Voltage Creative

Web Development & Design | Online Marketing

How to Negotiate Terms with a Daily Deals Site (Groupon, Living Social etc...)

D is for deal.

Daily deals sites are red hot right now. Appearing on one of these sites can be a big exposure boost, but it’s also important that the deal offered works for you and your business. That sounds like a no-brainer, but the web is filled with horror stories of mom-and-pop shops or early start ups getting burned by the big daily deals sites like Groupon and Living Social.

This is a judgement-free post by the way. The daily deal thing works for some businesses and doesn’t for others–despite possible misconceptions by business owners or proselytizing by Groupon’s sales department.

Getting Down to Business

First, you need to realize that this will be a cost center, not a profit center. You will lose money doing a daily deal, and in many cases the boost in exposure will be well worth the expense–it’s your call. What we want to do is minimize the expense once you’ve made that call.

Here’s a few tips to help you out. Some of these apply to general negotiation, but this specific post is obviously specifically tailored to wheeling and dealing with Groupon and the like.

  1. Know you’re outgunned: Be aware that you’re negotiating with someone who attempts these negotiations 10 times a day. Ostensibly, they’re good enough to get paid to do it professionally. They will press hard on terms; they’re supposed to. This isn’t a good/bad thing–it’s their job so they do it all the time. It’s not your job so you should prepare a bit. Figure out what you want, what you can afford and don’t budge. Accepting the reality of this situation can also offer some valuable perspective as you’re listing to their pitch.
  2. Pick your battles and be realistic about demands: There are some conditions, like terms of use and duration of acceptance, under which they negotiate with a lot of flexibility. Then there are others, like dollars of revenue, under which they are more constrained.
  3. Recognize the value of exclusivity: Be very clear on the existence or absence of any non-compete agreements. Don’t accept one from anyone except Groupon either. They’re the biggest fish in the pond by far, and in my opinion, the only one worth entering a non-compete to do business with. Groupon, last time I checked, requires a 90-day “no other daily deals” agreement. That might be fair in their specific instance, due to their market reach. In the other cases, it’s not and you should make sure to reject a non-compete agreement unless you get some real concessions made elsewhere.
  4. Play low power to buy time and objectivity: Finally, whoever negotiates should pretend not to be in charge, whether they are or not. This sort of allows you to play good cop bad cop all by yourself. “That sounds good to me, but can you put it in writing for my boss?” is your best defense against making a poor decision in the heat of the moment. It is totally acceptable and can diffuse a high-pressure sales pitch. Forcing a quick decision is one of the oldest and best negotiating tactics because humans are emotional creatures and perform poorly under pressure. Use this tactic to buy yourself some time to think things over. As long as you play man-in-the-middle, whether you are or not, you have the ability to stop and start negotiating sessions. You can take the time you need to run numbers, do some research or just take a step back and think it over.

In any negotiation you will have parties with different goals. This doesn’t mean you have to be antagonistic, but you must be a good shepherd to your own interests and those of your business. Never forget that their job is to make the biggest possible pile of cash selling your product, then take 50%. Your job is to make the pile the right size for your business, and then take 75%. Good luck!

I’d like to extend a big thanks to Tom Kessler for starting the discussion that led to this blog post. You can follow Tom on Twitter @magicclams.