Groupon: A Patch, Not A Solution

Groupon is a new fad that businesses think are going to rescue their business, but with a reality check you’ll see where Groupon should land on your marketing efforts.

Groupon is for giving unique or hidden businesses quick Mass Exposure, it’s not to be used on a regular basis for a Jolt to your business.

Let me explain.

First, let’s understand the premise of Groupon (for this I’ll look at their original mainstream product, not all of these new ones they’ve thrown on to the table to look more attractive for the shareholders). Groupon requests that you give a MAJOR discount on your product (I believe the minimal suggested amount was 33%, but it’s preferred to discount your product over 50%). This big discount is to really WOW the customer and to get them to come try your product. However, for most retail companies (restaurant owners, clothing or jewelry stores, etc.) they’re already working with such small profit margins that to give a 50% discount on their product they would be losing money. NOW consider how Groupon makes their buck. Groupon then takes between 40-50% of your discounted price. So at the end of the day, you end up receiving about 25% of your original asking price for your product.

At the end of the day, a Groupon sale will yield around 25% of your product’s original price. Always keep in mind, the initial Groupon customers are coming in at a LOSS.

I’ve seen far too many business owners celebrate at the fact that their store or restaurant has been SO BUSY with Groupon customers… but they’re NOT considering the fact that they are busy at a LOSS. Product is leaving their shelves and their workers are working extra hard at a LOSS. So does it sound like a smart strategy to continue inviting in more Groupon customers? By running a Groupon every 6 months are you adding a Jolt to your business to keep you alive, or are you only masking the serious case of your business by having bodies in your store?

So, am I saying that I totally hate Groupon? No, not necessarily. This gets me to my second point.

Groupon has a great use for MASS EXPOSURE. Groupon has a mass following of customers already. When your product is advertised with Groupon, thousands of people will see your offer and hundreds will buy in. Don’t forget, though, even if someone didn’t buy your product, they were exposed to your brand and your product.

So why would someone want to get busy at a LOSS?

If you have a unique product… if there’s no one else in the area who does what you do, or you have a REAL distinct advantage over your competitors but you’re just having trouble letting people know about you, Groupon is for you. Use Groupon to get your first 400 people in that door. Get people talking about your brand and your product. THEN you’ll start to be busy at a PROFIT!

Posted: January 15, 2012 - Blog

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