Daily Deals Are Broken

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The daily deals industry is broken.  You may not be familiar with the phrase “daily deals,” but you probably already know how it works.  You go to a website, sign up with your email address and then they blast daily emails at you with one or more offers of 50% vouchers that you can purchase from the site’s proprietors.  There are literally hundreds of sites that do this today (last we checked, there were about 1900).  By most accounts, it’s projected to be a $4+ billion industry by 2015, and yet it’s fundamentally flawed at its core.  Here’s why it’s bad…
 
…For Businesses
 
Small business owners often see daily deal providers as a way to bring in customers that they hope will be long-term, loyal customers.  But there are big problems with this strategy.
 
1) Too Costly
 
Most daily deal sites charge 50% commissions for selling a business’s discount vouchers.  For example, one of these sites may sell a $100 voucher for $50.  Of that, the daily deal site would take $25, leaving the business owner to provide $100 of goods and services for just $25.
 
2) Poor Cash Flow
 
What’s worse, the daily deal site generally doesn’t pay the business owner that $25 until weeks later – well after the owner has incurred the cost of serving the customer.
 
At Lantern, we created a simple, straight-forward pricing structure – $1 for each redeemed voucher.  It’s gives business owners the unique tools that Lantern provides for 60% to 95% less than a comparable daily deal service.  Even better, customers pay the business 
 
3) No Control
 
Once owners negotiate and sign their contract, they have little control over the marketing or traffic for their deal.  They can be flooded with 1000s of customers all at once or   be misrepresented in the marketing that goes out to potential customers.  They can’t change their deal without another lengthy contract process.
 
With Lantern, owners can change their deals in seconds.  They can pause their deals to stop the flow of new traffic.  They can update their marketing whenever they want.
 
 
…For Consumers
 
1) Paying for Vouchers
 
Ever bought a daily deal voucher only to have it expire?  Or to get to the place and find out it’s not what you expected?  There are tons of reasons why buying a voucher up front doesn’t make sense.  So with Lantern, we don’t make you.  All our vouchers are free and you never pay us a dime.
 
2) Waiting
 
Waiting for enough people to buy alongside you.  Waiting for midnight.  Waiting for an emailed voucher.  Whatever the flavor of waiting, it’s all lame.
 
Lantern lets you get deals instantly.  Enough said.
 
Do we think that daily deals will be a $4 billion industry in 2015?  Maybe.  But it will look a lot less like emailed daily deals and a lot more like Lantern.
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2 comments

  1. Jimbo · August 14, 2012

    How does it work when a business wants to limit the number of customers that claim a Lantern? They issue Vouchers, which are claimed for free, but can’t control the % of people that actually redeem the free voucher vs let them expire. Is the business suppose to build-in a claimed, but not redeemed rate? If the voucher isn’t claimed until time of purchase then you will have unhappy customers that drive to the business with no assurance they won’t be “sold out” when they arrive.

    I seem to be wanting to compare this to the person standing 10 feet in front of the store asking if you would like a coupon for 50% off? You say “sure,” who wouldn’t want 50% off and the person only has a limited stack so you take one. Since you didn’t spend any money buying the coupon, your incentive to redeem within the time period changes drastically. You claim the voucher, but don’t redeem it. In our family business only a small % of free coupons are ever redeemed.

    Also I would ask that you consider offering store owners the ability to set a minimum claimed (think ebay reserve price) as it helps us food business owners plan.

    Attractive site and love the concept of quick, limited coupons, but I think I’m missing something.

    • teamlantern · August 15, 2012

      Hi Jimbo,

      Thanks for your comments. We’re taking steps to make the “reserved” voucher work more like a restaurant reservation. Open Table has a concept that if you, as a consumer, don’t show up for a reservation more than three separate times in a calendar year, they lock out your account. We’re working on something similar with email reminders/notifications and ultimately an account suspension if those don’t work.

      Fortunately, we haven’t had a big problem with that yet, but it is something we’re proactively addressing.

      Thanks again for your comments and interest in Lantern!

      -Team Lantern

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