By Earl George, Freefu
What will 2011 bring us in terms of new business to consumer innovation?
In 2010 we witnessed the metamorphosis of Groupon, going from a small deal site platform to becoming the one of the fastest growing companies ever. Along the way, we learned a lot about how the deal site system works and why businesses are signing up – one word – FREE.
And free it is (sort of), a business selected to offer a deal doesn’t spend a dime to promote and/or advertise the offer, however at the end of the day after all the deals have been purchased that free advertising option may have caused the business to lose money.
Everyone likes a feel good story, and deal sites have absolutely given us that. From the great deals that consumers can get to businesses being able to reach new customers it’s almost too good to be true. In some circumstances, it probably is, and I’m sure many businesses would like to take back their daily deal offer.
In all honesty the problem is not really with the deal sites, but rather with how most are portrayed as being this great business tool and how the reporting by most major news organizations fail to explain the entire story about how deal sites operate, and how businesses that offered these great deals are left with the carnage that follows.
As any small business owner knows, if you are offering something at 50, 55, 60% off or more and then you also give away half of your sales revenue on that offer, the cost just to turn the power on for the day, could exceed the amount of revenue that is received from the deal.
A short explanation is this: Normal price of item A – $10.00 Daily deal price of item A – $5.00 Total sales of item A on the sale date – 100 Total revenue generated – $500.00 (100 x $5.00) Amount to small business – $250.00 Amount to deal site owner – $250.00 What is the cost to have 100 people bring in that offer-???
Unless the cost in product and/or service of each offer is less than $2.50, the business will lose money on each and every deal redeemed, and the only hope is that this strategy brings in new clients, that become long-term clients, otherwise the daily deal was not a good business decision.
The great thing about the proliferation of deal sites is that it raises awareness that other unique opportunities exist to help bring in customers, other than the traditional media formats such as print, radio and TV. And as usual, someone will always add a new twist to solve earlier challenges and in the process possibly even create a far superior product.
The actual Groupon killer may not be Facebook or Google, but rather a unique idea created by Naples, FL based IDEC Interactive Inc. which launched it’s own version of a deal site, called www.freefu.com. The unique twist with freefu is that it is completely free for any business, organization or individual to advertise as long as they are offering something for free.
What freefu means by free is that something in the categories of food & drink, entertainment, services or stuff must be given away for free, be it a 2-for-1, buy one get one free, free with purchase, or even $10.00 off total bill, if it’s a free offer, it is completely free to advertise it. For a consumer, a 2-for-1 offer on freefu.com is very similar to a 50% off offer on a deal site, except the business offering the 2-for-1 does not share the profits with freefu.com.
The IDEC Interactive story began in December 2009, well before the world knew about some company [Groupon] that refused a $6 Billion offer from Google. The concept was simple, “Find the Free for Free and Advertise the Free for Free”, become the purveyor of free, make it simple and everyone from 8 to 80 years old will use the tool to find offers and every business will find some product or service to offer for free. Simple! Right? Wrong! Free is a tricky word! Consumers seem to understand free, however businesses for some reason can’t seem to grasp the concept that they can advertise for free (unless it’s on a deal site where they have to give up half of the sales revenue).
Freefu.com was designed to be easy to use and completely free for both consumers and businesses with a lot of advanced features and functionality. Another attribute that makes freefu.com unique is that offers can be added or removed instantly, so a business can make decisions based on current real-time dynamics to help drive profits with no strings attached or commitments required. Will Groupon and the other deal sites be killed by the likes of Google or Facebook? I’m not so certain! Sometimes, just sometimes an idea comes along that is so simple, that it kills off the much more advanced opponent and in this battle my money is on freefu.com.
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