The daily deal industry has exploded over the past couple years. The industry is estimated to be worth $1.25 billion, and according to Bloomberg, Groupon will seek an initial public offering of about $20 billion. Also, sites like Groupon and LivingSocial have become so popular now Facebook, Google, Amazon, and AT&T are jumping on the bandwagon.

So with the daily deal market all a buzz, should local and national businesses be taking advantage of the opportunity? As with any marketing strategy, it all depends on your goals and your target audiences. Below are five points to consider prior to implementing a daily deal.

1. Document your goals and expectations: If you do this upfront, it will ensure you have a benchmark to measure the campaign. Also, share your goals and expectations directly with the daily deal sales associate to determine if your goals/expectations are realistic, and if he/she can provide case studies of similar services/products that achieved similar goals.

2. Identify the demographics: The demographics of the daily deal sites are pretty similar. For example, both Groupon and LivingSocial reach mostly females who are 35 years old and below, well educated and are making $50K plus. This clearly explains why spa services tend to do well.

In fact, according to an article in Forbes magazine (August 20, 2010), one of Groupon’s most successful sales was a 90-minute hot stone massage at SpellBound BodyWork in Chicago. The retail price was $220, Groupon price was $55, and they sold a whooping 4,960 stone massages.

You can find the demographics here for LivingSocial and Groupon.

3. What markets does the daily deal site reach: This sounds like a given, but if you are conducting a national campaign and your goal is to drive traffic to specific locations, check to ensure the markets you are targeting have subscribers. While the major markets are typically covered by both LivingSocial and Groupon, Groupon has about 2.5 times the subscribers than LivingSocial does.

4. Can you handle the demand? Certainly you cannot expect to win big like the spa in Chicago did; however, be sure you can handle an increase in product or service sales. The last thing you want is to disappoint first time customers, because they will more than likely not be back.

5. Develop a marketing strategy for daily deal customers: This is hands down the most important aspect of conducting a daily deal. It is imperative to develop a strategy to increase sales from your daily deal customers AND convert them to loyal customers. If you don’t achieve repeat business, then you are likely never recouping your costs from the first sale. Consider things like offering daily deal customers an incentive to join your email database, upgrade options to their original purchase or developing a specific price structure for daily deal customers for their second and/or third purchases. After all, you already know these customers like deals and are probably not willing to pay $220 for a stone message when they got it for $55!