can run both on your site, since the 50% off deals are not time limited, but don't confuse the two.

14. Take advantage of your promotional power
Top media companies launching the program have moved ad inventory around to accommodate a daily deal in a key position - top right hand on all pages that competes with Groupon's early in and buzz in the marketplace. In this case study in Omaha, Nebraska, Patrick Lazure, President of World Herald Interactive shows how running the deals in print and broadcast as part of the package can generate the same voucher sales on the same deals as Groupon, even with a 40% smaller email list (signonsandiego.com launched an extremely successful daily deal program with similar ad positiona). Lazure's aim is to match or exceed Groupon's deals in Omaha; an opportunity made possible by promotions, so dedicate significant real estate to this end.

Many thanks to Patrick Dillon, president and co-founder of Deal Current for sharing his expertise and thoughtful answers. These fourteen tips were written in collaboration with him. Thanks also to Patrick Lazure, President of World Herald Interactive for sharing his last six weeks spent launching a daily deal program in Omaha that helped inform this list and to Nadav Wilf, CEO of DiscoverSD.com, and Deal Current partner, who similarily shared experiences with his weekly deal start-up, now twice a week and expanding again in the fall.

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