Gripes With Groupon

Groupon Review How To SuccessDuring one week awhile back, the topic of Groupon came to me from three different sources/people. The discussion being the notion that Groupon will eventually collapse and cannot sustain its current model. It was kind of interesting as I just read and listened to their gripes, I do try to be a good listener :-) But it really got me thinking and assessing the situation. Here is my personal take and insight on the real underlying issue with Groupon, and my own gripes about the gripes if you will.

The people griping the most tend to be the local independent business owners. So let me say this: the problem with Groupon is NOT with it’s business model, but rather the fact that most small independent business owners DO NOT know how to do proper advertising and marketing. Nor do they set a budget to do so.

Targeted and used by many small and local businesses to increase their market share, I believe they using this service incorrectly. They use it to get a rush of people coming through their door to boost sales when they are going through a slump or to get new busienss, or so they think. Going with Groupon is not, and should not be about increasing sales. You are going to have dozens, if not hundreds of people all come through your doors paying for your product or service at half-price, (not to mention the percentage Groupon takes) which means your actual profit is going to be very slim. Surely not what you built your business on in terms of being profitable. You have to factor that loss, or rather change your strategy and consider that an advertising payment that has been built into your advertising budget and overall business profitability projections. Important to note however, is good advertising works on the long haul. You don’t place one ad and have people come flocking in, you absorb advertising as a cost long-term to increase awareness and get people in YOUR door as opposed to anyone else’s. Groupon, therefore, should be used as a PART of your overall advertising and marketing plan in order to harness the power of Groupon’s effectiveness for your biz. What seems to happen is businesses, is they think this will help them but are experiencing a loss.

Which leads to the next element of this problem with Groupon that has nothing to do with Groupon, but everything to do with the business owners who do not know how to do effective marketing. Customer retention is everything, so each business owner before they even consider doing Groupon needs to have a plan set into motion. Let’s say a restaurant offers some discount dinner special. Well, that’s great; I just got a nice dinner out for 50% but guess what never happens? They have no way of reaching me again. And I’m not talking about examples of let’s say a fitness class where you get added to a random email list for the local gym that you now get class schedule updates. I’m talking about having a real campaign to actually GET those customers to come back. Google “direct email marketing tips” and work on developing a solid and creative plan in advance to get the most bang for your buck when Groupon sends that rush of people through your front door.

Additionally, we live in what I like to call a costco-cost-saving society, so this other fear from biz owners that Groupons continuation is going to drive down prices across the board and put them out of business because no one will ever buy full price again, is false. This is not a Groupon issue; this is a United States society issue and how we value (or not value) the energy of money and exchange. When you throw down your credit card not thinking about whether or not you can really afford it, that’s a bigger issue, which has nothing to do with Groupon. When was the last time you paid full price for anything? We as a society value sale prices. Even the fashion industry uses this psychology to set retail pricing. They’ve done studies and people will pay $50 for a sweater that has a retail price of $100 simply because it’s marked half price, vs. a sweater that retails naturally for $40, even though the materials are the same. So in reality Groupon isn’t changing the name of the game, they’re just getting in on it. The biz owners have to know their profitability margins and how to make it work.

If businesses can incorporate Groupon more effectively into their advertising and marketing the way it’s designed, it can go on to have a long and prosperous life. Not that there won’t always be gripes about various things along the way, but perhaps this sheds a little light on part of where some discrepancies may be as I see them. And hopefully some insights on how to think about Groupon to work with it to really get good, long-lasting and more importantly, profitable results.


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