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Daily Deals Can Damage Your Brand

wholesale merchandise dealsAlthough the vendor or brand owner can sell significant inventory through the daily deal mechanism, it will ultimately damage their brand in the following ways.  First, it will create a new set of client expectations.  If a widget that was once sold for $100 is now available for $50, then that will be the new price that the customers will expect before they buy next time.  Any attempt to sell it once again at $100 will ultimately fail, as the customer has been primed to expect the product at a lower price.  

 

On top of this, the daily deals site will take a commission from the sale, so if that commission is 50%, then the retail vendor will only be receiving $25 in revenue for a product for which they once received $100.  Furthermore, regular use of daily deals sites can actually increase the costs for vendors, as it requires more manpower to process daily deals sales than regular sales.  This is fine if the sales staff have available clock-cycles, but in many cases it requires additional staff to counter the increase in overhead.

 

Finally, it is undeniable that in many cases, use of daily deals sites can devalue a company’s overall brand, leading to lower sales on other non-associated products. This would be akin to Prada offering a discount on just one model of handbag in their line and then seeing lower sales on the other luxury product lines, because the whole brand was sullied by the discounting.  Once someone knows they can get a Prada bag for a certain price, then that will be an incentive to only buy the cheaper option, leading to lower sales for the brand as a whole and a loss of the brand-loyal customer as they can no longer support the brands image as it heads for the hills.

 

As far as Broadway shows are concerned, though full price tickets are often sold for $125, available discounts will make theatregoers believe they can get a better price, or they will choose to attend a show for which discounts are available over more in-demand fare.  Though Broadway is an industry that has long offered discounts – from the TKTS booth, to direct mail offers, to email blasts – none of these mechanisms have such high visibility along with such high costs, devaluing the brand in the mind of consumers while also taking a major toll on potential revenue to producers. And lets face it, a Broadway show is one time experience, so you will not be getting this customer back.

 

Daily Deals – Conclusion Section Summation:

 

The vendor or brand owner can sell significant inventory through the daily deal mechanism, but will ultimately damage their brand in the following ways:

  • The will create a new client price expectation. If the widget was sold for $50 instead of $100, then this will be the new price that clients will expect before their next purchase. Any attempt to sell it at $100 will ultimately fail, as the customer has been primed to expect the product at the lower price.

 

  • Increased sales costs. It requires more manpower to process daily deals sales, than a regular sale – this is fine if sales staff have available clock-cycles, but additional staff is required in many cases to counter the increase in overhead.

 

  • Devalue the overall brand, leading to lower sales on other non-associated products.This would be akin to Prada offering a discount on only one type of handbag and then seeing lower sales on the other luxury product lines.