As consumer’s in today’s tough economy, we are on a constant search for deals. Searching for sales and coupons has become a way of life. So it stands to reason that the companies providing coupon deals are doing well. Some of them very well. Take the most popular one today – Groupon. The concept of group coupons – those that go into effect when a group of people agree to take advantage of them – has revolutionized the way consumers search for and redeem deals. And it has quickly made Groupon worth billions. There is no doubt that for consumers, it’s a huge hit. But for retailers, maybe not so much. It all depends. To determine whether or not to take the group coupon plunge, first you need to make sure you get all the facts.
Group Coupons – The Good, The Bad and the Ugly
Doing business in this economy is tough no matter how you slice it. Consumer spending is down, and competition is fierce. Retailers in particular are pulling out all the stops to get customers to spend a few of their hard-earned dollars with them instead of their competitor down the street. Group coupons are one way a business can divert business their way – at least momentarily. Here we break down the good, the bad and the ugly sides of group coupon sites like Groupon and Living Social.
The Good
For a business that needs to drive in new traffic – and lots of it – group coupons will most certainly do the trick. A restaurant that normally sees a modest weekday crowd can increase their customers tenfold (or more) by offering a $25 for $50 worth of food and drink coupon Monday through Thursday, for example. A nail salon that normally books 10 appointments a day can literally have thousands of new customers calling to book. If you’re ready for it (and you’d better be ready for it) offering a group coupon will increase your traffic.
Group coupons can also help your business get noticed. Many small businesses don’t have the advertising dollars to tell the world who they are, where they are, and what makes them worth a visit. They also don’t have the benefit of having an opt-in e-mail list thousands strong. Offer a Groupon, though, and suddenly your small business is smack in front of thousands of potential customers. Whether they take advantage of the deal or not, you’ve received tremendous brand exposure. And you have the opportunity to become a regular for customers who may have never found you before.
The Bad
While driving a tremendous amount of traffic to your location may sound like one of those problems that you’d like to have, it may actually backfire if you’re not prepared. Take for example Crystal Nails in Chicago. Their $28 mani pedi deal actually did some harm to their business. It drove so much traffic – over 5,000 Groupons were sold – that some customers were forced to wait for up to 6 months to take advantage of their deal. And on top of that, for every day of those six months it was jam-packed with back-to-back appointments. Customers were forced to wait for long periods of time for their scheduled appointment, and the staff was stressed out to say the least. It’s a classic case of ‘be careful what you wish for!’
Another problem with offering a too-good-to-be-true deal to your patrons is that it makes them question if what they would normally is too much. If you can offer $50 worth of food for $25 today, why not do that all the time? Now, most consumers aren’t really that naïve, but offering over-the-top deals can devalue your products and services. If you do decide to do a group coupon, your best bet is to remind your customers that this is a one-time only deal, and assure them that still-valuable offers will come their way should they become loyal customers.
Finally, the worst part about group coupons is that for all of the traffic and all of the leg work involved in making sure that you’re properly prepared for it, it’s not profitable for most. Unless your margins are very high, or you have the ability to make up the money lost in add-on sales (such as alcohol if you’re a restaurant), you may actually lose money during your group coupon run. You may decide that the gamble, and potential loss is worth it to secure new customers long-term, but your business needs to be prepared to do a whole lot of work for not a whole lot of profit. Most group coupons sites requires that your offer be deeply discounted, and they take 30-50% of that. So, your $25 food gift certificate worth $50 when redeemed could actually yield you a mere $12.50.
The Ugly
Those that argue against the group coupon movement say that this method of devaluation of goods and services is ultimately very bad for business – whether they participate or not. They say that consumers who live their lives via these deals will not be loyal, but will instead be quite the opposite – utterly disloyal, on a never-ending search for the next big deal.
The bottom line is that only you know whether or not taking the group coupon plunge is worth the risk. Our short checklist of questions to ask yourself can help. Also, ask the businesses who you know have done Groupon, Living Social or other group coupon offers about their experience and their return. Ask them during the deal, then again 6 months later and see if their story is the same.
Things to Consider Before Doing Groupon or Living Social
· Is my business and staff set up to take the sudden increase in traffic?
· Are my margins substantial enough to sustain a 75% or more cut, or will the add-on sales make up for the loss?
· Is the potential devaluation of my goods and services worth the immediate return?
· Do I believe that the effort will generate repeat or long-term customers?
If you answered ‘No’ to one or more of these, only enter into a group coupon eyes wide open, and know that there is a risk of a down side. If you answered ‘Yes’ to all or most, and are ready to take the group coupon plunge, consider working with a marketing firm to help make the most of your effort. A marketing pro can help work with the coupon provider to craft the best offer for your customers and long-term goals, and can help you do other items to make the most of your group coupon experience.
Making Group Coupons Work
In addition to doing some leg work up front to craft your best offer – the one that will not only get you the increase in business you want, but be beneficial long-term – there are things you can do to make the group coupon experience last. For example, for those taking advantage of the offer, keep track of them and do your best to get follow-up contact information (e-mail is best). This way, you can offer them deals directly in the future, and save the hefty fees. Also consider offering a loyalty program to your group coupon redeemers to entice them to return. You can also gain more exposure for your company and help stay connected with customers on social media sites like Facebook and Twitter. In addition to having the group coupon site send your offer, post it to your own social media sites and get people to pass it along. Bring them back to your Facebook page to ‘Like’ you, for example, and you’re on your way to building a nice following online.
Are You Ready to Do Groupon, Living Social or Another Group Coupon Offer?
Let Digidaze be your guide to group coupon specials. Call us at 1-855-digidaze (344-4329) or visit on the web at www.digidaze.com.
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