Living Social wants 40%!

Proof that these types of companies are living in a dream world. They are crazy to ask for a 50% discount and then take 40% of the remaining. That means no doubt the business runs the deal for a loss.

I'd like to ask them, "LS" if they'd not mind running at a loss.

Upsell, upsell, upsell.

Instore, offer an exclusive upsell to Livingsocial customers only.

Such as "Like our Livingsocial deal, redeem it now and receive a dozen cupcakes for only $9.99"

Hey jrod, this post may be a golden opportunity for some warriors here to learn something, myself included.

Can I ask you a few questions?

One of the key things you said is that the LS rep came to see you, and did a cold walk. How did that make them stand out among other people who may try to contact you by email, phone or letter?

How often are you contacted for services like this, altogether, and what are the rough percentages of those contacts - what % is cold walk, what % is cold call, what % is direct mail to you, what % is email?

Would there have been a number for your business that would have made this a deal you'd have gone for? If you had been offered 70%, would you have taken that? What about if someone came and offered something like you said - setting up and managing your own deal, where you start off building a list (don't have a huge Groupon list), but keep a higher % of the sales?

You said that you made a new contact in this person. So even though the person didn't end up selling you, this was a positive meeting, right?

I'd love to hear your answers to this, and I suspect I'll have something validated by you soon.

How would you have felt if someone cold walked or cold called you using the "jobless dad" method, asking to interview you about your business to be featured on a new local website?

Thanks in advance for this, and thank you for this input that you gave us about Living Social.

LS is a good deal if you know how to upsell off it. I ran it several times with a spa and the best part is the breakage! About 45% of people never redeem and thats money in the bank. We had an upsell funnel all the way and over 50% took it, plus a continuity membership that more than made up for it. We killed it on LS.

1. You should be able to negotiate deal sites down lower than 40%, i know many businesses that do.

2. You can tell them you will set a limit on the number of customers you can handle in any given deal so you don't get overwhelmed and customer svc suffers. Put a cap on your deals. The horror stories are just business owner stupidity at work. Can't blame a deal site for that. Early on I bought a house cleaning deal, called to make appt and they said 6mos...WTF!!! I yelled and they got me in the next week. Now if I buy a deal, I call the business first and see what their schedule is like before pulling the trigger.

3. Structure a deal that doesn't break your bank. Like half off a $20 coffee card, or half off a monthly/annual VIP club membership for continuous discounts, or half off a product that usually is paired with another that a customer will buy. Again, lots of stupidity by business owners not doing a deal that makes sense.

4. Know your lifetime value of a customer and acquisition costs. Make sure you capture customer information so you can market them directly.

5. A certain, sometimes very high % go unredeemed= free money. Same with a gift card program, hint hint. I've seen reports that 21% system wide are unredeemed, a staggering number. Outside the U.S. please note the deal sites may actually keep all unredeemed funds.

6. You can also negotiate how fast you get paid, accelerate the schedule so you get all your money in 30 days, opposed to 60-90 days.

I was considering a Living Socialish kind of kicker to get things going for an offline gig. Not an original idea. A friend of mine who is a massage therapist and someone who has tremendous energy and can just make things happen kicked a field goal with LS. But she warned me about the %ages. In a way it is like a loss leader, they used to call it. You take a loss in return for gaining continuity in business.
But the advice I see in this thread is exactly so. She had 1,000 booking in 24 hours. Could have knocked her over with a feather. But she is resourceful and went from a one girl show that mustered up a team of therapists to service the throng. And, yah, the upsells happened, and the continuity, and the no shows. It made her instant college town nobility.
The kind of deals that are being offered are so razzel that everyone would buy for themselves and a friend. Thing is many of those gifts expired in someone's sock drawer. That's when you get a breather and still bank the money.
Nice graphic New Paradigm illustrating the decision tree for this offering.
Thanks for bringing the topic JRod....
And, of course, it is possible to be your own LS couponer for your business. And you can can do both: theirs and yours. Just make sure you have the superstructure in place for when the avalanche comes through your front door. And when it does come, and it will. Help them figure out a way to stick around a while...

We do understand the value of upsells and gaining email subscribers. Like others have stated here, there is no guarantee on upsells.

Especially when most of the people would be driving across 3-4 counties to claim the deal. A lot of them just want the deal and nothing else.

I know this first hand. My wife and I purchased a deal for a local nursery here in Los Angeles. We live in the San Fernando Valley. We drove to claim our deal. We did sign up for their newsletter, however, we have never been back since.

Also, google some of groupons deals and look up the business on Yelp. A lot of deal seekers are hard to please and they end up leaving a low to negative review for the business.

It's just a risk not worth taking for a bakery IMO.

Jerry

I don't understand why people are still doing LS or Groupon. This is some of the most expensive advertising you can possibly come up with, alot of become wise to that fact but there are still an alarming amount of people that go with this sort of nonsense. But, then again, LS is shutting down offices and Groupon did just remove their CEO.

Marketers and sales people should be ecstatic, deal sites show that businesses will pay you up to 50% of gross sales to deliver a paying customer.

I personally recommend these deals as a way to gain a lot of extra customers for your business, especially if it's new. Provide a good service and they will hopefully come back again and again. I do a lot of deals with Wowcher and I'm more than happy to go down to 60% if it means I can pull a few hundred sales in a weekend.