Groupon attracts many small businesses due to it's large email user base and on the face of it free marketing. We if you delve a little deeper into how Groupon operates you will see it's not all it's cracked up to be and it could be a costly mistake for your business.
There are usually huge discounts involved (50% or more) to incentivize
buyers and the general idea is that by offering a big discount on your
products or services, people will try out your offerings. They may well try out your services but as Groupon holds the database of buyers how are you going to entice customers to return for repeat business?
|For all of you who are not familiar with Groupon,
Groupon is a service that offers a really great deal for a product or
service once per day. They have an email list of over ten million
people and if you contact Groupon to be included on their
“deal-of-the-day”, you can get the word out about your business to
millions of people you would otherwise never be able to reach.|
What is not explicitly spelled out is that they take around 50% of your revenue
as a fee for using their service. So given that most Groupon campaigns
offer the end customer around 50% off, let’s run some numbers here.
Say your product retails for £100. By giving a 50% discount to
customers, you will only make £50. After Groupon’s 50% cut, you only
get £25 for something you normally would charge £100 for. Depending on
what your markup is, it better be more than 400% otherwise you could
potentially lose money on every transaction!
Using a Groupon takes the spotlight away from your business. After all,
it was Groupon that provided your customer with the coupon and the
unbeatable deal. It was Groupon that made your customers’ purchase
exciting and fun. As a result, customers are more likely to brag about
the groupon and not your business.
To add to this with such huge discounts it can bleed your business of any profit.
Should You Use Groupon For Your Small Business?
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