How to make the most of daily deals programs

There's good news and bad news when it comes to daily deals programs, says Toby Scammell, CEO of Womply. The good news is that daily deals can provide a quick influx of cash and help fill open capacity. The bad news is that many daily deal programs end up costing merchants a lot more than they think.

Research shows that more than 60 percent of daily deal buyers are actually regular customers. Most merchants offer deep discounts in hope of capturing lifetime customer value -- but too often they spend that money on existing customers, or on customers who will never return.

"We see ourselves as the antidote to daily deals," Scammell says.

Womply's Loyalty Cloud works very differently from a typical daily deal. Merchants sign up for the service and pay a monthly fee instead of a per-deal fee. They can then market offers through traditional advertising or through social media.

Customers sign up one time by linking a credit or debit card to the service, allowing them to take advantage of as many Loyalty Cloud offers as they wish.

When customers visit a merchant offering a loyalty reward on three occasions, they automatically receive a reward that is credited directly to their card. (The typical reward is 25 percent of total spending, but the actual amount varies by merchant.) There are no coupons, nor additional transaction costs for merchants -- and existing customers are rewarded for being loyal customers.

"Our focus on loyalty is a fundamentally different approach," Scammell says. "Existing customers are incredibly valuable. Our program lets merchants reinvest in those customers, engage with them, and give them incentives to keep coming back. We put our money where our mouth is -- when we help merchants create loyal customers, they become loyal to us."

A hidden benefit is that the process is transparent to employees and customers. The customer pays with a credit or debit card, they tip (where applicable) on the full amount rather than a discounted amount -- keeping service staff happy -- and the rebate is credited to their account within a few days.

"There is no alignment of interests between daily deal sites and merchants," Scammell says. "A daily deal site wants the maximum number of offers accepted, while merchants only want what they can handle. Sometimes daily deal sites require merchants to hit a certain number of offers. If we prove their customers become loyal to them, they will become loyal to us."