Is Groupon Good for Business?

Yesterday, my local paper ran several articles discussing whether using Groupon, the online group coupon service, is good for business.

If you’re not familiar with Groupon, here’s out it works – Groupon sends out a daily email to its massive list touting a coupon for a local business, typically half off of a product or service. To get the deal, a pre-determined number of people have to purchase the Groupon. Half of the proceeds from the promotion go to Groupon, the other half to the business.

When you look at the math, you can understand the conundrum. After all, it does seem rather strange to give hundreds or thousands of people your product or service for a quarter to half of the regular price. So, why would anyone in their right mind do this?

Exposure.

In Nashville alone, nearly 200,000 people receive Groupon’s daily e-mail. Even more see the deals on Facebook and Twitter. In the world of fragmented media and short attention spans, that is difficult exposure to achieve.

In addition to raising awareness, many businesses have seen success with Groupon, bringing in a bevy of new customers and a bump in sales – both a welcome sight in an economic downturn.

Despite the possibility of massive exposure and increased sales, not all businesses are down with Groupon. According to a research study released in a recent Forbes article, one-third of businesses lost money through their Groupon promotion. The Tennessean article also chronicled businesses that had mixed reactions to using Groupon for their business. Some had problems fielding the large influx of business. Others found Groupon buyers skimped on tips or didn’t buy beyond the amount of the Groupon.

Clearly, Groupon is not right for every business. So, who should try a Groupon promotion?

  • New businesses. If you’re just opening up shop, Groupon would be a fantastic way to get the word out to your community.
  • Businesses promoting a new product or service. This would be perfect for businesses that are established in one area, but are trying to expand.
  • Business in their slow seasons. If you run a seasonal business, such as a golf shop or outdoor recreational facility, reward people with the Groupon for coming in during the off-season.

If you decide a Groupon promotion is right for your business, here are some suggestions to help you get the most out of the experience:

  • Create an enticing, yet feasible offer. Some of the businesses that have struggled with Groupon promotions offer too deep a discount that they end up hurting themselves in the process. Make sure the promotion attracts customers, but doesn’t break the bank in the process. Also, craft the promotion in a way that makes customers buy beyond the promotion.
  • Plan for the masses. Once the Groupon promotion goes live, your business will be inundated with calls and visitors. Prepare for the large influx of business to prevent customers from experiencing long lines, website crashes or poor customer service.
  • Delight and impress customers. With hundreds of new customers coming in the door, make sure you go out of your way to make their experience a positive one. Find a way to set your business apart so customers will be clamoring to come back.
  • Capture customer information. Groupon doesn’t share it’s coveted e-mail list, so build in ways to capture customer’s contact information so you can stay in touch with them directly. If you’re business does social media, you can also invite them to connect with you online to help you keep top of mind.

  • Train the upsell. It’s possible to upsell customers without selling like a used car salesman. Train your staff how to encourage customers to try other offerings or add-ons when they visit your business.
  • Encourage repeat business. Many Groupon buyers are “one and done” customers. Find creative ways to get Groupon customers coming back — give them a customer loyalty punch card for Groupon buyers only. Or, offer something for Groupon customers who come back and bring a friend. Get creative!

Have you used Groupon for your business? If so, what was your experience?

Have you purchased a Groupon? Did it introduce you to a new business? Did you become a repeat customer?

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Laura Click

Laura Click

Laura Click is brand strategist, speaker, podcaster and the founder of Blue Kite. Learn more about Laura and her work at Blue Kite.

2 replies on “Is Groupon Good for Business?”

Laura, I dare say based on what I have seen, most product based businesses are going to get the short end of the stick.
Beyond that, the percentages mean a large chunk of local commerce is LEAVING your area… at least look for local ones such as tryitlocal.com or perhaps even your local paper or radio station has one?
Groupon is functionally sucking 70% of that revenue to Chicago…

All great points, Todd. The margins would cripple some businesses, especially those with a lot of hard costs. It works a little bit better for service-based businesses, but you run the risk of being crippled by the onslaught of new business. It’s a catch 22. It seemed like a good idea out of the gate, but I think the consumer often benefits more than the business.

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