The small business world is abuzz with the pros and cons of group coupon discounts. Some business owners I’ve met are thrilled with the results others said it was a financial disaster. Overall, online group promotions seem to work best for things like spa services, restaurants and recreational activities with mixed results for other kinds of businesses.
If you’re thinking of adding a group discount promotion to your customer communications marketing mix, read on.
First, it’s important to understand how these group coupon promotions work, so spend time exploring all the sites to check out as many deals as possible. Focus on companies in your industry to see what’s working for them.
Groupon dominates the group coupon industry with 38 million subscribers and deals in 160 cities, according to its website. Groupon also claims to have saved its subscribers $1.7 billion so far.
Both Groupon and rival LivingSocial rely heavily on the power of social networking to promote deals and discounts. According to information posted on Groupon’s site, the most successful promotions are aimed at “hip, active people with money to spend.” So if you aren’t targeting that market, think carefully about signing up to offer a deal.
On the plus side, the risk is minimal because you don’t pay anything upfront. Both companies rely on a team of talented copywriters who craft snappy copy and design your online promotions, often with very little input from you.
Groupon splits the revenue 50/50 with the business owner. Be aware that Groupon also charges a 2.5 percent fee if your customers use credit cards to buy Groupons. If you are hardcore negotiator, you can get a better deal, but it’s not easy.
Although online group coupons sound like a no-lose proposition, there are a few drawbacks. No matter how much you beg, at this point, Groupon won’t provide you with a list of the folks who participated in your deal. So, you will have to figure out a way to capture that information on your own. (I keep hearing the company is changing that policy, which would be great).
Your dealings with Groupon will be conducted via email and over the phone. (I called to contact a media relations person and a real person in the customer service department answered the call within a minute). Another positive: I went through the process of setting up a new business account and it was easy and quick.
LivingSocial adds a personal touch by having local sales reps visit small businesses in many cities. You can set up a deal online but if you prefer to deal with a person, you have that option. The financial deals they cut are similar to Groupon.
So, do these promotions actually translate into dollars?
In my travels I have met business owners who were thrilled with the results and others who regretted the experience. These entrepreneurs asked me not to use their names, but here is what they told me:
- A Northern California day camp operator offered a Groupon discount on a week-long day camp program. It sold out, but was a financial disaster. Why? New families enrolled their kids for a week of camp at a deep discount. This reduced the number of slots for kids whose parents who planned to enroll them for the entire summer at the full price. “I would never do it again,” the owner told me. “It hurt my loyal customers.”
- The owner of a pizza restaurant in Livonia, Michigan told me she tried a Groupon promotion a few months ago. The response was overwhelming, but “we lost money on every single customer who came in.” Worst of all, “long-time customers who didn’t sign up for the Groupon deal were upset when everyone else got a deep discount on dinner that night,” the owner told me. “I was also upset that Groupon kept half the money but wouldn’t give me the list of customers,” she said.
On the positive side, the owner of a vintage clothing shop in Detroit brought in dozens of new shoppers with a recent Groupon offer. “We offered 20% off the price of one item,” she said. “Most people bought more than one thing, so we made money.”
So, the question is, should you sign up for one of these services or do it yourself?
If your customers or clients are comfortable using social media and have already subscribed to Groupon and/or LivingSocial, give it a try. Start with a small offer and test the response. Be sure to prepare for a big response if your deal is a hit. You might need to bring in temporary help, stock more merchandise or order more food.
If you have a robust email list or plan to purchase a mailing list or database of prospects, why not create your own printable discount coupon? It won’t cost much to send it out via email, post it on your home page and hand it out to customers who visit your business. Be sure to post it on your Facebook fan page, tweet it out and use all your social media profiles to spread the word.
Your mission is to dream up an offer that appeals to your current customers. For example, if you own a bakery or café and want to boost sales of a particular item or promote something that isn’t selling well, focus on that to start.
Finally, why not ask your customers what they think would work for a group discount?
Ready to get started with email marketing? Check out pbSmartConnections. To learn more, or if you already have an account, click here.
Jane Applegate is an expert on small business marketing. She is the author of 201 Great Ideas for Your Small Business and can be followed at http://201greatideas.com/. Jane is not a Pitney Bowes employee and shares her insights on this blog as a paid contributor.