Several people have asked me recently what I think of the Groupon concept. It’s an interesting one, so let’s explore it a bit.
If you don’t know what Groupon is, it’s a website that offers a deal of the day that must be purchased within a very short period of time, usually within one day. Most offers are done on a local basis. Interested prospective customers sign up for email alerts and get a daily deal in their email. The customer is happy because they get a great deal and theoretically the merchant is happy because they get a flood of new business without paying anything upfront. This is achieved because Groupon takes all of their commissions on the back end as a percentage of the deal value.
There are several daily deal sites out there. Here in the Dayton market, the major players are Groupon, Living Social and Reach Magazine’s Big Deal. Essentially, the programs all work fairly similarly. Groupon is the pioneer of this concept and overall is the biggest player in this niche. However, when I use the word “Groupon” in this article, I’m referring to any of these types of programs.
Now that you know a little about the Groupon concept, should you be using it in your own small business? Well, maybe.
Groupon works quite well and you will certainly get the exposure. You just might not make any money long term from it. You could even lose a lot of money if you’re not careful.
The Groupon concept works well if you have a system to bring back the customers that came to your business in the first place from a Groupon. Essentially, lure them with the Groupon (even at a small loss) and wow them with great customer service to bring them back for more.
The Groupon concept also works better for certain types of industries. For example, if your business is more of a fixed cost type of business like a bowling alley, movie theater, hotel or golf course, then Groupon can be a great idea as you are just getting rid of your excess capacity that would have probably not gotten sold anyway. Just make sure that you are able to target the Groupon on your slowest days and months. It’s also works pretty well for more service type businesses like massage therapy and day spas.
However, if you are in a retail store with merchandise, watch out. Many retail stores had problems with their Groupon promo and lost money because they were selling the promo for below their wholesale costs.
Strange concept isn’t it? In most forms of advertising, the big problem is not generating enough business from the ad. With Groupon, the big problem often times is getting TOO MUCH business. You need to know your numbers. If 5000 Groupons got sold, would you be able to handle the excess business? If you don’t have a large, well trained staff, that answer is often no.
Personally, I’ve also noticed that I’m often buying Groupons for businesses that I’ve already frequented in the past. I’ve gotten feedback from other people and merchants that have noticed the same thing.
For merchants, instead of plunking down huge chunks of cash on a Groupon promo, they could have done a lot of other things to get their customers back that were much more economical than the Groupon.
For example, the merchant could have hired a minimum wage telemarketer to call all of the customers that bought something but didn’t come back. The telemarketer could have offered a special right then and there over the phone to lure the inactive customer back.
The merchant could have also created a Facebook Fan Page and told their customers in the store to join the page. They could send out specials through the fan page on their slow days.
Alternatively, merchants could also deliver coupons through their website and require the customer to give an email address in exchange for the coupon. This would be connected to an email autoresponder and then the merchant could send out follow up emails to their list whenever they were having a slow day.
Merchants could also set up a text messaging system where they would send out their specials by text message.
All of these follow up ideas work and they work quite well. If your business is considering a Groupon promo, you should have these follow up systems in place first before pursuing the promo. If you combine the Groupon concept with follow up systems your business will thrive.
Source:
http://daytonseoservices.com/is-groupon-a-good-idea-for-your-business/