A love/hate LTR with Daily Deals


March, 2011

“Dear Diary!

OMG!!! I totally have a super awesome idea about how to get A LOT of exposure for my business!

I can’t talk right now, because the idea is SUPER SECRET! Someone might STEAL it from me.!!

Ciao

Rachael K.

November 2011

“Dear Diary,

Sorry i haven’t written much.  I tried that idea I told you about last time… it was horrible…I haven’t slept in 6 months and I’m $15,000 in debt…. I don’t know what I was thinking…I’m such an idiot…”

signed,

So tired I can’t remember my name…

January 2012

“Dear Diary,

Well, I did it again. I called, just to make some money, you know, a little bump until the busy season starts…it will be ok… I learned my lesson from last time….

March 2013

“Dear diary,

I am such a hustler, I am the smartest Chef ever. Now who’s calling who? Hm??? Beat them at their own game…”

March 2014,

“Dear Diary,

So sick of the games… if I’m a real business I don’t need them to get new customers.  Never. Again.

Love,

Chef Rachael K.

If the above confessions sound familiar, you may have had an experience as a Merchant with a daily deal company.

Almost a flash in the pan these days, this marketing technique is managing to stay alive by offering deals all over the world.

When one of these companies started offering local deals I was primed and ready to jump on the bandwagon. I rode that horse for 4 years with different deal ideas and price points. Overall I made it work for my business, but I can see how quickly a small mistake could engulf my budding business in flames of regret.  Read on for more details

My business has used 2 major Daily Deal companies many times in the past 5 years to reach new customers and market new products and services.  I would like to share some advice when considering running one of these promotions. I learned the hard way how to MAKE money (yes you can MAKE money with these deals, you can also lose a LOT of money and/or your sanity.)

First a little back-story.

I started my Personal Chef Service in September of 2010.  That was the month I also discovered that I was pregnant with my second son.  I had enough business to pay the bills but I had to wind down to get ready for Maternity leave.  I thought it would be great idea to promote my Grand (re) Opening and return to the workforce with some Daily Deal Promotions.  I contacted 2 different daily deal companies and ran 2 different deals.  The following is a breakdown of what I learned.

Designing your deal: These ads are deeply discounted. First they make you take 50% off of the item you propose to sell, then they take 50% of the sales.  You are left with 25% of your original price to work with.  Design your deal appropriately.  One way to do this is take your cost and multiply by 4.  So if it costs me $ 5 a meal and the deal is 5 meals then my cost is $25. So I tell the ad people that my price is $100, that way I end up making my cost.  Always include your labor, you don’t work for free!

Deal #1: Sample Pack of Dinners or Lunches and Dinners, Delivered. $35 or $70

Low price point + high sales # = Baptism by Fire

Goals: It is VERY important that you go into this with the correct goals if you want to succeed.  If your goal is to make lots of money, you will not succeed.  If your goal is to infiltrate your area and get your name out there, you will succeed.  Another outcome of running such a deal is that you will end up with an excellent web presence.  My Search Engine Optimization skyrocketed due to every single person clicking on my link to view my special.They then had to click back to my website to order their food.  Due to that high traffic I became one of the first results when searching for “Personal Chef Reno” on Google.

Along with this awesome SEO comes a trade-off.  Now you have to be ON TOP of
your web presence. Get that facebook sparkling clean, get on Yelp and claim your business.  If you want a crash course on maintaining your internet image than run a deal like this.

Another outcome is that you will be able to test out a new idea.  I learned that I did not like doing individual dinners, but in the beginning I thought it was a great idea.

Finally I would say that the #1 goal for running a deal like this is training.  You will need a staff and they will become a well oiled machine.  If your customer service skills are lacking you will be schooled.  By the end of your promotion you will be a Master at Customer Service, or you will be out of business.

Pros: This deal is a LOW price point, so many people will buy it. That means many people will be calling you and emailing you.  You will have the opportunity to “touch” your customers multiple times for 1 transaction.  Use this to your benefit by up-selling the customers.  My up-sell pitch went something like this.  “Oh well this deal is for a sample pack, if you are trying to feed your family why not use the voucher towards my family meal plan.” I effectively up-sold people because  I sold them what they really wanted.

Another “pro” is the ability to set a maximum amount for sale, and set an expiration date.  It
may seem like a good idea to sell as many as possible. It is NOT! I thought that maybe I would sell 100.  I sold 100 by 9 am the morning of the promo.  Living Social called and asked to run it for another day.  I ended up selling 300! REALITY CHECK! I should have maxed it out at 150.  Trust me the money you think you are making by selling as many as possible will be lost if you can not deliver a quality product because you are overwhelmed.  On the plus side, if you have an expiration date that assures you that this promo will end some day! That day will be a joyous occasion! The coupon is good for its face value after it expires which means that your customers will have a gift certificate for your service.  This is the best opportunity to up-sell.  It is a nice little bump of business.

Cons: There are many cons to running a low price point deal. You will not make any money.  Even if you keep food cost low and you have a good deal on rent at the commercial kitchen, you will still bleed money.  There will be unexpected costs, like extra help.  I ended up hiring a Courier Service and an Answering Service.  You will have customers who just don’t get it at all. The don’t understand what they are buying or how to order.  They hate your food.  They will try to get free stuff from you.  People that buy a low price point item are looking for a deal and some of them will try to rip you off.  My customer satisfaction rating from this deal was 40% Will this affect your moral? It will if you don’t put enough layers between you and your customer.  An example of layering is having many levels of interaction with professionals.  Your customers will expect you to be supremely professional from the minute they first contact you until after they are done eating your food.  Are you an Ace at customer service with all your pots on the fire, trying to be Chef to 3 employees? I sure am NOT! That is why I put a layer between my phone and I.  I hired an answering service to answer my calls and got a new phone number, which I blocked. Customers will call you at 3 am because they think they can leave a message. I had 30 calls a day on average and each call takes 5 minutes.  They all ask the same questions and you will tire of repeating yourself over and over.

Another drawback is the actual salespeople for the ad company.  Go into this with a clear idea of what your deal is and don’t budge.  I wanted this to showcase my family meals but instead it became individual meals.  Be VERY careful about how they word your ad.  They slipped in that each meal was for 2 people! That was a very bad thing for my business and a very messy mistake that I made.  I should have read the ad closer before I approved.  Don’t let them slip in things on you.  They won’t make money if you pull your ad, so if they start that song and dance just play hardball and pull the ad.  Your business doesn’t need the wrong  image.

Lessons:  I learned so much by doing this that I feel like I just got my MBA.

Lesson 1, hire professionals.  I hired a “friend” to deliver my food and he threw it at peoples’ houses like a newspaper! That cost me $1000, easy!  I hired professional couriers for the same amount of money and have had nothing but shining comments.  This is an example of effective layering.

Another lesson is that you need to have thick skin and stand up for yourself.  If people are mad at something that is not your fault, ie: they don’t like your food, offer a refund.  Don’t give them more free food, that will cost you more money in the long run.

My Major lesson with this kind of deal is that the sales demographic is wrong.  90% of the
people that buy this low priced deal will not return to your service.  Plain and simple.

Deal #2: In home cooking class for 4, $150. ( I make $75 a class)

High price point, Low sales

Goals:  This promo is a much better example of what you should do.  My goals were to meet new clients and show them my skills while educating them.  Sound better? It definitely is.  My customer satisfaction rate was 100%.  My customer retention rate is 50%.  These are good numbers. If your goal is to make a little extra money and fill in the slow periods I HIGHLY suggest a deal like this.  I only sold 16, but I have people calling me to buy classes for full price now.  The deal I ran 4 years ago still has return on investment because those first deal buyers are still my customers!

Pros:  This is easy money.  Basically just design a few classes and make master recipes for each.  Keep your food costs low by offering low cost, high skills intensive classes.  An example of this is Pasta Making, or Candy Making.  I also offered 2 entertaining classes that act more like mini-dinner parties. Wine pairing is another great class theme, as you will have the opportunity to sell wine to your clients. Everyone wants more wine! Just make sure you have the appropriate license to sell alcohol. I had the opportunity to up-sell with deals on return students or more guests.  People love the chance to see you work. They will listen to your sales pitch because they are genuinely interested in what you offer.  Always bring business cards and look professional.  Always bring your cooking kit because you never know what client’s kitchens will be like.

Cons: The cons with this deal are way less severe.  You will have to work nights and weekends.  There is always some last minute ingredient that you have to make a trip to the store for.  People will cancel at the last minute.  Have a 72 hour cancellation policy.

Lessons:  My biggest lesson is to make master copies of lists and recipes so that you don’t forget
anything.  I have had to drive all the way back home for a pot or an ingredient.  Price your classes high. If you charge $50 and hour and each class is 6 hours total (prep, shopping, teaching, driving) then that is $300. If you keep the same lesson plan then the prep time will drop and you will actually make a profit!

I hope that this information can help some of my fellow Entrepreneurs.  My biggest words of advice are practice Quality over Quantity and “Don’t sweat the small stuff.”  Keep Cookin’!

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