Did you hear? Even Groupon is moving away from the daily deal business.
That’s right, they are selling vacuum cleaners, mattresses and other overstock merchandise to their massive mailing list of bargain hunters because their services-based voucher sales have slowed.
Is it really any wonder?
I mean, how long could the craziness last before merchants just stopped wanting to sell their services at a 75% discount? Investors have also taken note of the slowdown and have hit the company’s stock price hard, driving it down by over 80% since it went public.
But the slowdown in daily deals isn’t just being felt by Groupon. Even its leading competitor LivingSocial has suffered this past year.
Amazon, which invested $175 million into LivingSocial in 2010, had to write down almost the entire value indicating that it had paid too much for the original investment. Not a very positive sign from one of the leading ecommerce companies in the world.
In April this year, Travelzoo CEO Chris Loughlin blamed the deal industry for "unsustainable practices" that affected Travelzoo’s ability to compete in the space.
In addition to the pain being felt by the big players, daily deal startups are finding it hard to stay alive too. According to Daily Deal Media and Yipit, over 798 daily deals sites closed down in the last half of 2011 and that number will undoubtedly increase in 2012 as the segment seeks to consolidate.
What seems most telling, for me anyway, was the noticeable lack of daily deal incumbents and startups at the recent PhoCusWright Conference. It seems as if the glamour of flash sales has winked out like some proverbial candle in the wind.
So what does this mean for tourism operators who made up a good proportion of the revenues for these daily deal sites? How on earth will they market to all those deal hungry consumers out there ready to take a sightseeing tour for 50% off?
I have argued in the past that daily deals are a race to the bottom and, despite my better judgement, I have even attempted to help tourism operators to avoid some of the common pitfalls associated with marketing using daily deal sites.
But the news that daily deals are on the decline is a welcome relief.
It means, hopefully, that small businesses are waking up to the idea that being successful requires a well rounded marketing plan, a solid pricing strategy, revenue management, and (most importantly of all) a service that people really like.
Living without daily deals
With all it’s pitfalls and headaches, the daily deal phenomena has reminded us of one thing, that hype based marketing is generally short-term.
Remember that daily deals didn’t really exist five years ago and local businesses thrived and survived without them by focusing on the fundamentals.
The group buying concept when taken at it’s core is not a bad idea. Getting a better deal by getting a group together certainly makes sense for both consumers and for the business.
Most businesses still offer these kinds of group deals and will in the future. Small tourism businesses just need to go back to basics and invest in marketing that will grow their business in a sustainable and profitable way.
The brochure is not dead
Despite many arguments to the contrary, the brochure is not dead, in fact it is as strong as ever. According to PhoCusWright research, 30% of travelers who booked local tours and activities used brochures during their search.
I think the daily deal sites have given brochure companies enough of a scare to have them considering how they can be more creative with their distribution, printing, and value add programs.
Until the world is one giant free wifi hotspot, however, don’t expect brochures to go anywhere. Businesses will need to be more creative with their brochure marketing perhaps by combining brochures with mobile marketing.
Tracking using custom web addresses or promotional codes could also provide better metrics for tracking the effectiveness of brochures as a local marketing tool.
Start Collaborating with other businesses
The daily deal business really seemed to pit everyone against everyone as it forced prices down. I think there is more power in collaborating with other local complementary businesses in order to offer a deeper more engaging experience and provide greater value for customers.
A tour operator might work with local restaurants to offer a lunch option with their tour, or with a vineyard to include a wine tasting session.
Those partner companies return the favour by helping to market the other partner’s tour to guests who visit their establishments. A group of non-competing (or even competing) operators might create a local marketing website that showcases all their tours increasing their search engine presence by providing more relevant content.
A group of operators and hoteliers might even work with their local or regional CVB or DMO to put a local marketing plan in place. Oh, and don't forget the hotel concierge.
In many markets a good relationship with local concierges can be good for business.
Don’t underestimate word of mouth
Part of the power of the daily deal is the network of users that deal companies have been able to harvest over time.
Most small businesses however don’t realize that they are building their own networks of users with each and every customer they acquire.
Simple marketing strategies like asking customers to opt in to a mailing list or offering customers a friends and family discount can go a long way to bringing in new customers.
Travel is tricky though because unlike selling to locals, travelers tend not to buy from the same local supplier more than once. This has been one of my strongest arguments against using daily deals.
But, what travelers lack in terms of providing recurring business, they more than make up in terms of potential referral business. Past customers can serve as a great resource for reviews, testimonials, and referrals if prompted in an appropriate and respectful way.
Focus on value not price
In the end, being a successful local tourism business is just like being any other kind of business. And believe me, I’m not against trying new marketing techniques.
I just think that businesses need to do their homework before jumping into something, especially when money is being collected and held by someone else.
All businesses need to focus on long term marketing strategies, building strong referrals and word of mouth, collaborating, sustainable pricing, and providing a great experience for customers. Get out of the mindset that the best "deal" means the lowest price.
It doesn't.
NB:Cut money image via Shutterstock.
A deal is something that offers great value for the amount paid. Local tourism flourished before daily deals and it will flourish without it.