Week 7- Deal or No Deal? Using Deal Sites to Boost Your Business

There are a ton of deal sites that exist today that businesses can use to promote and sell their services and products.  From Groupon to Half Off Depot to Living Social, deal sites are everywhere.  While they are great for consumers, how are they for business?

In the fall of 2013 I decided that I wanted to take a division of my educational consulting business to the next level and I wanted to do it spending as little money as possible.  So, I submitted my business to Living Social in hopes to reach students and parents across the country.  After about a month, I heard back from Living Social and they agreed to run a nationwide deal for Beyond A Classroom (my student-based division of Bruner Educational Consulting, LLC).  I was very excited because this was my chance to get my study skills and note taking course out to the masses.  I kept thinking that this was my big break.

My class is typically priced at $399 per student.  In the beginning, Living Social was going to run the deal at $199, but later came back to me and said that the price was too high and that they needed to lower it to $99.  It took me some time to decide if that was a wise decision because it was such a steep discount.  But, on the other hand, I figured that since it wasn't costing me anything to run the deal that it was still a good offer.  I agreed to the price and we kept going with the process.  When it came time to sign the contract, my first red flag went up.  They would run the deal at $99, BUT they would take half of my profits.  HALF!  So, instead of $99, I would really be walking away with $44.50 per purchase.  

Deal sites can be a way to help market and sell your business, but you have to be careful with your pricing.  Once you price yourself down to at-cost pricing, you will begin to lose.  Think about it.  Let's say you own a cupcake business and you charge $20 per dozen and it cost you $5 to make the dozen.  If you run a deal for half off, which is $10 and the deal site gets half of that, you will break even.  In other words, you won't make a profit, but will be spending the same amount of time and energy to produce the same cupcakes priced at $20.  That's where you will lose.  Remember, time is money!

Let's go back to my deal...

My study skills and note taking course was 6 weeks long with each class lasting an hour each.  If I divide the $44.50 out by the 6 weeks or actually 6 hours that I spend teaching the course, then each student will have paid me $7.42 per hour to teach them.  Now, most people would think that it might not be such a bad idea if I had 1,000 students sign up for the course, but I didn't.  There were only 32 people who purchased my class.  Ouch!  And to make matters worse, I didn't have a single repeat customer from the deal!

I am not knocking deal sites, but I am simply giving you food for thought.  

When in doubt, do the math.  If you don't like the figures, don't do the deal!