Chances are that you’ve participated in the Daily Deal craze and have bought a coupon (or three) from Living Social, Amazon Local or Groupon.
Sure, the savings to the customer are fantastic, and the businesses involved gain a good deal of exposure. But Pat Sajak and his associates have been monitoring that avenue of marketing and customer interaction, and think they can heighten the deal seller’s investment.
Sajak, famous for his long run as host of TV’s “Wheel of Fortune,” is known locally as the owner of WNAV Radio, in Annapolis, and as a philanthropist — the names of he and his wife, Lesley Brown Sajak, adorn a building at Anne Arundel Medical Center — and he’s now pitching for Great American Deals.
The business was founded by West Coast business associates of Sajak in an attempt to feature daily deal offers with a hyper-local approach.
In recent months, Sajak has been drumming up interest in Great American Deals as the company markets franchises for $35,000 and hopes to take it in a newer direction.
“It’s not a secret that the daily deal market is flooded,” he said. “I think everyone got in when they saw what Groupon did.”
The idea is to sell what the competition isn’t offering “and we decided that [they] didn’t have any boots on the ground,” Sajak said. “Many retailers felt that many people who [were doing business with] Groupon weren’t geographically close to the businesses, so they couldn’t really build a relationship with them. And that’s much of our idea.”
So, Great American Deals started signing up franchisees, then moving from California to around the country, targeting densely populated regions. “What we’re trying to do is get into markets like Baltimore/Washington, Dallas, Charlotte, Phoenix and Seattle, and sell franchises to people who have sales and marketing backgrounds,” he said, noting that it’s “nice that you’re not buying a major food franchise, where you often have to buy” more than one location.
What attracted Sajak to the concept is that, “No matter what anyone says, the economy is not exactly booming and anything that helps” is a bonus. Plus, the company gives $1 from each deal to a designated charity.
“That’s been very successful in California,” he said, and it’s part of “building a database. It’s all part of the hyper-local thing.”
Michael Silber is the CEO from Los Angeles-based Great American Deals, and delved more deeply into the company’s approach.
“By ‘hyper-local,’ we’re about neighborhood businesses,” said Silber. “For one, we cultivate e-mail only from the local neighborhood, which ensures that the buyer does business” locally.
“The common complaint we get is that the businesses lose money on these coupons. It hurts when people use a business once and it’s really too far from their home to go back when they bought just the one deal,” he said. But if the buyer purchases a coupon from a neighborhood business and has a good experience, “they’ll talk about it much more often. That encourages repeat business.”
As for the popularity, or waning popularity, of the daily deal approach to marketing, Silber said that there is “risk with just about any capital that a business puts out, whether it’s an ad or a daily deal.”
With Great American Deals, the split can vary, “but it’s generally a minimum of 50% off to the consumer, with the revenue split between Great American Deals and the franchise,” with the $1 to the local school or organization.
The company has already made some headway on the West Coast, and also operates a sister site, ConejoDeals.com, in the San Fernando Valley, west of L.A., but had not sold a Baltimore-Washington area franchise as of press time.
Todd Sacks is a Howard County-based businessman who was involved in the launch of a daily deal company, Meet Local Biz, in spring 2010 — right around the time Groupon and Living Social were becoming popular.
“Our concept was that a business would not have to pay any up-front marketing fees. Since e-mails were gold at the time, the concept was the marketing company owned the database and would market that business for free, then get half of whatever was made on the deal,” said Sacks. “The hope was to get [customers] in the door and that they would spend more, as well as to get people to try new places.
“So the businesses had to be prepared to make that customer theirs. Groupon ended up resulting in some businesses closing because they sold too many deals and couldn’t handle the load financially,” he said. “Their concept was weighted toward the deal company, not the business.”
So the Meet Local Biz approach was to invert that sale. “We had more of a local mantra, too. It didn’t work for us, because we came in six months behind the Groupon/Living Social wave, even though we weighted the deals more 25/75, reducing our take. Plus, you’d need an e-mail database of 5 or 6 million in Maryland to have a successful campaign,” said Sachs, who added that the model is “really tired.”
Duane Carey concurs. The president of Ellicott City-based Impact Marketing, wishes Great American Deals the best, but was “surprised to hear” about Sajak’s involvement in the endeavor.
“The Groupon/Living Social model is considered a scourge by many merchants. It’s sort of like dancing with the devil, because it trains consumers to wait for deals,” said Carey. “It also gives the very wrong impression that your local restaurant, for example, can afford to sell a $30 meal for $15. They can’t, because their profit margins are so terribly small.”
While allowing that daily deals “do get butts in seats,” he doesn’t feel that, longer-term, that really works.
“That provides the merchant with the possibility of upselling the customer with other items,” Carey said. “Too often, however, that customer is a mercenary buyer who is looking for the cheapest deal they can find, and they just get water with their meal,” instead of profitable alcohol, dessert, etc.
“I like Sajak and hope [the company] does well with this, but if he has not made any significant changes to the model, I’m not sure it will work,” said Carey. “Merchants are a little weary of this whole approach.”
But Sajak and Silber feel that, whether a merchant sells 10 deals or 1,000, the key is repeat business, though Silber did note that “if there is no repeat business 75% of the time, you have to do a lot of business to make up for it.”
Still, they’re sticking to their updated approach.
“Remember, every time someone buys a daily deal from us, we give a dollar back to the community,” he said. “That’s the way we cultivate business. We want Great American Deals to be a destination on the Net and a resource for the neighborbood.”