Electronic Retailer - October 2011 - 38

new offers per year, this means you must bring in other products to market to your buyers. This also means that managing inventory becomes paramount. Increasing SKUs is not to be taken lightly. Drop shipping from suppliers is a possibility, but that presents its own logistical challenges. If you try to offer coupons to local restaurants a la Groupon or Living Social, this solves inventory issues but requires a huge staff to sign up local vendors all over the country. This is not a practical solution. The barrier to enter this space is very low, but the logistics of having a lot of boots on the ground to sign up vendors is overwhelming. Email deployment is not a simple issue. We have one full-time person whose sole responsibility is interacting with ISPs and dealing with getting email unblocked. Gmail, Yahoo, Hotmail and AOL users generally use “report as spam” links to unsubscribe. This requires feedback loops and dealing with getting email unblocked. Outsourcing email deployment to ESPs (email service providers) remains an expensive alternative.

Creating a daily deal to send to your buyers is one way to add significant dollars to your bottom line and extend your brand.
potential partner will not want their customers to receive two of the same daily deals, they will purge matches. The bigger the partner, the more of your names will dupe out. You must find a partner that is large enough to have credibility, but one that is not too large to dupe most of your file. Remember, your email database is owned by you, and you need to maximize it. deals; otherwise, response rates simply will not be there. As with any new industry, there are many possibilities to explore from a bevy of suppliers. Choosing the right partner is critical for success.

What Can You Expect To Your Bottom Line?
Now that we have explored some of the options on how to get a piece of the daily deal pie, what can you expect? This is a lot like asking how much profit one can expect from a TV direct response campaign. Presently, our white label solution pays out a percentage of the gross shipped sales. We chose a percentage of the gross to avoid complex “net percentage” deals. The industry standard percentage is 50 percent of the net proceeds. It is essential to understand all the line items that go into the net calculations, but in the end, you really want to know what you can expect to get per name in your database. This information is jealously guarded by the industry. Our own white label deals generate on average $1.27 per name per year for our partners. This is bottom line money added to partners. That is over a combined average of 21 partners. The range is between a low of $.25 per name per year and $2.50 per name per year. The determining factors are how quickly names are remarketed with a daily deal email, the price of the original product sold, the product category and the reputation of the brand. These numbers prove that the daily deal space is not going to go away anytime soon. It is time you figured a way to get your piece of the pie. Jaffer Ali is a direct marketing veteran who is the CEO of PulseTV.com. He can be reached at j.ali@PulseTV.com or call him at (708) 478-4500, ext. 105.

Partner with a White Label Provider
There are several white-label daily deal providers. (One of our companies, PulseTV.com does this for several direct response marketers. Some other providers include Analog Analytics, Chomp On and DealWerk.) Because these providers often deploy in the name of the partner, they are not publicly known. The benefit of choosing a white-label provider is that it is your brand that is extended in the marketplace; however, you do not need a staff to manage inventory. It is a turnkey solution in which you receive a share of the revenues, yet one that you can implement with little to no effort, which is increasingly important as we are all so busy with plates spinning. When choosing a white label daily deal provider, it is critical that the tracking of sales is done by an independent third party. You never want the fox to guard the hen house so-to-speak. Also, it is critical that you choose a partner that has the right product mix that will appeal to your audience. TV marketing relies on impulse buying. The daily deal industry shares many of the same impulses of TV direct response marketing. As mentioned earlier, the daily deal space is competitive and this means that whoever your partner is must offer real

Partner with a Daily Deal Coupon Site
Each of the daily deal couponing sites offers partnerships. Here, securing the vendors for the daily deal is outsourced to Groupon, Living Social or some other site. Many local radio, newspaper and television stations have chosen this option. They leverage their subscribers/ audiences and give those to the partner to monetize and share revenues. This has pros and cons as well. The benefit is that one can start earning revenues immediately by supplying a partner with your database. The daily deal space is crowded, and this has put tremendous pressure on their margins. Sharing revenues on an increasingly marginalized pie is not an ideal business plan. But the No. 1 problem is timing. Groupon already has 83 million subscribers, and Living Social has just fewer than 30 million. These will be merged against your data file. Since any 38

electronicRETAILER | October 2011

Electronic Retailer - October 2011

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