These companies offer deals-of-the-day and charge each participant business a commission of 50% of the deal selling price in exchange for sending a rush of clients to their place of business. The deal vouchers normally average discounts of 50% of the regular price, minus the 50% commission fee the business pays for each deal which translates to a 75% give away of the regular price for the business.
The normal average profit for most businesses, especially restaurants, is 33% of the selling price. The other 66% normally goes in to the cost of the goods they sell and overhead costs. These deal discounts force the business to sell at a loss in return for getting some new customers through the door which is not always the case because many times their regular clients also purchase the vouchers for an even greater loss.
Businesses members of Price Setter® who do not use the services of deal-of-the-day companies can enjoy higher profits and can afford to beat these deals-of-the-day by offering to beat the price of the deal on the spot. How? Since they do not have to pay a 50% commission to Groupon or Livingsocial but only a $2.50 pay-per-win to Price Setter® each time they win a higher discount competition against other member merchants of Price Setter®.
50 businesses locations spread over a larger area selling one deal at a better discounted price makes more business sense than one business location selling 50 deals for a big loss.