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Tips for Negotiating a Daily Deal Feature for Your Business

April 21, 2012 | Comments: 0 | Views: 199

Understanding Your Value as a Prospect

Your business is valuable. Sure, you might not be a Billion dollar tech-giant or associated with a huge media outlet or haute brand but you're valuable. It's customers like you that keep these daily deal websites relevant. The sales teams at these companies have goals and quotas to sign-up as many businesses as possible. They understand that if they don't sell you first, they know the competition will. Understanding your leverage at the beginning of the negotiation is critical.

Negotiating Your Deal Structure

This is the part where we figure out who gets what, essentially negotiating commission for the sales of the feature. Something you may not know is that each of these companies has individual city GP (Gross Profit) goals that are broken down to the sales rep. To hit these goals they need to make a certain amount of GP per deal. Usually, the minimum GP per deal goal is around $5,000. The sales rep will want to do one of two things to help your feature hit that goal.

1). Sell a ton of units

2). Create a high price point and earn more per deal sold.

The potential to sell a lot of units is there for almost anyone. It all comes down to deal structure. And what that usually means is coming up with a really aggressive discount. Depending on your industry, it may only sell through to its potential if the discount is 60-80%. Then the daily deal site will take their cut, which can be anywhere from 20-50% of the total GP. The negotiation should start with the daily deal website. Let them do the heavy lifting.

When approached by your rep simply ask if he/she already has an approved deal in mind. Chances are good they do, because most daily deal websites have a "deal book" that tracks the best performing deals and catalogues them for sales reps to get ideas from. 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 pop-up in practice by others. They were first to the daily deal space so I guess that makes sense. So, you may want to compare your deal structure with similar deals from a range of platforms to gain a more complete picture into the ideal deal.

Negotiating Your Split

The deal split refers to the amount you'll share with your daily deal vendor. The way it works is the deal site will run the feature and charge consumers' credit cards for the purchase. So, they'll be collecting all of the money and then cutting you a check for your portion of the proceeds. Most of the larger platforms like Groupon or LivingSocial will demand 30-50% of the revenue.

So, although there is no up-front 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. It should also be known that some daily deal websites will ask that the merchant pays the online credit card processing fee that is charged when someone buys a deal voucher. Definitely address that and try to get the fees waived, this is often the easiest win when negotiating with daily deal vendors.

Once you've established yourself in the negotiation and have some momentum, start working on the deal split and aim high. I'd even be so bold as to say you want 80% of the proceeds. Work your way back from there and take your time. The sales rep has a monthly quota to fill, they'll cave eventually! If things start to get bogged down and you want to get your feature out there, contact some other daily deal vendors and get quotes. Pin them against each other the same way they pin merchants to speed deal negotiations up.

Jason Murphy is Co-founder of Gabster Media, a Cleveland website design digital & social media marketing agency.

Source: EzineArticles
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