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.
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
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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%.
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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