CMO Briefing
So, is it daily deals... or no deals?
The marketers’ verdict on Daily Deals and how to use them to your advantage (or disadvantage).
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hen Foodpanda launched a Daily Deal promotion through Facebook, the company saw an average uptake in sales of around 9% daily. When the company launched the same campaign through its e-newsletter, it saw a brisker uptake of 22% daily. This is just one illustration of why many marketers see Daily Deal promotions as a crucial part of the marketing plan. In an increasingly fast-paced world, where target markets are more mobile than ever, no brand can survive without striking a tough and hard bargain with their customers, who plainly have too many options to be forgiving. Merchants such as Groupon or SG Deals, who are popular for their Daily Deal models, have indeed given traditional advertisers a run for their money. No marketer who knows what they’re doing will be unfamiliar with a Daily Deal. After all, a Daily Deal is just one of the many modern innovations that have made it all the more difficult for marketers to grab, and keep, attention for their brands. But despite all the flak, using Daily Deals as part of a marketing campaign have proven crucial to some brands. However, on the other hand, when used incorrectly, it could equally prove to be problematic to margins, and ultimately the brand’s or the business’s long term health. When should a marketer start promoting through Daily Deals, and when is it time to stop? Are daily deals good kickstarters? Although there is some debate among seasoned marketers as to the optimal life of a Daily Deal promotion, there is definitely a consensus on one thing: Daily Deals are a great addition to 42 SINGAPORE BUSINESS REVIEW | JANUARY 2015
Daily Deals as part of a marketing campaign have proven crucial to some brands.
a marketing campaign’s front line. The aim of most marketing campaigns, first and foremost, is to attract the market’s attention. According to Cassandra Ong, marketing manager at Foodpanda, Daily Deals are a great tool for attracting substantial attention. “From a business point of view, Daily Deals are effective as they engage customers and allow Foodpanda to remain top of mind,” says Ong. The effectiveness of Daily Deals as attention grabbers is due to a simple but broad-based characteristic that is present in any typical customer: risk aversion. No matter your value proposition, the average customer will not be willing to try it without some cushion. After all, who would want to pay the full price for something that has not been tried and tested? In the eyes of the customer, the bargain brought by a Daily Deal provides this needed cushion–so they can find comfort in the fact that they were at least able to save, if it turns out that they don’t prefer the product after all. The effectiveness of a Daily Deal promotion is not black and white. Its effectiveness as a marketing tool varies in accordance with how it is executed. “The effectiveness of the campaign is also determined by how the campaign is being broadcasted,” shares Ong. In the experience of Foodpanda, as an example, broadcasting the deal via Facebook versus an e-newsletter spelled a 13 percentage point difference in take-up sales. Dennis Toh, owner of The Influencer Network Communications, and Feet Haven, shares another ingenious way of maximizing the Daily Deal. Apparently, these deals can be used to manage a company’s yields, especially during periods of low retail uptake. What roles do daily deals play in marketing? Aside from the fact that Daily Deals are effective attention grabbers, there is another consensus among marketing professionals: the returns of a Daily Deal diminish with use. This is why most marketers do not recommend Daily Deals to remain a central part of any marketing campaign. “Merchants who are keen to embark on a Daily Deals system should understand that the engagement is a one-off – tactical rather than strategic,” shares Toh. The resounding opinion of marketers is that Daily Deals should only be done in conjunction with other strategies. “Long-term strategic planning is key to success through a multi-faceted marketing plan,” says Sherrine Tan, marketing manager of Hotel Clover Group. Ultimately, overusing a Daily Deal promotion will have a negative, not neutral, net effect. “The long term ramifications would be an erosion in brand equity,” advises Toh, adding that, “consumers are conditioned to believe that the brand is synonymous with cheap deals.”