Grappling With Groupon

by Jay DeWitt on April 29, 2011

in Jay DeWitt, Marketing & Offers, O2O

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Last weekend, my wife and I stopped into a downtown Spokane restaurant and I noticed on their Chalkboard a message to Groupon customers, pointing out some of the features and limitations of their Groupon coupon. I asked the proprietor about their Groupon experience. She said she was very surprised by the number of sales, which approached 1000 customers, but was ambivalent about the whole deal, believing a lot of the purchases were made by deal-hunters versus the attractive new customers she was hoping for. She also mentioned another local restaurant which had sold over 2,000 certificates… and was worried about their success in a program that nets them about 25% in face value for each coupon sold.

I think it’s great that small, local merchants can use Groupon to offer marketing deals and potentially attract new customers… but I also worry for them. My worst case scenario is that the unique community merchant down the street signs up for a Groupon deal expecting a few new customers, but instead finds thousands of coupon-bearing price shoppers walking through the door, slowly, slowly putting that merchant out of business.

Small business owners, like the ones featured by Groupon, have to wear many hats each day: CEO, CIO, CTO, COO and CMO to name a few. As such, it will be the rare owner who has the time to sit down and really think through the consequences of a “successful” Groupon campaign on their business — both positive and negative — and make sure that the deal they negotiate with Groupon is a good deal for all parties concerned. I think this will happen more frequently over time, as the merchant community gets more familiar with these kinds of deals, and more deal performance evidence, both anecdotal and data-driven becomes known.

…But in the meantime, to all of my local, favorite Spokane merchants, please, before you do your next Groupon deal, make sure that you think long and hard about how your business will be affected if a whole lot of new (and existing) customers are standing at your door with their 75% off (to you) coupons!

 

7 Responses to “Grappling With Groupon”

  1. Allen Weinberg says:

    We’ll soon be at the point where we’re going to a “deals meta-search engine” to scan Groupon, Living Social, Plum, etc etc etc for who’d got the best deep-discount on carpet cleaning and such before buying anything. No surprise that Yelp is in the deals game now since that’s where many of us currently go to find local services.

    • John Tullis says:

      Try Yipit to search across the deal sites. (www.yipit.com) They aggregate about 90 of them for various cities.

      • Couldn’t agree with the post more.

        Yipit, DealRadar and DailyDealPool are meta-search engines. Google/offers and Facebook/Deals have also recently launched to do the same thing. Many people are playing in this space and the next evolution will be real time verses certificates. The Deal of the Day will soon be gone and replaced with something new that evolves from this behavior. You will probably see a similar story as the I-Pod moving toward the I-Phone and hopefully something that is more balanced for local merchants.

  2. Hi Jay!

    You are very right by saying that small merchants cannot be CIO, CTO, CMO, etc, so they can focus on the ROI of those Groupon “campaigns”. Here in Spain, small merchants are facing a very similar problem.

    On the other hand, I do also believe the idea of “deals meta-search engine” suggested by Allen, as I have heard that some giants are starting to go that way.

    In order to stop this “groupon abuse”, merchants should perharps get together to negotiate better deals and terms. They should push “Groupon” to offer only good deals to new customers and limit the number and value of the deals to those who have already been to that particular merchant. In other words, they should work on two kind of deals: acquisition and retention ones. It may be hard to monitor the “abuse” made by “deal hunters”, but merchants should really push to pass that responsability to Groupon, Living Social…

    In fact, if these giants do not look after this “abuse”, they will end up losing the credibility and profitability they still may have.

    If they just simply put a proper KYC policy on their sites…

  3. ArthurLR says:

    The problem with these offers is that they are one dimensional.

    If you only talk to your customer about price, then they will only talk to you about price …

  4. willr says:

    Terrific topic–thanks for the post. Interesting distinction between “new customers” and “coupon-bearing price shoppers.” That distinction or lack thereof, in my opinion, is the key piece of data missing from the equation: how many coupon-bearing, price shopping new customers return to a small business, but without a coupon. Groupon without loyalty or some type of tracking application, whether this is mobile or some other mechanism–even simply recognizing a return customer–is potentially harmful to small businesses.

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