Groupon, LivingSocial, and Google are just a few of the many companies offering daily deals designed to lure leads to businesses.  But is this a good idea for your small local business? Before you decide, consider all of the pros and cons.

Let’s first look at the benefits.

  • Daily deals can help spread your brand across the Web and create thousands of leads who are interested in your service.

  • These deals can also provide you with an opportunity to give your current customers a reason to keep coming back, and that builds customer loyalty.

Better Markets for Small Businesses

For small-business owners, LivingSocial and Groupon may not be the best choice. In many cities, new daily deal companies are popping up that market only to a specific geographical area. This can be beneficial for companies that are concerned about the heavy influx of new business they will see after the deal becomes active. Yelp and Facebook both have daily deal promotions that may provide a better market for small businesses.

Regardless of the provider you choose, keep these hard facts in mind. Only about 20% of daily deal purchases lead to repeat buyers. More important, according to Yipit, 20% of deals go unredeemed, and each daily deal site has its own rules on how they handle unused coupons. Look for a provider, such as LivingSocial or Groupon, that pays merchants for unredeemed coupons.

Lastly, according to Ask Your Target Market, 73% of daily deals are purchased by females. Keep this in mind when choosing the promotion you use to entice buyers.

If you still think you want to try daily deals, follow these guidelines:

  1. Prepare. You must prep your company for the large number of new customers your business is going to see, especially in the first couple of weeks after the promotion appears. Hire a temp if you need to, because important as it is that you make your new customers want to come back, it is equally crucial not to push existing loyal customers to the back burner and displease them.

  2. Track everything. This includes data you might not be sure you’ll need in the future. At a minimum, keep track of exactly how much money the promotion ended up costing, how many customers became repeat customers, and the average cost of the repeat purchases.

  3. Follow up. Don’t let all of these new leads sit on the side. Whether it’s offering another incentive to return or simply adding the contact to a monthly newsletter, it is important not to let these new quality leads go stale.

Doing your homework and having a strategy is the key to a successful daily deal promotion. By anticipating all of the outcomes, you will be prepared to handle the strong response you’re aiming for.

Chris Marentis is founder and CEO ofSurefire Social, a company specializing in local Internet marketing.

More REMODELING articles about daily deals and lead gen:

What's the Deal? Is Groupon right for you?

Lead-Generation Services: Make Me a Match