Don’t easily discount the business deals

Times have undoubtedly changed. A touch-screen 9.3 millimetre telephone sits inside our pockets instead of its water-bottle sized predecessor. The zippy broadband has replaced the screeching dial-up kilobits per second modem in the office. And Google Maps has long eliminated the need for annoying deliberation with a new client’s frosty telephonist.

But yet, when I took an evening stroll amongst the endless rows of traders along the busy Jalan Tunku Abdul Rahman (or as my grandpa unrelentingly reminded me of it being called Batu Road) during the recent Ramadhan period, certain aspects of running a business seemingly remains as before.

Pix: virtualmalaysia.com

Today, while these marketing gimmicks are better known by the online generation as daily deals, group buying and online coupons, the objective and intention of these marketers are clearly the same. They know that as before, now and many more years ahead of us, consumers are and will still be looking for the best deals.

According to BIA/Kelsey, U.S. consumer spending on deal-a-day offers will grow from US$873 million (RM2.6 billion) in 2010 to US$3.9 billion in 2015, representing a 35.1% annual growth rate. Last year, more than 23 million Americans made purchases through daily deals websites.

Over at the other side of the globe in New Zealand, another report showed that more than 95% of SMEs surveyed said daily deal websites “brought more customers through their doors”. Significantly, 80% revealed that these sites brought the most new customers to their businesses when compared with Google search advertising, local newspaper advertising, Yellow Pages, direct mail, radio, TV and public relation activities.

The above numbers plainly explains the more than 3,000 existing daily deal sites around the world that connect SMEs with global consumers. Leading the pack is Groupon with over 29 million unique visitors monthly and LivingSocial who claims to have more than 4 million monthly unique visitors. At home, there is no shortage of similar facilitators as sites such as Groupon Malaysia, StreetDeal, Dealmates, Everyday and MyMetroMall knock on Malaysian SMEs’ doors daily to sign them up.

As there are commonly no risks and upfront costs in working with most service providers – LivingSocial takes 40% of each deal’s profit while Groupon’s cut is 50% – for SMEs choosing to go the way of daily deals, group buying and online coupons, it is undeniably an affordable way to acquire new online savvy market segment as well as towards developing customer loyalty.

However as my gaze returns back to the bubbly traders on Batu Road, a nagging concern emerges of the growing trend of discounts and daily deals. The fact was that as superior as these sellers’ claims sounded, many other competitors located beside or across the road from them too were yelling out “today only” offers, desperate-sounding discounts, and claiming to be the “cheapest in town”. Similar to the virtual world, unless you check out every single trader’s offerings, you many not necessary walk away with the cheapest deal.

By now, windows shoppers walking along the endless rows of stalls are attuned to only listening to those with the loudest discounts and best-sounding deals. Those that have lazier salespersons or are steadfast in maintaining their price positioning would likely not attract the masses into their stores. Here is where I feel SMEs are in danger of shooting themselves in the foot should they become over-reliant on daily deals sites.

Through continuously offering deals-of-the-day and discounts, businesses could be lowering the reference price of their products and turning their customers into those that shop solely on price. After the “best deal” period – usually a week – customers would less likely to pay the regular prices as they prefer instead to wait for the next round of deals or proceed to another supplier that is offering one.

An example is Mastura, who plans her family’s annual holidays on the deals she gets from the popular MATTA travel fair. When she does not spot any “out of the ordinary deal”, her husband and children has to endure Ulu Kelang instead of United Kingdom. Like her, John also dedicates his free time squatting at AirAsia’s website in waiting for the appealing offers it regularly dishes out. He declares that he “will never pay regular flight ticket prices ever again”.

Similarly for many of us, one silk tudung is very much the same as another silk tudung; the quality of the material for our curtain is not of utmost importance when we just need something to prevent curious neighbours from keeping track of the number of times we visit the loo; the prawn crackers would likely make the same crackling sound as its pricier counterparts.

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