updated 7/26/2012 11:50:49 AM ET 2012-07-26T15:50:49

News of the demise of the daily deal may have been premature.

A new study from Rice University  shows that small businesses that partner with daily-deal providers do better as they gain experience with the marketing tactic. Interestingly, that finding stands in contrast to the same researchers' conclusion last year that cast doubts on their value for business owners.

The new report shows that more than half of businesses new to daily deals make no money from the experience. But a big chunk of businesses (75%) that ran seven or more deal offerings report showing a profit. Overall, daily deals appear sustainable for about a third of businesses, with newer and smaller companies doing even better.

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Daily deals can be good for word-of-mouth and also a low-cost sales tool for both products and services. But before jumping in it’s important to keep the following tips in mind:

  • Find out if daily deals work for businesses like yours. Ask daily-deal providers for references. Contact these merchants, and find out how things worked out and ask what sort of redemption rate (number of deals sold versus number of deals redeemed) they had. Then, ask the daily-deal provider the same question.
  • Negotiate for the best terms. Regardless of which daily-deal provider approaches you, negotiate for the most favorable terms and conditions. A provider that pitches you likely is feeling pressure to secure your deal. So if you're not getting what you want out of the negotiation, remind them that you can just as easily take the deal to one of their competitors.
  • Use deals to attract new customers. Businesses that become disillusioned with daily deals often feel that way because they fail to recognize an important distinction. You should approach any deal as an opportunity generate and cultivate new business leads. Never think of a daily deal as a way to generate positive cash. Train your employees on the nuances of cultivating new customers, because treating deal patrons like existing customers, or expecting deal patrons to act like customers, can lead to disappointing results. 

Copyright © 2013, Inc.


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