Will Groupon Really Boost Your Local Business?

social media viewpointsGroupon has been hailed as the new miracle advertising tool. It has also been accused of being a ruthless corporate giant, preying on the ignorance of small businesses.

Since its inception in November 2008, Groupon (think social media meets coupons) has transformed the way local businesses promote their products and services.

How does it work?

First, you agree to become a featured business on their network. You then reduce your product or service price by 50% or more. Groupon promotes the deal and gets new customers through your doors. For every deal, Groupon gets between 30% and 60% of your drastically reduced price.

What? You only get half of your discount price? That’s right. But it’s worth it when 800 new customers come storming in for your product. Or is it?

my groupon

At 58% discount, this restaurant is giving away food for exposure.

There are dozens of businesses that have been all but ruined from their Groupon deals. Like any decision in business, it’s easy to get swept away by trends and promises of future earnings. Now here’s a little secret – Groupon is not for everyone.

Small and large businesses alike have felt the keen sting of a Groupon feature gone wrong. It’s up to you, as the business owner, to make the right choices for your business.

This means carefully weighing the pros and cons before leaping headfirst into what could be a raging failure.

You need to decide whether Groupon makes sense for your business. Then you need to learn how to use it properly.

Seeing Groupon Through a Marketing Jam-Jar

If giving Groupon 50% of your already discounted price doesn’t raise some red flags, then you need to start seeing it through the eyes of a marketer. Marketers don’t like giving money away.

They calculate the repercussions of their actions long before they commit to something new.

Your Groupon deal could change your business. It could dismantle your loyal customer base. It could lead to the degeneration of your brand identity.

Weighing the negatives means actively looking for them. Unfortunately for Jesse, owner of Posies Bakery and Café, she didn’t see it coming. Her Groupons made her lose money to the point where she could hardly afford her expenses.

posies cafe

Groupon sold so many coupons her bakery nearly went under.

For 3 months, Jesse watched as Groupons rolled in – eating up all of her profits. At the time, her only intention was to get more customers through the door.

The moral of the story? Ask yourself these tough questions first.

  • Are you willing to replace your customer base with one-time-only coupon holders for the entire time they’re valid?
  • Are you willing to trade in loyal customers for customers who are loyal to Groupon, and will probably hunt for the next deal once yours is over?
  • Are you willing to sacrifice some brand loyalty for mass promotion?

If all you’re after is exposure, then Groupon is a viable option. If you’re expecting a massive boost in profits – first, tally up the most successful outcome of your deal with Groupon. The figures may shock you!

Tip #1: Limit the length of your Groupon promotion. Take note of what the Groupon sales rep has to say, and haggle for the best deal possible.

Addicted to Groupon Success

You’ve decided it’s worth the risk – and your Groupons were a huge success! This is great as long as you’re running deals, but what happens when they stop? If you use Groupon too many times, you might lose a lot of money.

The eager coupon holder, leads to loss of profits. Image source: iStockPhoto

Essentially, you’re creating an army of customers who only buy from you because you’re cheap. Your customer base will dissipate as soon as you give up on the coupon system. Plus your brand perception will change. The discounted product or service will not sell as well at its normal price.

Don’t get stuck in the Groupon addiction cycle. If your Groupons are that successful, your business will expand in a few short months. You might not be able to sustain the sales boom without more and more coupon discounts. As the deals fall away, you could be stuck in a situation where you have even less business than before.

Tip #2: Use Groupon to get people through the door. Entice them with some specials of your own. Focus on the upsell, on turning these one-off customers into repeat business.

Groupon in Context

Many businesses are still trying to recover from the economic recession. They cut their prices down to barely earn a profit from their sales. Competition based on price is an unhealthy way to grow your business. Yes, there are many advantages of an excellent Groupon promotion, but it has no real long-term returns.

The problem is that struggling small businesses see Groupon as their marketing savior. They don’t take into account the fact that they will have to work harder for less money, or order more stock to sell for next to nothing.

Groupon says that many people don’t claim their purchased coupon, which leaves more profit for the business owner. Be aware that the larger your product or service, the fewer people are likely to ‘forget’ to collect their Groupon.

J. Haynes of Hat Trick Associates says, “The truth is, when you charge some (current, satisfied, loyal) customers full price… and other (brand-new) customers half off, you make some people happy and others unhappy. And you are making the wrong category of customer happy!”

Tip #3: Prepare yourself for a boom in interest and sales. Display your Groupon ‘terms of use’ where your customers can see it in your store. It will prevent arguments about expiration, changes and repeat use by a single person.

Leveraging Groupon for the Right Reasons

Groupon is not advertising. An advert works to sell your product at a price that will be the most beneficial for your business. Groupon basically sells your promotion by showing thousands of people an incredible bargain associated with your brand. It gets people into your shop, but it doesn’t keep them there.

The best feature of a Groupon experience is the exposure that you get. It will boost your website, blog and social media traffic, which will lead to more signups, likes and follows. This is what you’re paying for when you’re running a Groupon.

groupon

This promotion lost this company $61,100.00 in profit. Imagine what you could do with that kind of ad budget.

What’s the key to making it successful? Do the numbers. Calculate the risks involved. Prepare for more sales in your shop. Work on upselling other products and services to take advantage of the boost in business.

Don’t rely completely on your Groupon deal. You might find that a well-orchestrated pay-per-click campaign renders the same results, at far greater financial reward for your business.

Groupon is part of the geolocation sales craze, so it can be a positive marketing tool. But take their promises with a pinch of salt. Maximize the opportunity and prep for the profit crunch.

Remember that Groupon will boost your business temporarily, but not necessarily your profits or your customer base!

Are you for or against Groupon? What is it about their service that you like/dislike? Join the thousands of people helping business owners to make the right decision with their Groupon promos by leaving us a comment in the box below!

All photos from iStockPhoto.

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About the Author, Carla Dewing

Carla Dewing is part owner of Contrast Media, and a content marketing expert. Follow her on @Contrastmedia or @CarlaDewing on Twitter. Other posts by »




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  • J-Y Beaudoin

    I totally agree with you. Groupon (and all its competitors) are the flavor of the month right now, but I also think that a lot of businesses don’t think it through before making a deal with them. When you think about it, it costs you a lot to bring these new customers in your store, so you better be sure you will keep them. 

    I think that the companies that sell “frequency” products or services like hairdresser (you gotta go every month) or restaurants are the businesses that can get the most out of Groupon, if they offer a unique experience and can get repeat business. The goal is to bring them in on the deal and keep them on the experience. At the end of the day, it’s all about repeat business, it’s the only way Groupon will help you turn a profit. 

    I sometimes see Groupon deals on things like running shoes and I’m not really sure how the store expects to make money out of it. Sure, they might sell me a pair of shorts while I’m there, but they will only receive around 30% of the original price of the shoes, and even if I have the best experience, I won’t be back the week after to buy another pair. 

    I do think Groupon can be a good thing, but as you said, you have to be very careful how you use it. 

    Great post ! 

    J-Y 

  • Omenlove

    Groupon is ruining  small business, It’s big bucks x them only. It is a ruthless corporate giant, preying on the ignorance of small businesses.

  • http://www.colemanmg.com Antonio Coleman

    This is great for people who are selling something digital also because of the low products cost which is none. I like it..

    “Black Seo Guy “Signing Off”

  • René Power

    The thing with Groupon and other voucher/time sensitive based schemes is that you need to be able to heavily discount to make a product/service worthwhile enough to be able to sell volume. You have to decide if you can trade margin.

    More importantly, with vouchering in general, I think the exact opposite of loyalty is created. Ask anyone in the UK if they will pay full price in Pizza Express, pay full price at Gap – I’d be surprised.

  • Carla Dewing

    @J-Y, I’m glad you liked it! As you said, its all about moderation and being fully aware of what you’re getting your business into. People hear and read about massive Groupon successes and they’re very quick to jump on the bandwagon, and its only after they’ve run their deal that they start to fully understand how much it actually costs their business. The best thing to do is to come up with supportive promotions, and figure out a strategy to keep your new customers once they arrive! 

  • Carla Dewing

    @twitter-20251241:disqus - You’re very right there, these social coupon sites do have a negative effect on brand loyalty, creating armies of customers that are always looking out for the next best deal. That’s why you have to be careful how often you choose to use Groupon if at all. You don’t want your brand to become synonymous with cheap deals. It devalues everything you’re trying to build! Thanks for the comment!

  • http://kkfmedia.com Kelly

    Sounds like you are just getting the ‘deal seekers’ instead of the loyal return customer.  Seems to me that these small companies would do better by offering their own deals their their social media outlets, then they can reward their customers and at the same time increase their social media presences. 

  • http://twitter.com/NathanRKing Nathan King

    This is spot-on. My sister ran a Groupon for her salon. She ‘gave away’ a signature facial for half the cost. She sold many coupons knowing that she was not making a profit. Being that her business had just opened their door a few month prior, the deal brought her salon a lot of exposure and new client.

    Now she’s playing the waiting game to see if any of these deal-seekers are willing to come back to pay full price. Their loyalty may very well be with the deal.

  • Steve

    This is really great information. I really had never thought of Groupon in this regard and I almost signed my personal training business up.

    I’m glad I didn’t given all the downsides. Thanks for this post, it has saved my some serious money and maybe my brand reputation!

  • http://socialmediazap.com/ Mark Austria

    Great article. Yeah, Groupon is really big and is making waves even here in Asia. I must agree, just like any marketing strategy, one must really weigh in the pros and cons before launching any campaign. In today’s marketing world and all the technology, one cannot help but be overwhelmed with the tools at hand and sometimes go along with the flow.  Still no excuse if that would mean losing out in the end. Anyone looking into Groupon should read this article.

  • Tony

    I saw a Groupon ad the other day that read “Never Pay Full Price Again” – that is fine for the consumer but not for the business. I have been questioning local business owners here in Tallahassee about their experience and most did not give me good feedback. 

    Here are some of their comments: 
    - Massage Clinic: Worked overtime and weekends for free and had to push full price regular clients out. Ended up that some of the Groupon customers were mad because they could not get an appointment for over a month. 
    - Restaurant – Had such a long wait on Thurs, Fri & Sat for the Groupon customers, that cash paying customers went elsewhere.
    - Restaurant – Most of the Grouponers were already regulars. I call this “Consumer Cannibalism” (this also happened with local “Baked Ham” shop just before Easter – they were going to buy their Easter hams there regardless)
    - Restaurant – Servers Morale Down because patrons were tipping on the Groupon rate.
    - Retail Store – Arguments with customers trying to include the sales tax in the Groupon certificate. 
    - Fitness Classes – Set up a class just for the Groupon clients. Deal was for 3 months. After 1 month, there were only 2 people left in the class. Had to teach it anyway. At the end, both customers (individually) said they would continue but only for the Groupon rate. 
    - Salon – unable to have slots open for regulars, unhappy current base that normally makes their appt as they leave today’s appt. They normally did 4 weeks out and now had to do 6 weeks out to get their hair done. 
    - Salon – Employees morale down, especially those that lease their booths. 

    Especially with Restaurants and Salons – there are several deals a week between Living Social and Groupon for another restaurant or another salon. You can just go Groupon Hopping and never pay full price again. 

    I see less and less businesses participating and small business owners talk to each other. Groupon needs the businesses to participate or they are dead in the water. 

  • Carla Dewing

    @Kelly – People are enticed by the ‘millions’ of people that already use Groupon in their area. It’s a ready-made social community of potential buyers – and you can see why that would be appealing. Most small businesses use social media, but they don’t really have large communities to share their deals with. But, I do agree with you that the effort would be better spent on private deals, to that small community – at least you know they have a higher chance of being back for more!

  • http://ideagirlmedia.com/ Keri at Idea Girl Media

    Carla,

    Great article – so glad to see an objective look at Groupon!I had explored the possibility of Groupon, and decided against it after some research.  This was after hearing about it via Social Media Success Summit 2010.My research showed me that a business in my position would not do well at that time.  And, that there hasn’t been a customer stickiness to it.  No Wibiya bar at the bottom of the screen.I do think that Groupon has some advantages if calculated.  But that’s the thing — ya gotta do your math and prepare for all outcomes.It is my impression that Groupon hadn’t guided some clients through the process well enough.  It is new, it is flavor-of-the-month.  If Groupon wants to be more than that, they should be doing all of their math too and providing a thorough “success kit” to help educate clients and customers.Just my 2 cents…~Keri

  • Carla Dewing

    @Nathan -Unfortunately thats the reality of Groupon. People might have loved your sisters facials, but why should they pay three times more? Better to wait for the next deal – right? If she ever does have another Groupon, then tell her to run some great specials of her own at the same time. Hand out promotional flyers to these ‘deal-seekers’ or display them loud and proud somewhere prominent. Hopefully, they’ll come back for her deal, and she won’t be forced to consider any more Groupons.  

  • Carla Dewing

    @Steve – I’m glad my post has saved you some trouble – but don’t be too quick to dismiss what Groupon can do (which is bring in new people). For a personal training business, it might work very well, as long as you limit the deal, and be wary of what the Groupon sales rep promises you! At the end of the day, if its not worth it – then better to run a Google ad campaign. Similar results, only you pay upfront, and you pay less. 

  • Carla Dewing

    @Mark – Thanks for your comment – I think Groupon made so much money so quickly, that they have an incredible PR or brand management system in place. Most of the info you find online is all roses and success stories. But as you say, like any new marketing tool, its best to investigate the real ROI for your business before leaping in head first!

  • Carla Dewing

    @Tony – Their comments are very valid, and the repercussions of Groupon deals always hit small service businesses the hardest. Thats why its so important not to rely on Groupon for anything but a bit of exposure. They get bodies in the door – but the rest of the mess that this causes is all left up to the owners. I’ve spoken to several local businesses that have had issues with Groupon. Namely staff being very unhappy and threatening to leave, customer arguments that ensue from overbooking, trying to use outdated groupons etc – and the general hassles that come from a mad unflux of people that really aren’t willing to pay anyway. You can see the benefit of Groupon if you aren’t in desperate need of money, but using it as a tool to get more money – well as you know, it doesn’t always work out! Thanks for a great comment!   

  • Carla Dewing

    @Keri – It’s good to know that there are some business owners out there that can see through marketing hype, and I agree with you about Groupon being beneficial for certain businesses and for certain outcomes. Groupon does have a lot of work to do if they plan on being around in the coming years. Smaller sites are popping up like wildfire, offering better deals that are far more lucrative for the business owner. I think we’re bound to see some changes from them coming soon – they can’t hope to sustain their current model – especially when word is getting around about the downsides of running a Groupon deal. Thanks for the awesome comment Keri :D

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  • http://warrenwhitlock.com/social-media-expert Warren Whitlock

    Anyone looking at Groupon for short term revenue is NOT marketing. Putting out a coupon is not a marketing program, but with a marketing program in place (upsells, relationships, referrals), new traffic will boost your bottom line.

    While this post has many good points to warn off people who don’t know the life time value of a new customers, it misses the point. Focusing on “does the tactic work?” without the context of strategy is business suicide.

  • http://anyessays.com/ essay

    I want to join to your comment! Really good points!

  • johnjaworski

    Great article!

    I HATE discounting as a tactic! I also get the allure of Groupon.

    For those in business that are not marketing savvy… and that is the majority of small/medium sized businesses it sounds like Manna from heaven. “We will fill your restaurant, car wash, beauty salon.. There is no cost to you if no one buys, we take all  the risk!”

    But as Warren pointed out, without a strategy for manuipulating that discount Customer into your buying funnel… You just made Groupon a bunch of dough, made a bunch of Customers happy and have exhausted  your self and likely a loty of your resources!

    For the right business with the right strategy – Groupon can be a great tool. But in my not so humble opinion there are not that many business owners that understand how to create and implement that type of strategy! Absolutely no insult intended, they just don’t have the knowledge….

    Groupon is definitely a double edged sword!

  • http://twitter.com/Shaysstudio Shay’s Studio

    Wonderful article and perfect timing for me since I was considering Groupon

  • johnjaworski

    Funny.. A Groupon offer just came across my desk. I bought it! Hey $30.00 to detail my car… great deal. Now will they be able to do a good job for the 15 bucks they get to keep.. we’ll see. As a Customer I expect the same detailing that I would have gotten for the $60.00! We’ll see!

  • http://www.amtmconsulting.com/ Ana Quillinan

    Very excited to see the objectiveness of your post –  the geolocation sales hype is finally being uncovered and explained in terms that most businesses could instantly understand. 

    Exhausting, costly, margin-reducing deals have to create customer loyalty not a short-term fix. Fabulous advice for SMEs who do use Groupon to have a strategy for long-term benefit. What’s the point otherwise? 

    Do you think the tide will be shifting for retailers? With Amazon Local making its debut, are retailers’ going to demand lower fees and expect more that just a deep discount?

  • johnjaworski

    Another caveat… when your coupon expires don’t expect the Customer that is standing in front of you to care about the exp date. Should they.. Uh Huh! Will they… hell no!

    This is not a coupon the cut out of the Sunday paper, this is a coupon they bought with their hard earned money and they will expect to be able to use it whenever they want. They won’t care about your rules.

    Be careful how you handle this situation… Your reputation is at stake and they will have the recession riddled public on their side!

  • http://www.signalfire.us/ Matthew Olson (Signalfire)

    I agree with both @twitter-22088021:disqus and @johnjaworski:disqus - Groupon has been a siren’s call for many small businesses and I’ve seen a couple spectacular shipwrecks because of it. 

    Here’s a hint: If you’re loosing a little money on each Groupon transaction, why would you want to loose a lot of money on many Groupon transactions? Wishful thinking that each customer experience will lead to another, full price experience? I don’t think too many small businesses have margins that large.

    Discounting to beat the competition is nothing more than a “race to the bottom.” Luring clients in by discounted pricing will not keep many of them. Most are shopping from business to business getting the least cost (and often least value) service for their dollar. How will you retain these customers? Deeper discounts? What happens when the shop around the corner offer 5% more off than you? Your business gets further and further into the red for each transaction.

    At some point your small business needs to shift the conversation away from price and make it about value. The few success stories I’ve seen from Groupon users tend to have special services specific for the Groupon deal. Carefully watching the bottom line when you only get 25% (or less) of the service’s/product’s face value.

    @1a0b7c9fba1887a7bcbc2a598fae1f03:disqus has put together a fantastic article. I hope she’s drops me a line as I expand my thoughts on “race to the bottom.”

  • http://blog.socialmediahq.com/ Nick Robinson

    I think you said it correctly. Groupon is merely a customer acquisition tactic. After that, it is the business’s job to 1. create a great experience 2. upsell 3. have their own marketing strategy in place for nurturing customer loyalty.

    I often work with start-ups, and I tell them to absolutely do Groupon, as they are going to most likely operate at a loss in the first year or two. So why not invest in a little customer acquisition, right?

  • http://www.facebook.com/profile.php?id=564839691 Demian Ross

    I think online coupons are a great idea. I started one in North Orange County (CA). We are finding very local people to try local spots. We are using it as a way to increase hyper local business. I do NOT use Groupon, but I might when I travel, which really defeats the purpose of gaining repeat business. When I log in with my zip code, it shouldn’t even show me deals in Chicago. Groupon has turned into a great Travel/Tourist site.

  • http://twitter.com/fingersfly fingersfly

    I think people should consider Groupon as another version of Overstock.com. If you’ve got inventory to liquidate, it can be just the thing. But if the motivation is related to marketing/profit, it’s not your tool. Empty rooms? Stock soon to be outdated? DO IT. Otherwise, look on. 

    I use Groupon a lot. Can’t resist! But I was already a customer at many, and the others I’d never use and probably won’t afford to use again. I’m waiting for a car dealership Groupon, LOL!

  • http://www.facebook.com/profile.php?id=1758048531 Paris Bernhardt

    Great article. The company I work for looked into giving Groupons a try and decided against it. As a customer I am done with Groupons. The last couple deals I bought into I became so aware of how much the businesses did not want to provide me the service I paid for. One I was a second class booking that they could cancel on without any regard for me time and what’s weird is I really needed a good Vet to continue on with. The other charged me extra on the side and did not deliver the 2 hours of cleaning. The second was so done with fulfilling the deal they didn’t even care to try and get me as a regular full price customer. I would rather pay the real price and get great service and feel good about the experience. 

  • http://twitter.com/AlbertaSuperNet Alberta SuperNet

     Interesting perspective. I always looked at this from the point of view of the consumer getting a great deal, not how it would affect a small business owner.  But now, even as a consumer, it doesn’t sound like such a great deal, particularly for services, as the person providing the service might not be putting their full effort into it.

  • http://twitter.com/mjbtompkins Matt Tompkins

    I think Carla is right, Steve. Your business may be a perfect candidate for Groupon, if you take time to decide what the right price point is. If you usually charge $200 for three sessions of PT, and your Groupon deal is to give 50% discount ($100 for 3 sessions), and then you only get, say, $60 of that after Groupon takes their cut, will you stay afloat?

    The math will get messy, but here’s a scenario: If 100 people buy the deal, you just made $6000 ($60 per deal, as above). Then look at your current client base. Let’s say you have 50 clients. If they all paid full price ($200 for 3 sessions), that’s $10,000…or $4,000 less than you you received through the Groupon deal.

    But chances are that not all current clients are buying at the same time, meaning you aren’t getting that $10,000 as quickly as the $6000 from the deal. If you get 20 of the 50 potential clients to buy the regular package, you just made up the $4000 difference (I’ll admit that 40% conversion rate is high, but who knows?). No matter what # of potential clients buy sessions after the Groupon, that cuts into the losses you took to try to get new clients.

    Chances are that those new clients, through your building great relationships with them, will more than make up that $4000 difference in the long run.

    I realize that these numbers aren’t accurate and the scenario is best-case, but hopefully they help people see how some businesses are great fits for Groupon. Bakeries/restaurants who have to buy product to sell product can get hurt, as shown in the article, but those that are selling a service could help themselves in the long run, if they are able to weather the profit loss at the time. It’s a marathon, not a sprint, so the rewards take awhile to be realized.

  • Tina

    I think the main key is that each business needs to decide whether it’s a good idea for them, rather than just assuming that Groupon is ruining all busineses. I have a fairly new energy healing business. I haven’t had time yet to market to many clients yet, and I also need practice working with different people. I’ve considered doing a Groupon-type deal because for me it’s a win-win situation. Even if I took home 25% of my regular price, it’s still about what I earn per hour in my “day job” (when I’m not doing my own business), so it’s a reasonable rate, and even if they don’t come back, I’ve gotten practice working on more people. So for me, it’s not a bad idea at all. Any new clients I get would be a bonus.

  • Bobf

    Thanks, Carla, for the good post. I, too, wrote about Groupon a few months ago (http://bit.ly/j48098), with largely the same conclusions. I referenced a couple helpful pieces of research, too, which suggest that about half of the retailers who use Groupon wouldn’t do it again. It doesn’t take a math wizard to figure out that when you discount your goods by 50%, then give 50% of the proceeds to Groupon, you’re probably losing money on every item that goes out the door. Those who use Groupon successfully, limit the time period and/or volume, plan well enough to offer their best service during the Groupon time period and—maybe most importantly—make sure they collect customer info for their marketing list, since they will need to make $$ on these people at a later date. Still, it’s a crap shoot, as is discounting in general.

  • http://www.facebook.com/chrisbaker04 Chris Baker

    I understand what you all are saying and for the most part agree with your sentiments.  I feel that it does need to be expressed the business owner’s responsibility when they do any marketing.  They need to see the point.  If they haven’t figured out a way to work the upsell then they are definitely in trouble. If they haven’t figure out a way to counteract the potentially bad parts of a Groupon deal, then they aren’t very savvy.  I smell opportunities to educate…good, solid, well though out post.   

  • Mazen

    Great article. As a small business consultant, Groupon is a great source of leads for me. After a business has their day in the sun with Groupon, I follow up with them and offer to help them build their own list of loyal customers that they can market to in the future. Building a mobile list and/or email list of loyal customers is more valuable and less expensive to these businesses than dealing a typical Groupon customer who only buys from you when there is a huge discount.

    Mazen Musallam
    http://www.LocalBusinessExposure.com

  • BobPhibbs,RetailDoc

    I disagree this is good for any business – sorry. Customers are quite loyal to “their” hairdresser. Those who go for the “deal” are not loyal to anyone but the deal. People trying to justify the numbers are dealing in fantasy. That’s why I wrote the ebook Groupon: Why Deep Discounts Are Bad For Business. They are not going away because so many people are encouraging businesses to use them. Why? Because they want the deal. It’s a race to the bottom as a commodity if you follow these discount seekers.

  • http://www.parajunkee.com/ Parajunkee

    Personally Groupon is not for me. If I was trying to get monster amounts of clients, maybe, but I would much rather a quality client of quantity of client. Sometimes the Groupons that come through just flabergast me… I got one today that was so outrageous that I had to Tumble it: http://parajunkee.tumblr.com/post/6107125417/when-advertising-goes-bad-i-got-this-in-my-inbox

    I can’t understand how that type of marketing can work for a doctor of all things.

  • http://www.spalutions.com/ Felicia Brown

    As a marketing coach, consultant and educator for the massage, spa and wellness industry, I have to applaud your article whole-heartedly. Groupons and their ilk are GREAT for getting your name out and bringing lots of new clients in for no money up front. However, the absolute chaos they create in service-based businesses is most often not worth the savings. And unfortunately, in the case of service industry businesses which have higher labor costs than the average business, they can actually create scheduling crisies, staff unrest and huge financial problems.

    Before running a Groupon, I suggest people consider first offering an “in-house” special to their current clients or to try and reactivate inactive customers. Find ways to creatively reach out to new people that don’t have so much risk. And, if the Groupon type-deal seems like the only thing to do, consider all the possible problems and opportunities that could come from it. Find ways to prepare for those issues and make sure your entire team is on board to help make the experience pleasant and profitable. If I can be of help in that, please let me know!

    http://www.spalutions.com

  • Ethically Hip

    Great
    post and debate!  How many business owners have a grip on what the cost
    of acquiring a new customer really is? There was a Yipit blog post
    several months ago that actually included a downloadable spreadsheet
    that business owners can use to gauge the viability/profitability of
    doing a daily deal. I use a similar spreadsheet for deal anlaysis almost
    every day. It can be viewed at http://blog.yipit.com/2011/01/10/daily-deal-success-is-all-about-new-customers/ . 

    We are in the process of launching a site with a deal component to it
    but we operate as a Social Purpose Business that donates 100% of our net
    profits to local charities.  We make a point of sitting down and doing
    the math with our business partners to ensure they are fully aware of
    what the impact may be on their bottom line. We also believe that using
    the Groupon model for charitable giving changes the dynamic for both the
    business offering the deal as well as the consumer.

    Robin

    http://www.ethicallyhip.com

  • David

    @J-Y Your comment is well balanced, but I disagree with you that Groupon is just a ‘flavor of the month’. (competitors, completely different story)…we may hate giving away stuff at half off, but consumers love it. 
    I don’t know how many other people here have actually used Groupon for their business, but I recommended it to my wife’s company (a medical weight loss and aesthetics clinic). They actually put some thought into what the promotion would be,  weighing the positives and negatives, and ran the deal. 

    In one day, they had over 500 new customers buy the deal – set at $129. Around 5% never scheduled – but the 95% that did were treated with great customer service and fulfilled the deal package without any problems. 5 months later, more than half of those customers continue to come back and pay for their weekly visit at the normal price. The deal was very profitable and a huge win for my wife’s company – and Groupon. 

    Now I won’t argue that Groupon may be a bit aggressive in their pricing and you’d certainly better make sure to consider the fine print for the deal before it goes live ( is your deal for new customers only or all customers – is there a limit to how many you can buy and can they be shared – is there an expiration date, etc…), but they’re not holding a gun to business owners heads forcing them to sign up. 

    Ask yourself some questions before thinking about doing a Groupon:
    1. What am I selling? An item, a package of items, a continuing service? What type of customer will I attract for each?
    2. What are my profit margins?
    3. Will my existing customers suffer if it’s successful? Can I handle the increased demand?
    4. Whats the lifetime value of my average customer?

    I would never consider giving something away at less than cost, ever. If you think you might lose money on your Groupon deal, don’t do it.

  • http://420creative.com/ Angie Herrera

    Wholeheartedly agree with you Bob. ^  I’ve seen it happen to a service-based client of ours who has never even used Groupon. The folks coming in with the coupon just want the deal. Then, if you don’t treat them *better* than the regular customers paying full price they’re off whining and exaggerating on Yelp and CitySearch.

  • http://phylliskhare.com/ Phyllis Khare

    Amen Warren. Using a geolocation or location-based service is still a good idea in the mix of marketing. Everything needs to be thought through carefully with a long view in mind. 

  • Danitalicious

    Thanks for this article! As an advertising agency, we were approached pretty early on when Groupon finally got to our little area of West Texas. It was the ‘next big thing’ so our clients wanted us to get them on the program. Once we learned the ins and outs, we were so completely against it, we couldn’t bring ourselves to even want to allow our clients to lose 50% of an already steeply discounted special. 

    While I agree that more service-oriented Groupons work – gyms, out-of-home businesses like cleaning services – I don’t see the benefit for retail or restaurants AT ALL. Not even a little bit. When you think of your cost (overhead, staff, ingredients/products, etc), why would you want to give that away for 50% of 50% + service fees (don’t forget those pesky credit card fees they charge for every single transaction!)? 

    The only success story we’ve had from any of our clients is a local photographer (service) who offered a discount for expecting mothers and newborns. That’s it. His thinking is that when that baby is born or grows up, he will have gained new clientele since he has an amazing product. While the true ‘success’ really awaits to be seen, that’s probably the only instance I’ve seen that might actually produce some repeat business – at the regular price. 

    The lack of local businesses in our area is also glaring. Initially when Groupon hit the Midland/Odessa, TX area, it was all local, now they are filling days with generic national, online retailers. I think our local businesses have finally wised up to what’s really going on. It’s unfortunate it took so many of them to fail to realize that. 

    It will be interesting to see what happens with Google Offers & Facebook Deals now hitting metros. I think this is a small piece of the geo-location platform puzzle. Check-in specials (thru Foursquare, Gowalla, SCVNGR & even Facebook) still seem like a more viable option. Reward loyalty. Not flashes-in-the-pan. 

  • Pwright

    I have always believed that discounting your price should always be tempered with a short time frame and limitations.  If you have to give a 50% discount to your customer plus 30% of your gross to Groupon in order to bring customers in the door, then maybe you haven’t done a great job at pricing your product.  If you want to use it to bring in new customers, then use the old “loss leader” approach.  As with anything, check three times before you commit and make sure it is really going to work for you.

  • Paulo

    What’s your feeling about the launch of Groupon Now? Business Week had a good article on it – http://www.businessweek.com/magazine/content/11_13/b4221070014682_page_2.htm

    I thought this bit was particularly interesting:
    “Unlike Groupon’s daily deals, which tend to generate a flood of customers, Groupon Now might lure just a few, but at the right time……
    Piece Brewery & Pizzeria, in Chicago’s fashionable Wicker Park neighborhood, gets two kinds of phone calls from Groupon. Employees regularly call the restaurant to order its New Haven-style thin-crust pizza. And sales reps regularly call to exhort its owner, Bill Jacobs, to do a deal-of-the day offer. Jacobs has always declined. “Fortunately, we’re very busy,” he says, citing two- to three-hour waits on weekend nights. “There really isn’t any benefit for us in doing the typical Groupon.”
    Early this year, though, Andrew Mason himself called Jacobs to pitch Groupon Now. The restaurateur was intrigued—the service could let him draw customers to empty tables during its few slow hours midweek. Jacobs says he’s preparing to use Groupon Now to sell a $30 coupon for $20; the deal will be good only on Tuesdays, Wednesdays, and Thursdays from 11 a.m. to 3 p.m. “We can run it for a while, we can change the deal, change the times, and tweak it as we see fit,” he says. “The new program is a good fit for us.”

  • Jonathan

    Interesting that the first comment was about it’s effectiveness for service based industries like salons.  As a user (in a business mindset) I always thought the opposite.  Usually staff in the service industry, particularly those that rely on tips hate to see discounts and often provide service accordingly.  Of course you should normally tip on the regular price (assuming the service was good).  Many times you can check out Yelp and see people saying, “I went there because I had a Groupon and the service was blah…”  Not a great give and take for businesses and customers and definitely not good PR (see Angie’s comment above)

    There really two concerns on the business end.  One is Groupon is relatively new and businesses don’t want to be left behind and two small business owners often don’t have the time, resources or know-how to calculate the metrics that might give them some insight here.  I’m not sure how the sale works exactly, but I think the idea of starting out small is a good one.

  • http://www.facebook.com/MarkHess411 Mark Hess

    Great piece, and really great comments. 
    There is one thing that Groupon and all it’s clones should be doing; and that is helping their deal partners understand the true value of their deal exposure. It’s not about making one highly discounted sale to potential new customers; it’s utilizing this new marketing channel to acquire new long term clients. The “deal” is just a loss leader to find actual converted prospects, not unlike traditional coupons, which I can assure you do work. Right now Groupon et. al. is great for consumers but as you said, not so great for the deal vendors.

    I’ve just launched a new company in the group buying category: BizSaves.com, a site dedicated to bringing the same benefits consumers realize from Groupon to B2B companies. Our new twist is to structure deals with incentives for future purchases built in, such as future small discounts for a limited period of time. We also offer free services like customer satisfaction surveys, analytics, follow up emails, reminders, etc. And encourage deal partners to offer some loyal customers semi-regular discounts as well, to support their base (we’ll even provide that service if they so desire). It’s our up-sell, cross-sell and continued customer ‘massaging’ strategies that make us different.

    So the idea for the deal partner (seller) is to use this marketing channel as an additional lead generator and customer acquisition tool to create new brand loyalists. The brand exposure a deal partner gets for no up-front costs is good, but that’s just the beginning.

    This whole debate is like the early days of AOL. At one point it was the champion, then others found ways to improve on the model. Groupon is the fasting growing business in history, but the model needs improvement.

    I’d appreciate any thoughts, criticisms or help with our efforts. And again, nice piece.

    Mark Hess, BizSaves.com

  • http://www.facebook.com/people/Jonathan-Thompson/1348513934 Jonathan Thompson

    Are you for or against Groupon? Depends.
    You raised appropriate cautionary topics. As you briefly mentioned, companies should roll up their Groupon strategy into their overall marketing strategy. This is the key. The opportunity to promote your business, product, service, etc. to Groupon users should be carefully planned in advance.

    JT

  • Lesley

    The problem with Groupon is that the people who purchase them are after a BARGAIN, once your deal is over they move on. It can be very difficult & quite often unlikely to turn them into “regular shoppers”. It really has ruined a lot of small business’s, though those business owners have to take their share of the blame for not researching properly. There are other options out there. There’s a facebook app called deal share, I think it’s put out by North Social. If you have a decent fan count you can run your own deal and not give 50% or more away to Groupon and the like.

  • sharon

    I just did and sold 118! These were women that really are excited about having skincare. I believe i can turn these people in to regulars.. Got my name out there and made a few bucks.. plus repeat business and retails sales. So far so good for me. Beside’s summer are a little slow and this fills up my books. Even if i end up with half of these women as repeats.. I say that is pretty good. Not sure I will do it again. but it was fun to try!

  • sharon

    P.S. It was a anti-aging treatment and i am a skin care salon

  • John Cofie

    Hi,

    I will echo that this is a balanced and good article on Groupon . I can’t reinforce enough the point that Groupon should be a microcosim of the wider marketing communications mix and any business should at least have an evolving strategy to develop long term relationships with Groupon customers.

    Groupon will not positively change the fortunes of a business that does not commit to marketing. It does however introduce small to medium sized businesses to new customers cost effectively and as a sales promotion tactic, it’s a winner!

  • Stas

    Definitely do the math and limit the number of groupons sold to where you won’t lost as much money – always go conservative :)

  • http://AffordableWords.com Cindy Brock

    I have used Groupon three times.  One of my coupons expired in a very short period of time. However, this business (luxury car wash) gives away free coupons throughout local business parks all the time.  They get 75% repeat business (because I asked them that).  They do, however, have a niche in the area that works. 

    I also bought a restaurant coupon.  You had to buy the maximum amount (e.g., $7 for $15 worth of food) or they would not let you use the coupon. This is a very popular place that I have eaten at before so they would be getting my repeat business anyway.

    The final one I purchased that doesn’t expire until October is a house cleaning service. This one is a good example of how marketing can backfire on the business owner.  I already know that I will only use this business once: that’s why I bought the coupon. The full price the cleaning service will charge is what will not keep me from using them again. (I can get a recommendation from a friend cheaper.)

    I wonder how many of these businesses have “upp’d” their price to make some profit?   When it’s a small amount – say the $15 lunch coupon – paying full price may not be an issue. 

    I do 100% agree with J-Y that this type of marketing is the “flavor of the month.”  Every time I turn around, there’s another one (Locally, Living Social, etc.).  That’s what’s ruined it for me.  (I don’t need more emails in a day of which only 1% may be a need I hvae.)

    As an Internet marketer for my own business, I have NEVER offered a freebie to bring in business.  My ‘freebie’ is in the form of sharing my advice, experience, etc. when talking to a client intially (and one who has contacted me).  This client attention is what wins me the project: my service is what keeps my clients coming back.  

  • http://weightplateworkout.com/ Robert Pinto-Fernandes

    Hey Carla,

    I think you make some excellent points in this post. The biggest takeaway is that anyone considering using Groupon should fully analyse the costs and benefits of doing so. Like you say, one of the foundational rules of marketing is that you shouldn’t have to compete on price. However, I understand how trendy and appealing “deals” have become to consumers, especially since the start of the economic recession. 

    I think that business owners need to realise that Groupon is not for everyone. I’m sure there have been some huge success stories as well as some monumental failures from using Groupon. The problem is that many business owners are not marketing experts, and they see Groupon as some “Knight in Shining Armour”, when they should be doing their own research to ascertain whether or not a Groupon deal is good for them. Often not enough thought goes into the deal itself, yes it may be appealing to Groupon subscribers but how viable is it to use in the long run?

    I don’t particularly think there is anyone to blame here, business owners need to do a cost-benefit analysis when considering a Groupon deal. However, I know that some owners are so busy they don’t take the time out to really assess the potential long-term impact of using Groupon, and how it will affect their bottom-line profits in the longer term.

    As you said, great for exposure for a new business but can be extremely costly if the business is not yet profitable and the deal is structured incorrectly.

    Thanks for this post, it’s had quite a reaction!

  • http://weightplateworkout.com/ Robert Pinto-Fernandes

    You make some great points in your first paragraph. Just checked out the site, looks good. Hope it does well

  • http://www.girlonpoint.com Rosemary

    There are also fantastic local (and national) mobile programs that can be built with promos that are a win-win for business owners without having to give away 60+ % of the farm. Business owners are better off creatively developing loyal customer programs so that they can offer great deals to those who love them, as well as deals that those same folks will pass along. I would say, if you’re going to use Groupon to get new customers in the door, at least have them sign up for your loyal (mobile) customer program since they’ve already proven they can be drug in by a discount deal. It’s still paying for new list members — the hard and expensive way — but at least you have something at the end of the day to show for it. 

  • MCS

    This couldn’t have better timing…

    http://www.huffingtonpost.com/2011/06/02/groupon-files-for-ipo_n_870473.html

    Maybe you will save a lot of people from making another bad investment…. Although I think the idea behind groupon and living social is great for the customer in this economy, now businesses are just robbing businesses and just hoping people are nieve or too desperate to realize… What happened to integrity????

  • Bobf

    FYI: The research I saw showed spa/salons seemed to have the best experiences with Groupon. Restaurants not so much.

  • Linda

    Groupon boosted my business during tough months.  Many Groupon customers stayed on to take at least one more month of classes and almost all ended up buying products from my student store.  It was a good experience for my art school.  No regrets.

  • http://www.facebook.com/people/Tina-Reed-Johnson/1108075575 Tina Reed-Johnson

    Great article and feedback. I have been looking at a new coupon program QNanza run by AdzZoo from a sales perspective.  I’m now even more aware of the disadvantages of small business using such a program.  It has to be right solution to the problem!

  • Diane Aksten

    I’d like to weigh in; I think there have been many valid points for and against Groupon and similiar companies.  My feeling is that, as a business owner, Groupon can help to give you some additional exposure but it’s YOUR responsibility to keep the customers returning with outstanding customer service.  Also, I don’t think Groupon will work for every single business; there are businesses like hair salons and nail salons that have repeat customers that would greatly benefit from Groupon.

    The Customer Advantage is another entrant about to go nationwide in the group buying category; similiar to Groupon and LivingSocial, TCA PAYS its members for the purchases they make; find out more about TCA at http://www.decide2bewealthy.com

    Diane Aksten

  • http://www.successfulinternettools.com Al

    As a consumer, I just took advantage of a local nursery and
    a Groupon worth 50% off.  I didn’t know this
    flower nursery even existed five miles from my home!  This gives me a reason to go there.  Will they get more than my $20.00?  Probably. 
    If I am treated right, they may develop a longer term customer.  Coupons should never be taken as an isolated
    factor in a business, they are part of a business process and the other
    elements in the process also need to be in place. I think that is what Carla was suggesting in her article.

    For all of the
    Groupon haters, what about the marketing advice small business have been given
    for years “to give some things away free”! 
    Whether we call these free samples or free lead generation items or buy
    one get one free.  The growing popularity
    of Groupon says they have struck a consumer nerve.  I think it’s better to learn how to win at the
    Groupon game then stick our noses at it and call it a bad game!

  • Pwright

    I may have come across as a “Groupon hater” but I’m not really.  The difference between the give something away free mantra and Groupon’s coupon model is that the something free was tied into the model of a “loss leader.”  Groupon, on the other hand, is promoting deeply discounted coupons for your main product.  For example, a loss leader may be a free manicure with a cut and color for a salon.  Your giving away the manicure but covering the cost with the sale of cut and color.  Groupon would be a cut and color for 50% off.  Let’s assume a cut and color is $100 regularly.  You are now going to perform the same service and charge the customer $50.  Of the $50 that you collect, you are going to pay Groupon between $15 to $25.  The balance of $25 – $35 has to cover all the costs. The second portion of Groupon that we haven’t seen talked about here is that the coupon is only good if a certain number of people purchase the coupon.  So if the base number is 50, that means that you are going to perform the service for 50 people.

  • Beat Huerlimann

    After all the posts and comments I recently followed, Courpon is bad for Branding, bad for Marketing – because its very sales orienteded. As an advertiser, very focused on value-building, I completly agreed to that. But now I’m very, very insicure. Because my wife and 10 of her collegues made a deal through Croupons, with the benefit of 10 sessions of 100 Swiss Francs each (about 90 Dollars). Croupons is working – even in Switzerland, where people are very, very sceptic about that kind of offers. I’m really confused! Beatus

  • madeline gutierrez

    My friends and I have been purchasing different Groupons and LivingSocial deals.  We often go together to redeem the coupon.  We study the establishment, ask the owner when possible questions about their experience with these coupons, and look at the kind of traffic they have.  We then come together and discuss how we think the owner could better leverage their Groupon experience.  

    One thing we have noticed is the owner never seems to really take advantage of the marketing they could be doing with their new customers.

    Now this is very random – and not scientific – simply our observations.  
    But I can’t wait to take this article to our weekly “Skull” group.  It should spark some good discussion.

    Madeline
    3skulls

    http://www.180DegreesStudio.com
    http://www.Linkedin.com/in/MadelineHere

  • Beat Huerlimann

    Fact is, that Groupons even works in Switzerland, a place, where Social Media still is fare away from beeing part of the (economic) game.

  • webvidman

    I think Groupon is a death wish for most small to medium size businesses. Anyone willing to discount their product or service that low is only lowering the quality of that product or service in the eyes of the general public.  What person would think that a business would sell a product or service at 50% off or more and still make money if the company was selling a quality product. They would be much farther ahead to offer their current customer a 25% discount for every new customer they bring into the business and provide that new customer a 25% discount as well.  This would preserve the integrity of the business and their price structure as the discount would be a reward for the new customer.  This to me would be a much wiser way to do business.  No, they wouldn’t have the large influx of money sucking discount mongers flocking their business, but they also wouldn’t be pissing off their existing customer base and losing the people they worked so hard to earn their business.  I for one hope this is a dying phase and Groupon won’t possibly put more small businesses out of business. Our economy can’t afford this type of catastrophe.

  • http://www.stephaniesammons.com/ Stephanie Sammons

    The rich get richer. Groupon knows how to capture emails and build lists. This episode from @CopyBlogger is worth a listen on the subject!  http://www.copyblogger.com/imfsp-radio-12/  Great stuff on how to position yourself.

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  • http://www.engagingdentists.com EngagingDentists.com

    A great article with even better timing.

    If you haven’t heard yet, Groupon filed for a
    $750 million IPO today…I’ll save my thoughts regarding the investment value
    of a daily deal website for another day; however, this announcement makes your
    article extremely relevant.

    The problem isn’t Groupon. Actually, Groupon has
    marketed itself quite well (given how easily its business model can be
    replicated and how much competition it is about to face).

    Groupon’s sales angle takes advantage of two
    facts: one, small business owners struggle to market their services (that’s why
    they’re still small); two, small business owners jump at opportunities to
    advertise their businesses for “free”.

    Few small business owners see the risks associated
    with discounting their services. First of all, it’s much easier to discount a
    service than add value to a service. Adding value requires work, and many of us
    are already too busy to incentivize new customers to pay full price. Instead,
    we would much rather discount a product or service to make the sales process
    easier. Before Groupon, small businesses had to pay an up-front fee to run an
    advertisement in newspapers and coupon books. In the eyes of a small business
    owner, an up-front fee coupled with no promise of returns, is a major financial
    risk – especially if the small business is already standing on shaky financial ground.
    Then, along came Groupon, who said, “Whoa, whoa, whoa! How about this, no
    up-front fees and guaranteed results?” It was too good to be true, a
    company that finally took the risk out of advertising.

    But here is the truth; as a consumer, Groupon is
    fantastic – a real gift from the gods – but as a business owner, Groupon is a
    brand-name slayer.

    Few small business owners truly understand the
    value of brand loyalty – if they did, they would never offer a discount to a
    first-time shopper from an internet based campaign.

    To begin, small business owners greatly
    undervalue their time – they often work too many hours to justify their bottom
    line. What does this have to do with Groupon? While small business owners
    undervalue their time, they also underestimate the resources necessary to handle
    the volume of customer inquiries they receive from Groupon and over estimate
    the volume of deals they can comfortably accommodate.

    Running a Groupon does two things very well:
    one, it turns your small business into one of the hottest call centers in your
    city; two, it upsets your current, long-term, full-paying customers very
    quickly.

    If you run a daily deal, but fail to prepare
    your staff to accommodate the flood of customer inquiries you are bound to
    receive, you will successfully leave prospective customers with a bad
    impression of your brand. Next, if you sell too many daily deals, the quality
    of your customer service (the only real perk for doing business with a small
    business) will be negatively affected. With the cultural acceptance of social
    media – Yelp, Twitter, Facebook etc. – bad news spreads quickly, and tarnishes
    to your brand name on these websites can take years to repair.

    Think about this for a minute, the one thing
    that separates a small business from the big guys is its attention to detail -
    its customer care. So, why is a small business willing to jeopardize their only
    advantage? My answer is that every small business believes they’re different;
    they believe they’re special; they believe that their services are so good that
    after they interact with a discount shopper, he will come back – anxious to pay
    full price (even though there’s mountains of data suggesting the exact
    opposite).

    The fact is, the customers you get from discount
    campaigns are not yours, they’re Groupons. Furthermore, few small business
    owners have the power – the sales techniques – to strip a bargain shopper from
    his bond with Groupon, but this strip is what you have to do when you compete
    on price and rely on Groupon to fuel your business.

    My conclusion:

    If you are having a hard time finding new
    customers, call 20 or 30 of your most loyal followers – the ones who have
    happily paid full price for years – and give them something amazing for free.
    The result will be 20 supercharged advocates that should yield a better return
    on investment than 1000 Groupon users.

  • http://www.engagingdentists.com EngagingDentists.com

    Wow, I apologize to readers for the weird format my previous post took on after I clicked post. It was a copy and paste from a word document since it took a little time to write. 

  • http://www.facebook.com/profile.php?id=1414187389 Karen Kaffenberger

    I agree with this article wholeheartedly. A client of mine wants to try this, & I tried to dissuade her, as she sells gourmet cookies (both online and in brick and mortar stores). I am of the opinion that she will not get new customers from this & it will simply dilute her brand. She does have a new product that I think Groupon could work well to introduce, if it is followed up with deals of her own. As for her well established products, no. We’ll see what happens.

  • Laura

    I run a small photography business on the Gulf Coast. For me, Groupon would be pure suicide. Never use it as an individual, either, yes, I do like discounts, but I hate buying into the latest trends and hypes, as I knew this would heavily backfire on the hardest working people… And as I have many friends that own small businesses… I’d rather not see them fail than run crazy to get a flippin’ haircut half price… But that’s just me!
    I never used Groupon, never used Living Social, don’t like the Foursquare app and approach, don’t “check in” to various places (why ON EARTH I’d want to tell the whole world where I am at all times?!?!).
    Life is better lived as we please, not by trends…

  • http://twitter.com/beadboutiquenc Amanda Carroll

    I created my own coupon that I call a “grouper couper” and I send it out a couple of times a year to my current email list. My customer base loves it and always shares it with new customers as well. My customers get an occasional great deal and I keep all the $$

  • Elene

    Thanks for all this excellent advice.  I’m feeling very fortunate now that Groupon did not want me as an advertiser.  My husband had been going to a massage therapist who did repeat Groupons, and she seemed to be doing well with them, so I was interested in trying this strategy for my Oriental Medicine clinic, which was going through a slow period.  The Groupon representative told me that they did not work with acupuncturists (even though they do work with chiropractors) because they had tried it in various markets and it didn’t get enough of a response.  That seems like a strange statement to make in the Albuquerque/Santa Fe area, where our medicine is huge, but that was that, they wouldn’t tell me anything further.  

    The Groupon strategy seemed rather iffy anyway for marketing a doctor’s practice– not very dignified– but I would have liked the option to try it and didn’t appreciate being dissed in this way!

    I ended up doing something like what one of the posters above suggested– wrote to a bunch of patients who hadn’t been in to see me for a while– and got a pretty decent response.  I couldn’t have handled a very large influx of new people anyway, and as has been pointed out, I need people who will stick with me, not those who will come in once, take up a lot of my time and energy, and then never be seen again.

    Elene Gusch, DOM
    Albuquerque, NM

  • http://www.online-business-virtual-assistant.com/ Shilpi Roy – Virtual Assistant

     Really an awesome article. Loved it and thanks for sharing this info with us. Groupon is in fact making its way in Social Media.

  • http://www.DevaniFreeman.com/ Devani Freeman

    I work for a local online news source site. In April we launched our own daily deal site which we are marketing to our local 50K subscribers and readers of this news source. Completely different subscriber base than Groupon and it has worked very well being that the response is a lot lower because the subscribers are not typical “coupon users” so the exposure exposure is amazing and the sold deals are not overwhelmed, great transition from direct mail. We did a trendy furniture store and someone went in to redeem their $60 voucher and bought a $1,500 couch! Talking with business owners & hearing their experiences with Groupon, I have come to the conclusion that Groupon does not have the best subscriber base as people are being trained to just look for the next deal and also they don’t have the businesses best interest in mind and oversell the deals putting the business under. My advise: Do a daily deal through a local news site or anything that has a subscriber base that aren’t just “deal seekers”.

  • Sunil Gandhi

    Group Sites r good for perishable goods requires daily sales or else it goes waste (under utilised capacities at airlines, hotel rooms, restaurant & spas, & other such services), its also good for end of the season kind of clearance sales, it also good for some initial quick awareness abt the product and services i.e. price entry strategy. For group sites its their daily business, for vendors its occasional strategic use and for consumer, well be smart or else u will start spending on unwanted things merely cuz its cheap. 

    http://www.aanekant.blogspot.com  

  • http://twitter.com/docmarkting Mark Scott

    HI Carla,

    Great article. 

    A lot of companies are turing to Groupon for a quick fix but don’t think how it will affect their brand in the long term. I have manny companies damage their reputation as they have had massive response form Groupon customers but were unable to handle the demand. 

    Mark Scott
    Doc Marketing 

  • Tulika Sahai

    Very interesting article! Really enjoyed reading it. I totally agree with the viepoints above about how it can be detrimental to a brand image (i work in advertising/branding). My view is that Groupon is here to stay for a while and because Groupon appears to be attractive at first, companie will continue working with them. Agian, agree that this is a short term solution and many factors shold be considered.
     
    However, because it is here to stay i think the best thing would be to find the optimal way to use it. It can’t be considered advertising, but it can be considered an advertising tool. This can’t be the sole method of acquiring clients, companies need to start looking at how Groupon can “help” build a client base through a series of other activities to attract and retain customers.

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  • http://www.videoforimpact.com Peter Fry

    One thing getting people in another getting them back in. Last week yahoo stats stated only 60% of ones emails get opened. Businesses should be capturing mobile numbers a spart of the deal with a view to being able to keep the person informed every so often of other deals they are having. Nothing more powerful than texting with a 98% open rate

  • Annette

    Excellent article Carla. I was in direct mail advertising for 15 years. I always stressed how important it was to create an offer that would benefit the consumer but not hurt the business. Groupon and all of the other daily deals out there only care about their profits. I helped design and now sell advertising for a website where we offer coupons and vouchers but we work with the business owner to create a program that will benefit everyone involved. Business owners need to crunch the numbers before signing the contract.

  • Carla Dewing

    Ana – Retailers are definitely going to start looking for better deals. If Groupon isn’t careful, it will lose many clients to smaller sites that do more for your business, at lower percentage rates. The power is shifting, and Groupon can’t hope to sustain their market share for much longer – they’ll need to restructure or come up with more features and benefits in order to keep businesses interested! 

  • http://www.locallife.co.uk/ayrshire Robin Sinclair

    I agree with the summary of Groupon, but I know of a company who inflated their “recommended” price on their own website by 100% so they could then offer Groupons at 50% discount.  Who wins then.

  • Carla Dewing

    Wow thanks to everyone for their comments and added info! 

    The common theme that seems to be emerging is about businesses taking responsibility for the deals they make, and preparing properly for the repercussions of those deals. 

    I agree that success is subjective, and that certain businesses (especially those that want to move old stock, or fill rooms in an empty guesthouse for example) can have a lot of success with Groupon. We can’t blame Groupon for its success, or for the fact that it can be very damaging – that responsibility rests squarely on the the business owner. 

    I specifically wrote the article to inform businesses of what exactly they are dealing with, when the Groupon sales rep calls them. Of course they are only going say great things about their deals, and talk about all the huge successes they’ve had! Its about seeing through the hype, making a calculated decision based on circumstances and goals – and preparing for whats to come.

  • Annette

    Hi Devani, Our local newspaper has a daily deal site also. A local small restaurant with two locations did a deal with them. They told him he would bring in a ton of new customers. His busines is established and has been in the area for over 50 years although he has only owned it for the past four years. He did the deal-$10 value for $5 good on any menu items. He sold over 850 deals. Groupon will tell you 15% of the deals sold will never be redeemed. Do the math-If 722 are redeemed he is giving away $7220 in product. He does get 50% back on each one sold so he gets $1887 to cover his expenses.  You tell me who wins in this deal. And think about this-Saturday night is one of his busiest nights. What if 100 deals come in on a Saturday? He is already busy and has a full staff.  Best night of the week and his profits are going out the window. I think this can be done correctly but you have to keep the business in mind. Especially if they are a small business or else they can be put out of business. Good Luck.

  • Carla Dewing

    @Beat – Groupons do work, if they didn’t it wouldn’t be the hottest marketing tool to use right now. The article was meant as a cautionary tale – but if you think it can work for you, give it a shot! At least you’ll know what could happen, and can prepare for those eventualities :D

  • Carla Dewing

    I agree with you – personally I wouldn’t go near a Groupon deal. Instead I would work on my time investment, building my social media community – run my own discounts, save some money and reinvest in online advertising. Unfortunately, most business owners can’t do that because, as many of us have pointed out – they aren’t marketing experts. Those of us that can should count ourselves very lucky, and offer a helping hand to other businesses of course!

  • i.communicate

    I admit I do get enticed by Groupon. Initially because of the “deal” BUT if the service is good and I am hooked, I will go back for more at the regular price. It could definitely backfire if the service is so-so. Then I’m in it for the one time bargain.

  • Carla Dewing

    Something else to watch out for is Google Wallet. It’s incorporating Groupon-like deals with a completely mobile payment service based on your smartphone. Now thats something to keep an eye on!

  • http://www.facebook.com/jasebell Jason Bell

    Rene, before vouchering occurs loyalty should be gained.  Once you know who the buyer customers are then it makes sense to reward them in different ways.  Certain vouchers work with certain people. 

    There’s nothing wrong with brand communication to customers with vouchers.  Setting the bar low with a 65%+ discount is not going to start a loyal customer relationship.  Owning a customer loyalty company a lot of clients have asked me about the daily deal route and the answer is clear, you seriously need to know your margins and what you are wanting to achieve.  It isn’t for everyone but it could work for a small minority.  I’ve always maintained that the daily deals sites will have a limited shelf life and retailers will go back and want to maintain a solid relationship a build trust with their customer base.

    Deep discounting is a dangerous game to play.

    Cheers
    Jase

  • http://pulse.yahoo.com/_AMVSSSV3ZY4YF4YBAW36UKXSGM MAVIS

    Great article. We had a company in Toronto who really didn’t know what they were getting into and has since had to shut down their store. If a business is going to do this, they should really know all the facts! Here’s the article from the Toronto Star: http://www.moneyville.ca/blog/post/1000512–this-online-coupon-deal-has-caused-chaos

  • http://pulse.yahoo.com/_BUVPDFEMEQVTHZY4XUTOIVZ2S4 Les in Carlsbad

    Carla, very good essay. Well organized and great points.

    I use Groupon like products when moving hotel rooms.  Like all businesses, our advertising budget relies on finding the right delivery tool to bring in the clients with a positive ROI.  Part of the issue with “traditional” advertising (print, banner ads, email blasts, CPM spend), we must spend money in order to get the exposure.  With email blasts or print advertising costing upwards of $15K per run, I have found myself praying that i can get my revenue to make my $15K be my target percentage of my revenue earned.  With the travel industry changing so much, sometimes it works and sometimes it doesn’t . . . even with the same tool or publisher, a months time can make the difference in success or failure.  There have been many times when I don’t even cover the costs of my advertising.  There are other times when I exceed my expectations considerably.

    The good about Groupon and its cousins is that although you sacrifce REVENUE, you forgo the RISK of traditional advertising.  Obviously, we don’t run these offers every day or even every week, but what i do get is a RISK FREE advertising tool that does put cash in our pocket.  there are some of our products where these campaigns work (our high margin products).  We don’t even try them on our low margin rooms because we’d lose any profit margin we have.

    The use of these tools does need to be used sparingly and with a hawk eye to your overall profit margin.  They aren’t for everyone.

    Thanks for the read and common sense approach to this blossoming trend . . . especially in light of the fact that Groupon just announced an upcoming IPO.

  • http://twitter.com/daxonedwards Daxon Edwards

    Carla, just wanted to say another thanks for this article. You really prepared this well and provide valuable insight into a tough market. Thank you for doing that. I’ll be sure to send out this word for you. It’s also good to relate this kind of promotion with Google’s new Deals and Facebook’s Deals when preparing promotions. I have personally found it very important to protect the value of one’s product/services. Value perception and proper customer attraction makes a large difference between success and working hard for pennies. 

    Again, thank you.

  • PC

    Good points, thanks Tony.  And Groupon wants the business owner to pay for credit card processing fees, which I find outrageous – I mean, it’s Groupon’s sale, they should shoulder the costs of collecting the payments.  Now, I hear that Groupon is going public while losing money.  Just sounds icky to me.

  • PC

    And there are state laws in place that may force you to honor an expired deal.  You gotta check your state laws in this regard.

  • http://twitter.com/PrietoPa Pablo Prieto A

    I just wanted to add my two cents, some things that i think are important and haven´t been mentioned, one is that businesses need to think how using Groupon affects your already loyal customers, they can feel ripped off or undervalued, i would rather start a referral program with existing customers, I think Groupon can be a great tool for some new businesses but it cant be a one size-fits-all solution.

    And my other point (At least applied to México where Groupon has been active only 10 months), from the customer point of view, does anyone else feel that Groupon is the new term for spam? i have been receiving 2 e-mails a day for the last 7 months, approximately 70% of them had been offers from beauty salons and im a guy… from the more than 500 offers i´ve received i´ve purchased one, i get the point that their business model is based on e-mailing amount but, isn´t that what spam “companies” have been doing since the 1990´s?

    If this coupon model keeps growing, either Groupon will start loosing ground to companies that do more segmentation (Ladies only coupon company?) or the next big thing will be a great “offer filtering company”

    Thanks! 

  • http://cindyking.biz/ Cindy King

    I appreciated reading your comment Pablo! And I think you’re right, Groupon is best suited for certain businesses….

    And you know, I think you may be right on another point, it’s mainly for girls :) I get the emails for a US city and Paris and I also follow the offers in Toronto… and there are definitely more offers for women than for men. My daughters are in their early 20′s and they love Groupon.

    I only get one email a day for each location, so I don’t find it spammy at this stage. If the emails were to increase I’d unsubscribe.

    I have to say that I really love the tone of the American ones I get. The text is full of personality. (The French Groupon emails are standard French text, nothing new there). But the American emails I get make a very fun read even if I’m not really interested in the offer. They make me interested in email marketing once again. Do the emails have personality in Mexico too, or are they like the French ones and just your normal email text? I suspect that emails with personality are hard to scale consistently.

  • http://cindyking.biz/ Cindy King

    Great point Peter! I’m guilty of deleting all of the Groupon emails with a subject line that doesn’t immediately grab me. But I open all of the text messages I get from the few retailers who send me their promotions.

  • http://cindyking.biz/ Cindy King

    Thanks for sharing your story Elene!

  • les abeyta

    Two other things i forgot to add . . .

    1) if you do use these flash sales sites, manage the product offerings that you have.  That will give you the opportunity to UPSELL the clients you get.  That profit will be 100%  yours and not shareable with the discounter. 

    2) One of the pitfalls we’ve seen is the “repeat purchaser” who keeps buying the most current offer.  We’ve limited that to offer our products to “first time customers only”.  it takes some negotiating with the discounter, and not all want to play by that rule – you have to be willing to walk away from that publisher . . . after all, it’s your profit and your business and your rules.

  • Barbara Mackie

    As a business owner:
    A ruthless corporate giant??! Groupon started as a small
    business a little over 2 years ago.  The
    business concept is simple, cost efficient and has been around for
    many years. The only difference is the social media aspect which spreads
    the word louder and faster. There are many ways to
    decide how to promote your business and all are costly; commercials,
    advertisements, billboards, trade shows, promotions, discounted sales, etc. Business decisions should never be entered into blindly or without consideration for the ROI.
    As a customer:
    I’m more than happy to be introduced to a new business by way of a good deal because it is difficult to find good ones. If I’m satisfied with the product and the service, I will be a long time loyal customer at the full price. Social media will continue to increase expectations and bad service or poor quality will no longer go unnoticed for very long.

  • maryframer

    Great article and comments!

    As a business (custom frame shop) that has used this service, our experience has been very good.

    Our reach to our local area, with limited ad budget was not huge – though use of social media has been very helpful and key in efforts since opening in 2007.

    Getting our name before 200,000+ eyes (size of our city’s Groupon email list at the time) is something that without Groupon, would have otherwise been an impossible task. That appeal was worth this loss on the front end of our deal knowing that a percentage would turn into repeat customers. What percentage that is has yet to be determined at the moment.

      I may not have done the Groupon if my company had been in business longer and had had a larger client base. About 5% of deal buyers were already our customer. But if we were more established I’m sure that number would have been greater.

    I think that the experience level of the Groupon rep is important in educating the business owner and making suggestions as to the type of deal, at what level to cap the deal, redemption time frame etc.. These factors will greatly effect the resulting customer experience and the ability of the business to fulfill the deal when the time comes.

    The responsibility is on the business owner however, to run his or her own numbers – add terms, time limits, selling caps, etc., until they are satisfied with the deal before it goes out.

    Used correctly I think this is a Win for all concerned.

    Will I do another Groupon?
    I might down the road but probably not likely unless they do something that reaches a new  audience.

  • http://twitter.com/thepebbleffect Nakia angelique

    Thanks for the article. I ran a deal through a similar company and would like massage therapists and other hands on practitioners to keep in mind that the amount of work required to build relationships in our fields and the cost of doing business in this manner don’t always add up. 

         I had a huge response and have stayed solid in my practice for the six months of the deal. That was very exciting and alleviated the anxiety of looking for clients. 
         
         In that process, I also learned that a large number of the clients coming my way are committed deal shoppers and while they loved the work they love the deal more.  I chose not to reduce my regular rates to keep people coming back because my intention was to build a sustainable practice at my existing rates.  

         I’ve learned that clients who shop by price aren’t the clients I’m looking for and they won’t be able to support my business.  
       
         The cost to me to support the volume coming through (with rent, business tax, supplies etc. and the majority of my book turned over to deal purchasers) at the reduced rate has not been a financial win for me. It has actually cost me a good chunk of money in the last few months of the deal run. 

          I HAVE met some amazing people and I have gained new clients.  However, I wouldn’t recommend this path to other practitioners without a solid plan of recapture and schedule structure- that may involve further discounts- and even then, I believe there are better ways to build a loyal clientele. 

  • http://twitter.com/thepebbleffect Nakia angelique

    Cindy,
    I have to agree with you that the copy writing is fantastic in the U.S ads.  I do love the creativity in them.

  • http://twitter.com/thepebbleffect Nakia angelique

    Daxon ~
    I think what you’ve expressed here is what I learned in my own deal experience.  Thanks for saying it so succinctly.

  • http://pulse.yahoo.com/_5HIASQH37U2G7P3ILOYEXC4DYM Matt

    I wouldn’t say “preying”.  They offer a service (which I’ve used and enjoyed for my small business) that offers something different.  If someone’s ignorance is going to burn them on Groupon, it’s going to burn them on something else, too.  Like others have said, just do your homework.

  • http://twitter.com/thepebbleffect Nakia angelique

    Annette ~ 
    can you share the website you work with?

  • http://twitter.com/thepebbleffect Nakia angelique

    that’s an awesome name!

  • http://twitter.com/thepebbleffect Nakia angelique

    Yes. that’s a big piece of it right there: “the customers you get from discount campiagns are not yours, they’re groupons”  at least for the time being ~

  • http://twitter.com/thepebbleffect Nakia angelique

    I think small businesses are willing to risk themselves because there’s anxiety about building business. It’s reasonable to look around for options and very human to seek out the quick fixes.

  • http://www.facebook.com/EmilyWrightSC Emily Wright

    I agree that use of Groupon should involve a very specific strategy.  The recommendations in the article were very good – use your own promotions to get them to come back, and up-sell them while they’re there.  Try to get Groupon clients to subscribe to your newsletter or other continuity program, and collect their information so you can work to build a relationship and some kind of loyalty with them.  Great article!

  • http://pulse.yahoo.com/_5HIASQH37U2G7P3ILOYEXC4DYM Matt

    Steve, I’ve known several trainers who have had success running their own Groupon-style deals.  It all depends on how you personally tailor it.  If Groupon isn’t able to accommodate your wishes, then it’s a no brainer to pass.  However, in a situation like yours, you are able to personally perform a service and not just give away a product.  Risky, sure, but bottom line it’s one of the best ways to meet the most potential clients in a short amount of time – you just have to be prepared for those only taking advantage of the deal.

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  • Annette

    Nakia I work for a new website called BikerGrub.com. We are connecting motorcycle riders to all the great independent restaurants, bars, bike shops etc…throughout the country. We have started in Ohio because that is where we live but plan on expanding as fast as we can manage. Check it out and let me know what you think.

  • Natasha Smits

    I own a skin clinic in Southbank Melbourne, with 3 staff.  We are busy with our regular established clientele, we operate at a high standard and we are constantly being contacted by these mongrels who want me to offer my services at below cost, assuming that I need them when I don’t.  I can’t even type in this box without tears coming to my eyes.   I am writing here to the 500 clinics who closed in Victoria in the last year.
     
    “To my friends in the industry who have lost everything, to those I haven’t met but whose names I knew through the long, established reputations of your businesses, whom I know by name, by brand, by the good things people have said about your clinics and salons for many long successful years.  To those friends and colleagues, who have lost everything to this ruthless campaign by larger companies prepared to rinse you for all you were worth, those aggressive corporates of nil integrity, who perhaps spoke a marketing language more eloquently but with less integrity than we… I am with you, beside you, behind you and for you, as you recover from the loss of your dreams.  You were not silly, you were not ignorant, you were tricked.  I and other business people of like mind are here, standing firm against these giants.  We will not be fooled, we will continue to represent the best of our industry and when this is over, your industry will welcome you back to the fray of competition.  Don’t give up on life, as some of you have.  Talk about what has happened to you so that others can avoid this terrible fate – the loss of their dreams, businesses and the work of many years. ”

    It costs $30 an hour all up to employ a beauty therapist, more for a dermal therapist.  Consider the self respect and income of the woman performing your facial – what is her life like?  Is her boss suicidal?  Does she have any hope of career progression in a salon that offers coupons?  There is none.

    SAY NO TO COUPONS.  SAVE YOUR LOCAL SALON!  KEEP AUSTRALIAN BEAUTY THERAPISTS IN JOBS!

    Natasha Smits
    CIDESCO, Dip. Beauty Therapy
    Owner Natasha’s Skin and Body Southbank

  • Natasha Smits

    This strategy would assume you had any hope of competing with the marketing or newsletter of Groupon.  Do you think you can do that?   Compete with the likes of giants this size, with the marketing teams behind them?  Anyone would be a fool to think so.
    This strategy is only valid for those who are already locked in Groupon hell and trying to save what they can.  Everyone else needs to just not do them in the first place.  
    JUST SAY NO.

  • Natasha Smits

     Mary I’m glad to hear you had a positive outcome and your business was not negatively affected.  You are definitely in the minority. 

    The problem is that those who’ve gone out of business are often too ashamed to speak up.  The feelings of isolation, despair and failure run deep and prevent complete disclosure of the loss. 

    I am interested to know which industry you are in and what kind of a deal you did?  Did you feel your rep was aggressive in pushing for terms that suited them better?  Are you the kind of person who negotiates well and is strong in conversation?  Many are not and are being bullied into deals that hurt.

  • Robert

    Hoteliers, in particular, beware. If you need Groupon, and worse still, Groupon+Expedia following the recent tie-up, my guess is there’s something drastically wrong with your current sales and marketing. Groupon is not for selling hotel rooms. its legalised robbery at a time when rates and revpar are still under severe pressure. Its a numbers game to make Groupon money, no more, no less. Does Groupon care about the customer, the experience, and the hotel(supplier)? – not one bit. I know of many hoteliers who have had problems. Ask a hotel that uses them about their experience. Its the real world you know. Roll on the next Trip Advisor review.

    If you currently are represented in any way shape or form with Expedia, think twice before you are railroaded in to the ‘Expedia-Groupon experience’

    When will all the leading industry hotel brands get together and tell these third parties – its 5% commission or we’re off? They have a big enough slice of the market to do it, but all the so called experts are on the wrong foot, talking about the benefits of these TPI’s and how to ‘maximise’ your dealings with them as if they were sacrosanct. Time for some realism.

    The day of the hotel brand will be over if the daily deal and bargain market gets much stronger, the big brands need to be aware of this. Look at all the noise about American Airlines among the intellectuals – because they were right.

  • Rachelann1

    My spa did Groupon back in October, and we almost closed in December.  I had to make significant paycuts across the board to keep in business, which made me cringe and lost me a long-time employee and another short-term.   I was working overtime, losing money and there was no end in sight.  We sold almost 1,000 Groupons as a very small business, because Groupon would not let us limit it more. 

    We thought we were being smart about it, and had measures in place as this article suggests.  I had negotiated so that we got almost 60% of what Groupon took in, with no credit card fees taken out.  We also immediately implemented a rebooking program, and all of the massage therapists were coached on it.  Our phone person was coached (and very skillful) at up-selling folks to add-on time and services. 

    Even with these plans in the works, upselling at least 30% of Groupons, we were losing money.  We lost full paying customers, because the times were booked with Groupons (even though we somewhat limited Groupon bookings and learned very quickly not to put them in the most popular spots).  We rebooked about 20% of Groupons as they were checking out, but only 5% returned.  The cancellations were almost all last minute, even though we have very clear cancellation terms on our intake and we made reminder calls the previous day.  We had very clear terms that only new clients could get the Groupon, and only one use per person, but people very obviously didn’t read that, so we were faced with making a customer very, very angry, or giving in.

    Groupon also significantly lowered the perceived value of massage in our area.  Other spas did it too, and I don’t know how they have faired, but we get a lot more “shoppers” on the phone now, asking our rates.  Rates around town have dropped, which I am sure has a lot to do with the economy, but I bet has a lot to do with Groupon too.

    While there are a few notable exceptions of good return clients (about 5% at this point), many, many Groupon customers are very, very poor customers.  They come in the door expecting extra-special treatment.  If they upgrade on the phone, more than one has cancelled that upgrade, or simply refused to pay for it after receiving it.  They have no plans to ever return.  They have wreaked havoc on the schedule with cancellations (we always get credit cards now and explain the cancellation policy, so most of them just don’t book).

    On the positive end, we have made a few customers that I believe will stay long-term.  I look forward to it expiring, and getting some profit out of it in the end if possible (I hope so, anyway!).  It greatly increased our traffic on the web, so that we are consistently #1 on Google (in addition to Groupon, we also have a web designer on staff who does a great deal of SEO for that as well- so that is certainly not all Groupon although it did help).  We had to completely revamp our spa and our operations in a very short period of time, while myself and my manager (a good friend of mine) worked overtime for next to nothing for 3 months.  (when the Groupon came out, I paid myself $200 for the month, and her 3 or 400).  Oh, right, positives…  it did boost our business (though we lost money for a while).  We are now on the positive side, if you do not count the thousands of hours of time I put in that were not compensated.  My therapists got more business, but are not real happy to get a “Groupon”. (even though I discussed it individually with each staff member, and basically got their permission before running it).

    If I had to do it all over again, I wouldn’t do it.  Those were the most stressful months of my life, and the results?  We are on the positive side, but we are still struggling.  We have made improvements, but customers don’t want to pay full price.  If you own a small business, stay away from Groupon, unless you have such a huge profit margin that you can afford to give away your services.  Don’t forget about the time involved that will be unpaid, and the extra stock and supplies (even paper towels!), and the extra man-hours you will have to pay.  Your cell phone will go over minutes resolving stupid problems because people don’t think the fine print should apply to them.  We had an angry review on Google about this situation, even after we refunded them in full.  Groupons customers, by and large, are not the people you want in your business!!  Business Beware.

  • Robert

    Well said re the demographics!  Also I find the biggest complainers generally are the ‘cheapskates’ so you’ve a potential customer service problem. Our top paying customers are usually our best customers, because they have a value concept. This cheap as chips selling is a complete no no for a respectable business.

  • Annette

    Natasha thanks for your input. As I said Groupon can put a small business out of business and you experienced the stress from that possibility first hand. Your input is invaluable to business owners everywhere. Best of luck and much success in the future.

  • maryframer

    Natasha my business is custom picture framing. You can see our deal here http://www.groupon.com/deals/frame-nation-custom-framing?c=all&p=3 . This is the second one. The first was in Oct. 2011.
    My rep, Caitlin, (out of Chicago) was very good. She was attentive before and after the deals went live. Not aggressive at all. I never felt bullied and if I had been in the least, I would have immediatly been turned off and ended the conversation.

  • JustaskD

    Great
    article! Groupon, Living Social, Amazon etc. are good vehicles for small
    businesses to bring in new clients with the understanding that it is up to the
    owner to create the best deal for their business. Business owners can’t really
    blame these companies for revenue loss if they were solely responsible for
    creating their own offer. I would suggest a very limited timeframe for the
    offer to be used and also looking at products/services that have not sold well
    in the past and promote that in the coupon vs. anything else. Then the revenue
    that is generated will be a benefit to the business while giving the owner the
    option of developing new clients and repeat business. If you don’t know how to
    build client relationships, up sell to other products or services that your
    business has to offer, it is the owner and staffs issue for failure to make a
    profit in the long run not Groupon etc. Business owners have to be smart and do
    what is best for their business and not just go with the flow thinking
    everything will take care of itself if you put it out there. Being able to move
    stagnate product or pushing poor performing services with the creation of the
    right discounted offer could never be a bad thing once traditional types of
    branding and marketing are explored. If you need a business coach to help you
    achieve your full potential go to http://www.denisedema.com

     

     

  • A2ZMeetings

    It is a good strategy for “dark inventory” on perishabe products. The deal is only offered for one day and it highlights your business tothousands of folks who would never know you existed. Don’t take the business when it can be sold at full fare. It is typically good when it is a service as most of the staffers work for gratuity and I always tip at least 20% on the retail value so it helps service industry staff to generate income when they might otherwise be sitting alone. Coming from the hospitality industry there are many marketing opportunities to generate new business in the underground world … many of them cost quite a bit and the return is not overwhelming. This delivers a high volume of deeply discounted business that may never buy you at full fare. If profit margins don’t make sense, find another strategy.

  • alex

    i’ve been in marketing for over 20 years and have always steered my clients away from couponing, it cheepens brands and the greatest example of this is arby’s restaurants, they did the 5 for 5 deal years ago and now they can’t stop doing it because otherwise no one will eat their food. need i say more!

  • http://MarketingNinjas.com/ Jeff Schneider

    Great article! I commonly recoommend Groupon to clients but we always make sure we’re strategic about it when we do it. This usually means offering a product that they’re not going to totally lose their shirt on or a service that can be performed quickly. The number one thing I recommend to my clients is to ALWAYS have a special up-sell offer just for new Groupon customers. This works great for service clients because the up-sell offer is always a package of some sort that has that client coming back multiple times. This gives them an opportunity to engage with them and build a relationship with them and the likelihood of them becoming a regular client is far greater. 

  • http://www.engagingdentists.com EngagingDentists.com

    Hi Jeff, what kind of retention rates do your clients see when using Groupon? And have do they offer the same deal or at least let current, loyal customers know of their promotion? If not, what kind of fall out have they observed?

  • Guest

    seems like it won’t stop growing though….says marketingvox- http://www.marketingvox.com/q-with-500-plus-daily-deal-sites-now-is-deal-fatigue-on-the-horizon-049387?utm_campaign=rssfeed&utm_source=mv&utm_medium=textlink

  • http://MarketingNinjas.com/ Jeff Schneider

    It’s totally different depending on the product or service or industry the client is in, but it’s not uncommon for them to convert 5-10% sometimes even as high as 25% to the up-sell. Of those, they might convert a quarter to a half of them to new repeat customers. As for offering the deal to current clients, sometimes they do and sometimes not. Most of the time the Groupon user is told verbally about the special when they come in to redeem their Groupon. If a loyal client asks about it I recommend the extend the offer to the current client too. I haven’t heard of any of my clients experiencing a fallout since I educate them on how much harder it is to attract a new client than it is to keep a current client happy. Hope that helps.

  • Petersmithfacilitator

    Wow, I think I just read every comment on here. Amazing passion of small business owners always inspires me. You all deserve the best in business for your integrity and appreciation for value. 

    What is conspicuous in it’s absence, and I may have missed it, is a comment/response from Groupon; if they we’re playing this game fair and square, they would be listening in to this dialogue. They’re not. That says volumes.

    Stay true folks

    cheers, 

    Pete

  • http://www.juditmdesigns.com Judi Muller @ juditmdesigns

    I sell handmade jewelry on ZIbbet (an online marketplace) and they just started offering Heartsy:

    “Heartsy, ‘the Groupon for handmade’, have contacted me to invite all Zibbet sellers to apply to be featured on their site.  They love our sellers and we love their site too!  We encourage all Zibbet sellers to apply to be featured as it will surely bring you sales if you’re lucky enough to get picked. ”

    Glad I ready this article first – I’ve posted it on their discussion board because everyone seems to think this will be the answer to their marketing woes. The margins on handmade items are so low already – I don’t know how people think it will help them….

  • http://www.directresponse.net David Polykoff

    I completely agree when you say that using Groupon and letting people have 50% discounts deteriorates the value of your products.  People rely on Groupon’s discounts in order to purchase items are your store so once they go, the customers go with it.

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  • Sudsie

    Great article.  I have a small mobile laundry service business that I’m about to start and I came across groupon in a google search when looking for ways to market my services.  I’m not sure if they have this listed on their website (maybe they do) but I was a little confused as to what exactly was in it for the groupon people for marketing my business.  When I emailed them, they responded promptly.  I was told that if I set up a store on groupon, I would be responsible for advertising my groupon store myself.  Then, groupon would take 30% of the already heavily discounted sale price.  Worse yet,  if my business was chosen as a feature business then Groupon would advertise but would take 50% of the profits from the already drastically reduced sale price of my services.   When I factored in my expenses,  (including that of advertising my groupo store, utility costs, cost of detergents, gas for delivery service and labor…  I came out in the hole for every groupon sale).   Basically the only people who benefit from Groupon is GROUPON and the customers because a business like mine would end up in the red.  Maybe if you had a product or service that is heavily marked up to begin with where you are recognizing a tremendous profit margin that groupon might be worth it.  But a business owner who only recognize a modest and reasonable markup on their products and services, would have to be wary of exactly “what’s in it for them”.  Sure,  maybe you’ve got money in the budget to sell your stuff at a loss in order to get your name out there and get people buying from you.  However,  as your article points out,  how loyal are these groupon customers to your business when all they are doing is chasing drastically reduced prices?   

  • Colin

    Fantastic article, we were about to jump on the band wagon with little thought, having read this we are going to look at the bigger picture befor agreeing to anything!

  • Mark Hess

    Thanks Robert. Sorry for the late reply; working like crazy. What kind of work do you do?
    Mark

  • Mark Hess

    Thanks Robert. Sorry for the late reply; working like crazy. What kind of work do you do?
    Mark

  • http://www.voucherpages.ie Ronan Hickey

    Yes, really believe that a business has to think about how best to make a deal work for them and also the the deal promoter can explain how best to make a deal suit an individual business. While I agree that daily deals sites work best for repeat business services such as restaurants and other services, it can also work very welll for one off products like running shoes. Maybe a store has a lot of last seasons stock or certain stock do not sell very well, if they discount these items they can encourage sales of the poor selling items and also get people into the store to upsell and cross sell by showing them new ranges and other product ranges

  • Robert

    Have any of you really tried to negotiate the deal/commission, and what’s the best result you’ve had?

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  • daniel@ uk deals

    Hi, I really dislike groupons exploitative nature, and firmly believe it is a product if the recession….however as with anything in the economy, markets, prices and discounts are driven by supply and demand…..business that arent doing well produce a supply of uk deals and cash strapped consumers certainly demand the uk deals. I only wish groupon paid uk taxes!!

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  • http://twitter.com/lovesail LoveSail

    I was considering using Groupon to attract more customers to my business, but having read your article and several others, I won’t be!  I have decided to remain loyal to my existing customers and use another form of marketing.  Using Groupon could attract the type of customer I just do not want, and then I’m stuck with them.  Thanks for a very balanced article.

  • http://www.facebook.com/profile.php?id=100003040115089 Wesley Taylor

    Love your view point!!

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  • Roy

    Right now I am hearing the siren call of Groupon. I have been playing with many scenarios in my head,  some end with me in a cold sweat, fearful of how I would pay the rent, while others see me with 10 new customers a month.  For me I have to be very careful, because I am a website designer.  I don’t want the coupon to read like a contract, but I don’t want someone saying “I’ll take a website, just make a new Amazon.  Here’s the groupon.”

  • http://www.facebook.com/rick.brewer.9256 Rick Brewer

    If you are a small business owner – find another way to promote your business. Groupon’s deal structures destroy the market. If you a service company you better be prepared to run the deals yourself otherwise  – no making money and people that cant upsell make no money. Are you willing to take $12 to clean a house for 3 hours? Are you willing to take $19 to clean 900 sq ft of carpet? Then you have to deal with customers tht have disgusting homes haven’t cleaned in over a month but want a deep clean. You also have to have the man power to pay people to answer the phones. The same person will call leave 5 messages that you have to listen to . People get ticked when the cant get a next day appt. I like the woman who told the cleaner she was go to “work her like a dog for the next two hours”.  LEts not forget groupon’s refund policy – they give them out like candy to children. Get your house cleaned for free because even with before and after photos of a really disgusting home they still gave a refund. Oh it comes out of groupon’s pocket but counts against your business as a refund. Groupon now holds funds if they have too many refunds initially for a year! Can you wait a year to get your money and serve the customers? They used to run good deals now they run dirt cheap deals trying desperately to make more money but it screws the little man in the long run.

  • http://www.keystoclarity.com/ Louise Crooks

     I believe the danger with cheap deals and negative effective on brand loyalty is if you do it often.  If you do it once or twice a year, I don’t believe that would happen.  It’s a bit like real stores who have sales on all the time, you’re not going to pay regular prices if you know its coming on sale.

  • http://keystoclarity.com/ Louise Crooks

     I think you make a key point here – when you can sell products that are digital, you’re actually not losing any income, and having them fly off your shelves  – you’re actually making money on something you might have been doing nothing with.  I’m excited to see Groupon doing more digital products over the last short while.

  • http://keystoclarity.com/ Louise Crooks

     Leveraging these folks coming into the salon is paramount. Giving them a great experience will bring them back.. Upselling to other products and services while they are there is going help profit margins. And getting them signed up on an email list to share about upcoming events or deals instore, will have them coming back.  You have utilise the situation to your best advantage so approaching this with a strategy is important.  Should Groupon teach that to you…I don’t know.

  • http://keystoclarity.com/ Louise Crooks

     We’re thinking alike here Warren. I think its a trap a lot of folks are falling into.  It has to be with the end game in mind.  Strategy is paramount.

  • http://keystoclarity.com/ Louise Crooks

     I’ve had a similar experience to you Al, I used a groupon for a restaurant not far from my home that I had never thought to try.  We went, the food was excellent, the regular prices were reasonable, and the service was good.  We’ll definitely go back.  (and of course we tipped the waiter on the full value of the bill) 

  • http://keystoclarity.com/ Louise Crooks

     this is where Groupon allows you to set limitation on a when a Groupon can be used.  It might serve the restaurant to have groupons come in on specific nights of the week that are much quieter…they are then kept busy and can give their new clients great service which would ensure they come back a second and third time…

  • http://keystoclarity.com/ Louise Crooks

     Great to hear your experience and how you prepared for the onslaught and still got nailed in different ways, you probably hadn’t anticipated.  Thanks for being so open, its a great lesson.  I still believe Groupon can be an awesome way to get new traffic to a business, but the cost/benefit analysis really needs to be looked at on a case by case basis.  Hope your business is now benefiting from what you went through.

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