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Are daily deal style vouchers hurting business?

David Capaldi, managing director of Opinurate, a mobile-optimised customer experience management software firm, warns that businesses need to be careful with how they use daily deal sites in order to avoid damaging their customers' experience of them, their brand and, ultimately, their bottom line.

It's not just the Scots that are known for getting a bargain; almost a third of all Brits now use daily deal sites in order to save money. However, is this drive for a bargain really hurting businesses by losing them customers?

Businesses want more from these sites than just taking a slice of their income for delivering 'any old' footfall - they understand that it is about more than just one time, 'bums on seats' customers. It is this lack of conversion that has resulted in a shift from using voucher sites as part of a launch acquisition strategy, to using them to help build lasting relationships with customers.

It seems that the deal makers are listening to this feedback too and are now channelling their efforts, and deals, into reflecting this. Itison daily deal decided to 'slim down' the public relations agency from which it came and instead capitalise on the higher growth opportunities that the Itison brand offered by developing vouchers that added value to the current product or service. The site is said to be attracting over 500 new users each day in the UK; although this has slowed from a previous launch high of 1,000 a day.

Yet, not everyone in the daily deals market is doing as well. Earlier this year Groupon posted its first major loss, causing shares in the market's biggest deal site to tumble by as much as 28 per cent. However, they aren't the only site to lose money - LivingSocial, third in the UK market, is hoping to, finally, post its first ever profitable financial year in 2014.

What makes Groupon's loss so remarkable is that they fired their co-founder and CEO Andrew Mason. On leaving, Mr Mason reflected that his biggest regret was letting "a lack of data override [his] intuition on what's best for our customers." He is not the first to realise that listening to customers is a sensible way to guide business activities.

As businesses become savvier to the use of vouchers to attract and retain customers, more are beginning to listen to what customers want. Every voucher site provides feedback on how popular an offer is, but, unless the business begins to turn its attention to the customer experience of their organisation, they are unlikely to reap the potential rewards.

Ignoring customer feedback in this age of connectivity is simply business suicide - no matter how big or small that business is. By understanding what customers expect from the business, organisations will be better placed to deliver at every interaction, helping to create excellent customer experiences. This is exactly what we are increasingly being asked to help them do - and not just in the industries that you would typically expect like retail and hospitality - but, also, in professional services and travel.

Our experience, and clients, tell us that as a result of focusing on customers, businesses will experience increased customer satisfaction, enhanced brand image and loyalty, customer recommendations and, ultimately, increased overall profitability.

When these deal sites first appeared every type of business believed that they would deliver new customers through their doors; and indeed many did. However, this 'rush' turned out to be quite damaging for some businesses, as many struggled to keep their customers happy and ensure their return business.

Research, both here and in North America, has shown that customers felt that many businesses (for which they purchased vouchers) had failed to deliver on the product or service that they were offering. Often this has been because the organisation has been a victim of the vouchers success - either they have been overwhelmed by the sheer numbers of responses (because they have failed to set realistic limits), or they have had to employ temporary staff to deal with the volume of customers and this staff is not fully engaged with the company and its brand ethos, so do not convey it in the best light.

It seems that some businesses couldn't even cope with demand and had to turn away voucher customers, meaning that they would never return and would spread a negative message about their experience to family, friends and peers. For those not turned away, the general sentiment from customers was that businesses treated those who used vouchers as 'second class citizens'. Some users have also reported that the business has resorted to offering a limited, alternative or smaller version for those using vouchers compared to 'full price' customers. None of this activity provides a good customer experience.

Worse still was the shocking statistic that almost 30 per cent of those who use vouchers feel that a company's reputation is damaged by over-promotion through these same deal sites. So not only does an organisation run the risk of failing to deliver their usual high quality product or service to those using vouchers, subsequently generating negative word of mouth about the organisation; they already seem 'weak' because of using the voucher system in the first place; a no-win situation all around.

It is customer experience that is driving loyalty and these sites offer potential customers an opportunity to try something new. Indeed, research indicates that is the case for more than 60 per cent of users. Get that visit wrong however, and not only have you lost that customer, but, they are likely to tell all their friends and family about their negative experience resulting in even more lost custom."

It is with interest that we continue to watch the voucher market and the changing nature of it. I suspect that as organisations become more customer-centric in their approach, they are likely to become less of an important customer tool - unless, of course, the customer demands it!

Customer service management is one the biggest global growth industries; although still in its infancy within the UK, it is estimated to grow to in excess of £3.5 billion by 2017 not only here, but in the majority of other worldwide economies. Utilising cloud-based software technology Opinurate has opened up the market to be able to work with every size of business, from one outlet, to multi-venue global brands, and across every sector.

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