If you haven’t heard about the ‘local deal’ phenomena (that’s Living Social, KGB and the daddy of daily deals; Groupon) where have you been?

The aforementioned companies (and a few others) have taken the marketing world by storm, offering local businesses a new way to ‘advertise’ to potential customers in their area.

However, this is not marketing as we know it. There’s no social media agency trying to boost your Facebook presence and build relationships with your followers. There’s no television advertising and there’s no one-on-one communication with your potential customers.

This form of marketing is costly and all too often, ineffective. For an unfortunate few, that cost has been their business.

When you sign a contract with Groupon or friends you agree to offer your product or service at a heavily discounted price. For instance, a restaurant might offer a three course meal for two for £25 instead of £60. Doesn’t sound so bad you might think? They’ll make money off drinks and the happy customers might return, won’t they?

What a lot of people don’t realise is that Groupon (I can’t say for sure regarding its competitors, but I assume the stats are similar) takes 50% of that £25. So said restaurant now has to serve two, three course meals for £12.50.

They would be lucky to crawl back the cost of the produce for this amount; not forgetting the price of their rent, bills and staff.

But as Groupon et al will tell its potential clients (i.e. victims); this is the price you pay for marketing. There is no extra fee for sending details of your offer to their mailing list. You pay Groupon half the cost of everything you make (i.e. lose) in the hope that many of those who visit will return another time and pay full price. And many of them will, won’t they?

Wrong.

Groupon and friends are installing a ‘discounter culture’. When we pay a certain price for something, we are very reluctant to return and pay a significant amount more for the same thing.

And why would we? With three or four restaurant deals available across the ‘daily deals’ board each week, why would anyone return to the same place and pay full price?

Does this form of marketing work for anyone?

If used correctly and by the right sort of company, daily deals can be effective. Large companies who can cope with the losses may do well from this form of marketing, as might companies who don’t use significant stock or produce in order to complete each sale (such as a hairdressers or nail salon).

What alternatives are there?

For businesses who may suffer great losses if they choose to use ‘daily deal’ marketing, there are many other less costly marketing forms that should also serve to be much more effective in the long term.

Social media – is a fantastic way to connect with your customers, provide an additional form of customer service and create long-lasting relationships. If used correctly, social media can ensure your customers return to you time and again, while also recommending you to friends and family.

However, social media can have a negative impact on a company and its reputation if utilised incorrectly. There are a number of professional social media agencies around who can offer advice on how to execute a social media campaign properly, or you can employ a social media agency to carry out the work for you.

SEO – is a slow form of marketing that can, over time, have fantastic results. It uses a variety of methods in order to move your website up the search engine rankings, meaning more of your potential customers will find you. Carrying out an SEO campaign in-house is rarely successful; however, many social media agencies are part of a bigger SEO agency who can execute both forms of marketing in unison.

PPC – an instant marketing form that can if used correctly, be very profitable. This again, should be carried out by a professional pay per click agency. If you already work with an online marketing company or social media agency, talk to them; they will probably offer this service too.

Offer your own deal – you don’t have to rely on daily deal sites in order to market a deal. Once your social media campaign has got going, contact all your fans and followers about your deal, and ask them to repost it on their Facebook walls or Twitter feeds. This might not have the same reach as a deal ran by Groupon or the like, but at least every penny of profit is your own!

This article was written by Amy Fowler on behalf of Boom Online Marketing; a specialist social media and SEO agency.