MEDIA & MARKETING:City Deal is a hot favourite with bargain hunters and people with a keen eye for discounts

ASK DUBLIN housewives what their favourite website is and the chances are that they’ll say City Deal. Every day the site offers discount vouchers that can be redeemed at various small businesses – from restaurants to beauty salons. From a marketing perspective, City Deal is a great way for a small business to win new customers. But how can they make a profit when prices are slashed to the bone?

City Deal originated in Germany a year ago and last May it was acquired by American firm Groupon, which came up with the idea. Groupon is an amalgamation of “group” and “coupon” and the idea is that the online audience is presented with a deeply discounted offer on a product and service. The novel element is that the deal only takes effect if a specified number of people buy the same thing on the same day.

For the vendor, the attraction of the scheme is that they’re going to secure new customers. The downside is that not only is the revenue discounted but sometimes it is shared with City Deal too. The result is that the vendor may scarcely break even on the incremental sales.

However, that doesn’t bother the Knightsbrook Hotel in Trim, Co Meath. Through City Deal, the hotel offered a weekend package valued at €370 and discounted to €110. City Deal subscribers loved the bargain and 2,500 vouchers were sold.

Clara Clarke, Knightsbrook’s corporate sales manager, says the hotel was able to make the deal work by upselling to guests once they come to stay in her hotel. “We agreed a 50/50 revenue split on every booking I got from the site,” says Clarke. “The offer didn’t include dinner and people will eat and drink when they’re here. Every staff member is aware of how important the upselling is.”

Vera O’Grady opened her French restaurant Le Café des Irlandais in the centre of Dublin three months ago and last week she ran her first promotion with City Deal. The offer was a two-course meal for two with Prosecco priced at €32 instead of the regular menu price of €71.

O’Grady says: “I am not doing this to make money but to promote my restaurant. I have sold 800 vouchers which means I should get 1,600 people through the restaurant in January to March. It’s costing me what I am losing on food but then I try to do deals with my suppliers. Before I decide to do another offer, I will wait to see how much administration is involved in processing the vouchers and how much extra money the voucher customers spend.”

Based in Chicago, Groupon is the brainchild of Andrew Mason (29), who, in a couple of years, has garnered 13 million subscribers and grown the firm to annual turnover of $500 million. The company has been so successful at diverting small business marketing spend from regular advertising that Google is reported to be eyeing Groupon up as a takeover candidate.

In Ireland, City Deal claims to have signed up 350,000 subscribers. But to keep them happy it needs a regular supply of small businesses offering discounts. The technology might be new but City Deal is building its business in Dublin the old-fashioned way, with a team of five sales people out knocking on doors to pitch the concept to retailers and restaurants.

“Since we launched in Dublin we have five to six discount deals running each week and we have close to 200 companies signed up to offer discounts,” says Jens Hutzschenreuter, director of Groupon UK.

“It’s a new form of marketing and we find that a lot of businesses are not that educated about online marketing. So they understand the concept better when we meet them face to face. Each time we set up a deal, we look at the cost structure of the business and the promotions run at cost. The discount voucher on offer is only activated after a certain number of people have signed up for it.”