Welcome to the Novel Entrepreneur by David Moore. This blog was started to give readers a sense of what entrepreneurs of scale, angel investors, and academia look for in business plans, ideas and innovative products. Enjoy!more about David
Many merchants and retailers run some sort of sale, daily deals, or discount programs without understanding which is better for their business. Different types of discount programs have vastly different effects on business goals.
Let’s take a moment to dissect daily deal programs. Consumers purchase or use daily deals simply because of the sense of urgency. Messages such as “This deal good only today” and “only 25 opportunities are left” prompt consumers to act even if they don’t need the service or product today. For some businesses, daily deals make perfect sense if you need to liquidate overstock or generate a rush of sales in a short time. If you do this, just be aware your gross margins will diminish in aggregate. You are essentially paying off your customers to accelerate a purchase they may make later.
For the sake of argument, let’s say the daily deal is for an oil change on my car, or for a discount at a hair salon, valid only for today. Well, my car isn’t due for an oil change, and I don’t need a haircut, so most likely I won’t use those daily deals. Even if the haircut was free, I don’t need one today, or this week. The same goes for restaurants. We just had pizza last night, so I probably won’t use your daily deal. You are essentially hedging that you reach enough people that would use your deal, and you are discounting heavily to prompt a purchase. This strategy can work well for travel and hard goods categories for businesses with overstock, but not necessarily for service -based retail.
Many businesses need steady growth, branding and awareness. Something called Always Available deals can be less aggressive, with lower discounts. The rational behind this is pretty logical. Let’s say I come across your oil change discount. I know that it ’s always available and I can use it when I need it, not when you say I have to. There is a good chance I will use it when the time is right. This means you can offer a lessor discount. Always Available deals also increase consumer loyalty, and help build long-term branding.
Bottom-line? One size does not fit all. Examine your long-term goals, and make the right decision for your small business. Daily deals work for some business, and Always Available for others.
New strategy = new clients
City Rewards grows by tapping in to online coupon trend
David Moore founded City Rewards Network, an online coupon site, a decade ago, well before the advent of such companies as Groupon and Living Social, which entered the market around 2008. By then, City Rewards was in dozens of cities.
But the new national competition hit Moore’s hyper-local company hard. The recession also contributed to a precipitous decrease in revenue.
“I either had to change or find another career,” says Moore, 37.
So he shut down City Rewards for nine months, reopening last year. During that interim, Moore reinvented the company, invested heavily in new software and created a new business model.
As this year draws to a close and I reflect on 2012, I am reminded of what a great year we have had as a company. With new products, new people, new clients, and new partners, 2013 will be a banner year for City Rewards Network. We are honored to be part of the community.
Best wishes and Happy New Year!
David M Moore, MBA | CEO