Does offering a discount on a daily deal website really damage your brand?
Are killer deals killing the economy and corrupting cultural values? Or simply the world turning smarter and more modern?
Daily Deals: Breaking Brands, But Doting Customers
As if Americans haven’t made their lives comfortable enough, the daily deals industry and the promoting of websites such as Groupon or LivingSocial are means that are currently increasing convenience, pace, and filling people with this giddy thrill that comes with cheap purchases. Much like how people do not realize how dependent they are on technology and its double-edged sword, people are not realizing the dramatic effect that these daily deals have been having on businesses, brands, and more specifically, Broadway shows.
Converting Full-Priced Buyers and Impact on Consumers
There is such a poor percentage of consumers returning back to the original vendors that these vendors are only achieving tactical sales, failing to convert anybody into a regular client or an avid fan. On a recent NPR article, Yuki Noguchi states that a company had only one-fifth of the daily deal clients returning again and paying full price, out of the four thousand coupons that they sold. Similarly, websites that sell clothing lines with famous brands, for much cheaper, captivates customers who used to shop at retail stores and customers end up solely supporting these types of sites such as Dailylook or Hautelook, erasing all financial consistency and stability in regular retail stores.
A Change in the Class Hierarchy at Broadway
Few would argue that over the years Broadway theatre has experienced a demographic shift. What was once considered the standard for entertainment in the early days of theatre, Broadway in the later half of the century became a platinum-level experience for the economic “haves” instead of the “have nots”. Now, with the recent advent of daily deal sites, this aggressive discounting has once again made Broadway relatively more attainable for the masses.
If a person who has been loyal to an expensive, high-end brand, that suddenly becomes attainable to the masses who can now buy their products for cheap, that person might not come back to the same brand and be as initially as loyal as a customer as they were in the first place because the brand has been degraded.
For example’s sake, if Valentino succumbed to giving out daily deals, their image of being a luxury brand and their desire to appeal towards the wealthy, upscale, and the more fashionable part of society, would be corrupted; the brand would be plagued by the wrong target audience and Valentino would not be on that high pedestal upheld “Valentino” anymore.
Specifically skewing this concept towards Broadway shows, this same idea applies to Broadway shows, where people might not come out to watch them or buy tickets. Especially since shows are one-time, single experiences where not many people would pay again to go back and watch twice.
Financial Cost to the Vendors Offering Daily Deals
The financial cost to a vendor is all relative depending on how much they take in in revenue and how much they spend in expenses. Vendors will choose to run deals with daily deal websites with the misconception that they will benefit their company significantly, however this is most likely not the case. In a New York Times article by Jay Goltz, he explains that “the members who buy the coupon get 50 to 70 percent off on a product or service, and Groupon splits the proceeds with the retailer – usually leaving the retailer with about 20 to 25 cents on the dollar of retail value.” Some do not even end up redeeming their coupons. And even though daily deals brings in new customers, the important questions are: was the cost worth getting them or will they be regulars because they have become marred by the lower prices and will never be willing to pay for a regular priced item.
And although this scenario does not apply to all vendors, most vendors have to seriously calculate what they are losing because of them running these daily deals. Not only are they potentially doing a lot of harm to their branding, but they are losing out on sales profit.
Likewise, Broadway shows that end up running such deals are hindering and damaging their brand because customers will not be willing to pay for an original, regular priced ticket. But unlike Lion King, that does not run on any daily deals, let alone market discounts in general, they are still able to maintain a consistent, high ticket sales rate. This truly begs the thought as to whether or not daily deals are having a negative effect on companies and sales.
Mass Appeal Brands Desperate To Sell Tickets but Not Profiting
With shows such as RCCS, Spiderman, Phantom of the Opera, Chicago, Cinderella, and Stomp, there are many seats to be filled, but not enough people who are willing to buy tickets. Since these are famous shows, many people have already heard about them from reading reviews, word of mouth, or by having seen them; this causes a drop in ticket sales. So, in efforts to sell more tickets, and even though this is not profitable in the long run, these shows indulge in these quick-fix websites of Groupon and LivingSocial. For example, RCCS is held at such a large venue that, in order to sell the most amount of tickets to fill the seats, they would have to use daily deal websites to make tickets more affordable for a broader audience.
Daily Deals Effect on the Quality of Broadway Shows
Daily deals are especially an abomination for Broadway actors and actresses because comparative to what they perform or how many shows that they do in a single week, they barely earn enough for a living. With these cheaper deals, that most likely signifies the near ending of the life expectancy of a show, these people have to struggle to survive financially. According to a Chicago Tribune article actors in well-off shows, such as Wicked, Jersey Boys, The Lion King, or The Book of Mormon, get paid minimum salaries of $1,754 per week, but with shows that do not do as well, actors receive a far lower minimum salary.
Not only are these deals hitting hard on personal lives, but they could also change the product and the quality of the show negatively. If the producers or directors figure that these discounted priced shows are bringing in people who are paying way less than the original ticketed price, this might not only fail to motivate them to get the best of everything, but the amount of money that they have to get the best of the best (the props, the set, the cast) might not be there anymore. This brings in some serious considerations towards show closures, the dangers of bankruptcy, and if they are making enough in profit.
This is similar to what happened with the show Big Fish and the reason as to why the producers have decided to close the show after only being open for three months. By placing a $142 value ticket on LivingSocial for $85 they were trying to increase their percent capacity, but not making enough in their gross sales, eventually leading to a loss in profit and not having the means to stay open.
Weighing the Pros and Cons; Short-term versus Long-term
For short-term sales for Broadway Shows and New York Attractions, daily deal websites are very positive because this strategy is suited towards marketing staff that do not expect to be with a show for very long because daily deals are also short-term and are a tactical decision. Tickets are sold at a rapid pace and the seats are filled, but the downside to this is that consumers are spoiled and the probability that they will come back is little to none. For the impact on long-term sales and pricing, they damage the brand monetarily because of inexpensive, one-time deals that bring in disloyal customers. And since these deals garner many audiences of all kind, it becomes harder to cultivate a specific image or a slogan that a brand might have. These websites have been taking away from long-term, strategically thought out marketing plans for a Broadway show and encouraging short-term, tactical decisions.
Solutions or Alternatives to Daily Deals Websites
Private vertical markets, such as CorporateOffers.com or Plum Benefits, offer discounted Broadway tickets, but these offers are drastically different from daily deal websites. The key differences are that these companies have loyal customers, which creates financial stability, and markets discounted prices for Broadway shows through large corporations (such as KPMG), building personal and long-term relationships between companies. They do not damage the public image or brand of these Broadway shows and these companies are not open towards the entirety of the virtual world; emphasizing exclusivity.
How the Future Is Panning Out At This Rate
Daily deals might be helpful for small businesses that are trying to spread the word that they are there, existent, and wanting to expand, but for hard working companies, or Broadway shows, they have to frantically struggle to maintain all of their hard work and advocate their images because of these websites that are downgrading their values. But, one thing is for sure: daily deals are not disappearing anytime soon.