Understand your value as a potential customer
Your business is valuable. Sure, it may not be a billion-dollar tech giant or associated with a big media outlet or big brand, but it’s valuable. It’s customers like you that make these daily deals websites relevant. The sales teams of these companies have goals and quotas to enroll as many businesses as possible. They understand that if they don’t sell to you first, they know the competition will. Understanding your leverage at the start of trading is critical.
Negotiating your deal structure
This is the part where we find out who gets what, essentially negotiating commission on feature sales. Something you may not know is that each of these companies have individual city GP (Gross Profit) targets that are broken down for the sales rep. To reach these goals, you need to make a certain amount of GP per deal. Typically, the minimum GP per deal goal is around $5,000. The sales rep will want to do one of two things to help his role achieve that goal.
1). Sell a ton of units
two). Create a high price point and earn more per deal sold.
The potential to sell many units is there for almost anyone. It all comes down to the structure of the deal. And what that usually means is getting a really aggressive discount. Depending on your industry, you may only sell through your potential if the discount is 60-80%. Then the daily deals site will take your share, which can be between 20-50% of the total GP. Trading should start with the daily deals website. Let them do the heavy lifting.
When your representative approaches you, simply ask if they already have an approved offer in mind. They most likely do, because most daily deal websites have a “deal book” that tracks the best deals and catalogs them so sales reps can get ideas. This will save you some time. However, you should know that some deal sites are better than others when it comes to structuring deals. Groupon, for example, tends to do the best job, and I often see the deal structures they create emerging in practice by others. They were the first in the daily deals space, so I guess that makes sense. Therefore, you may want to compare your offer structure with similar offers from a variety of platforms to get a more complete picture of the ideal offer.
Negotiate your split
Bid split refers to the amount you will share with your daily bid provider. The way it works is that the deal site will run the feature and charge consumers’ credit cards for the purchase. Therefore, they will collect all the money and then give you a check for your share of the winnings. Most of the larger platforms like Groupon or LivingSocial will require 30-50% of revenue.
So while there is no upfront cost involved with a daily deal feature, there are some back-end costs that add up. A 5-10% swing either way could mean thousands of dollars in revenue. Also be aware that some daily deal websites will ask the merchant to pay the online credit card processing fee that is charged when someone purchases a deal coupon. Definitely address that and try to get the fees waived, this is often the easiest win when dealing with daily deal providers.
Once you’ve settled into the negotiation and have some momentum, start working on splitting the deal and aim high. I would even be so bold as to say that you want 80% of the profits. Work your way back from there and take your time. The sales rep has a monthly quota to fill, they will eventually give in! If things start to get bogged down and you want to post your feature, reach out to other daily deal providers and get quotes. Pin them down against each other the same way you pin down merchants to speed up deal negotiations.