If I told you for every dollar you spend on customer acquisition, you could make $.40 (or LESS!) with me, how much would you spend? Hopefully NOTHING. But for small businesses using Groupon, it’s not as far-fetched as you may think.
In the excitement of making coupons cool again, Groupon and other group deal buying sites have wooed thousands of local businesses looking for a sure-fire way to attract new customers. Sadly a large number of those businesses barely break even or worse, lose money when they use a Groupon to attract customers. Here’s 3 reasons businesses should think twice before creating a Group buying deal.
- Groupon promotes Quantity not Quality traffic to businesses. When a business creates a deal with Groupon, there is absolutely no segmentation beyond geographic targeting. What you get is to tap into Groupon’s email list of deal hunters. Yes, the new customers are local but a business owner must take into account the other factors that the additional un-targeted traffic brings with it. The bargain buyers are not your customers, they’re Groupon’s customers. In a study conducted at Rice University, it was found that only 20% are returning for full price purchases at restaurants, bars and other retailers.
- Groupon positions their product as an all-in-one solution and doesn’t educate local businesses on how to integrate the Groupon process into their marketing plan to RETAIN customers. For example a business might include an opt-in to collect email addresses from new Groupon customers so they can add them to their email list. Or they might include an up-sell to the Groupon deal. But many businesses don’t even have an up-sell to offer their customers such as this small business offering discount helicopter lessons. They also don’t teach businesses how to accept the Groupon deals and it makes for a very poor experience. I had bought a Groupon for Dominoes a month back and when I tried to redeem it, not only did the Groupon not work but the employees weren’t even aware that there was a Groupon deal available to their customers.
- Deep Discounts and coupons hurt your brand. When a new Groupon customer redeems a Groupon at a store, the perception and value to them is tied into that discounted price. This makes it extremely difficult to get a return customer out of the deal. Secondly, It affects you current customer base who will also buy the Groupons (thought they would have happily paid full price.) If your staff isn’t prepared for the swarm of new traffic a Groupon can bring, your current customers may experience poor service and note return.
Yes, I do realize there are businesses that have greatly benefited from Groupon. But I also know there are a lot more who have almost been put out of business by the coupon giant. So if you are considering using a Groupon, I’d really encourage you to do your homework and figure out how you are going to make it work with every part of your business. Here’s a great resource to some best practices that may help: Best practices for Groupon, LivingSocial or Google Offers
If you’ve used a Groupon in the past, let us know your experience and what you learned from it in the comments!