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Aug 18

To Groupon or Not To Groupon

To Groupon or Not To Groupon - That is the question ...

I was reading an article published in Social Media Today about Groupon. It is a fabulous article and observation - the comments back and forth are very good as well.
  • Below are short parts of the article
  • Copy of my comments to the blog
  • link to original article so you can read it yourself.
here goes!

Considering Offering a Groupon? Read This First.

I’m going to break down why I don’t like Groupon and why I think group-buying as it stands now is horrible.  I’m going to use Groupon in this post to stand for all group buying platforms (with some small exceptions).

#1 – Groupon does not make financial sense for businesses

#2 – Groupon buyers are bargain shoppers

#3 – Groupon does not build loyalty

A Better Solution

Here’s what I think.  I think offering a Groupon is lazy.  No seriously, it’s lazy.  You want to bring in new people?  You want to get more business?  Then stop focusing on these bargain shoppers; instead focus on YOUR CUSTOMERS!  If you have people walking in the door already, why not turn them into your marketing department.  Take some time to build a community on Facebook, Twitter or wherever your customers are and offer them the discounts instead. Here’s an idea: Offer YOUR CUSTOMERS 50% off to bring in someone new (who will pay either full price or a slightly reduced price).  This way you are rewarding your existing customers with a discount AND getting new business at full or nearly full price.  They already come in, they already like you, why not use that to your advantage? Here’s another idea: Why not build a strong Twitter and Facebook following of customers and people that already like you?  That way if things are slow and you are considering offering a Groupon, you can save yourself the cut that you’d pay to Groupon and bring your customers back in.  Reward your loyal fans and followers with 50% off, not just any stooge with an email address and a taste for daily deals.  You might even find that your customers will tell their friends.  And at the very least, you are saving yourself around 15%.
My point is this: if you are going to offer 50% off, why not offer it to your customers either as a reward for being part of your community or incentivizing them for bringing you new people that they would serve as word of mouth representatives for?
Why give Groupon 15% to bring you the wrong kind of customer?
  Here are my comments: Good point about Groupon - One of our clients have offered it in their business and have had good results. However, let me quantify a little bit. They have a boat that transports passengers. It sails on a regular schedule so fixed costs are already accounted for with existing business. The boat usually sails at 45% capacity - the Groupon has helped increase payloads to 85%. So far, so good - HOWEVER - the season is not yet over so the ability to track and measure the actual sales/ redemption rates are not completed. Once this is done we will have a "Good" handle on whether it was profitable or not. I would imagine, in a business that has relatively high COG (Cost of Goods) expenses, margins will be quite tight unless the business owner knows the new customer acquisition cost, annual value of a customer, lifetime value, and redemption rate of the Groupon. (we are currently building that data for our clients) I have asked other business about this in regard to Groupon and all I have gotten is the "Deer-in-The-Headlights" look. We have a couple of restaurant clients we do marketing for and have been steering clear of Groupon. Instead, we promote specials, include desserts, do birthday promotions to existing clients via a weekly email campaign. Business for them is up an average of 21% week to week comparison over last year while others are starving and offering 2-4-1 specials, and I assume participating in Groupon. Thanks for the post -   To read the entire post, Click This Link
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Pieces of the Puzzle To Groupon or Not To Groupon

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1 comment

  1. Jerry

    You have excellent points and Groupon will not work for the lazy owner. Are there better ways to market your small business? Yes, but Groupon can be useful for the right business who does the proper planning and execution. It is not a long term marketing strategy, but like a retail store high impact promotional sale can bring cash and new customers if done properly.

    With that said, I have purchased over 25 vouchers from daily deals sites. Would you like to guess, how many have attempted to get my contact info or follow up with me? That would be a big fat zero. That is thousands of dollars and the difference between a profitable Groupon and another complaining small business owner.

    Groupon does a good job of luring in the small business owner to get new customers without having to pay upfront. Your suggestions instead of a Groupon would be what I suggest to many small business owners. If they already have a mailing list, most small businesses could make plenty of money by marketing to their inactive customers.

    However, some will still want to do it, like business owners who use yellow page ads, the best thing to do is to give them the best advice to get the most $ in their pocket while doing their thing.

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