Lots of people are talking about Groupon and how great the deals are right now. After all, whenever you can get 50% or better off a product or service, it has to be a good deal — right? Well, it depends on which side of the sale you are on as to how beneficial it really is. It should be good for the customer, but is it good for the seller as well? And, don’t forget that Groupon gets something out of the sale too — so is there enough left for the seller to make a profit? That is the real question.
Benefits of Groupon to a Business
- It is a great method of advertising and attracting customers especially to a new or small business by providing exposure to its products.
- If you have unsold or excess inventory, it is a terrific way to liquidate it — especially if it is no longer being produced.
- It should generate repeat sales, on the same product or service, or related ones that are featured by your business.
Pitfalls of Groupon to a Business
- It can bring a huge influx of customers that you cannot handle if you are ill prepared. In other words, you might not be able to meet the demand if you do not have enough products on hand or enough manpower to handle the increase in customers.
- You generally make approximately 25% of your normal earnings (50% discount and Groupon gets 25% as their fee too) so you need to calculate whether it is worth the risk and whether you can afford it.
- Ensure that the gift certificate laws in your state do not have any laws that might come back to haunt you — such as a five year term so that someone could come up with a voucher five years from now and want to cash it in.
Points to Ponder Prior to Using Groupon
- How much is it actually costing your company to offer the discounted product or service with Groupon? Is another intense marketing campaign of a different type more valuable than the one time shot with Groupon?
- Do your homework. Invest some time reading through GrouponWorks.com (Groupon’s site for businesses).
- Read up on actual experiences from other businesses. Here are 3 great articles discussing the use of Groupon in actual situations. In addition to reading the articles, please pay attention to the dialogue that takes place in the comments too.
1. Game On With Groupon
2. The Dark Side of Groupon Sites
3. The Dark Side of Groupon
Tips to Avoid the Pitfalls of Groupon
- Ensure you have adequate staff on hand in customer service and sales so you don’t get lots of complaints from unhappy customers who could not get help when they needed it. You can even hire temporary staff to cover the short-term need.
- Another way to avoid inadequate staffing is to limit the number of Groupon deals or products that can be sold. This should be clearly stated on the offer.
- Review the “details” thoroughly with the Groupon representative to ensure you understand the implications of all the fine print so you are clear on what your earnings will be and all the terms of sale.
- Set the limits for redemption or dates when they expire clearly so there are no misunderstandings.
- Customer service that excels will always win over critics — so the key is to ensure that you have a trained staff on hand to handle calls and know what the correct answers are so that everyone is following the same set of answers.
- Collect the data about the Groupon deal and understand the impact on your business and whether it was worthwhile. If so, you might consider doing another one.
The growth and popularity of Groupon has been phenomenal. However, instead of just jumping on to the “latest and greatest” form of business promotion and advertising, we encourage you to exercise due diligence and really examine whether or not Groupon is a good fit for your company’s products and services. If you have used Groupon, we would really enjoy hearing from you about the experience.
[We also invite you to visit our Groupon Deals page for links to the latest Groupon consumer offers.]
