To close out the week, a friendly heads up…
Before you or anyone you know jumps on the “Deal o’ the Day” bandwagon with sites such as Groupon.com and livingsocial.com, you’ll want to consider the following, which their reps will most likely NOT share with you…
While these daily deals may be great for the consumer (my wife is a fanatic and has jumped on quite a few outstanding offers), they may not be so good for businesses.
Rice University just published a study of businesses that used Groupon and found:
“Groupon promotions were profitable for 66 percent of the businesses surveyed for the study, but they were unprofitable for 32 percent. More than 40 percent of the respondents indicated they would not run such a promotion again.”
The popularity of these kinds of sites is very attractive to businesses because it offers them a flood of traffic and exposure that they wouldn’t normally get on their own.
But as with most things, this kind of traffic comes at a price – sometimes up to 75% off the regular retail value of the product or service (which includes both the initial discount and Groupon’s commission).
I’ve heard several horror stories where businesses had undercut themselves so much they were unable to cover their payroll, or on the verge of closing up shop.
We could play the blame game till the cows came home, but rather than do that, let’s list some questions you’ll want to consider BEFORE you toss your hat in the Groupon game (in no particular order)…
- What is your limit for this coupon?
- Will this turn your coupon into a “loss leader”?
- How can you structure your offer to absorb the discount over a longer period of time?
- What’s your plan for upselling at the point of coupon redemption?
- Is your promotion targeting new customers or existing customers?
- What is your follow up plan after they redeem the coupon?
- How will you determine the success or failure of the coupon?
Don’t be seduced by getting lots of traffic (ahem, “Get on Page 1 of Google” SEO guys) and thinking that will be the answer to all your challenges.
It’s about CONVERTING whatever traffic you get into (even more) PROFITABLE RELATIONSHIPS.
And Groupon may or may not be the best way to get that…
Happy Friday and Cheers to your success!