The Good And Bad Of Groupon For Small Business
The Good And Bad Of Groupon And Small Businesses
The Good And Bad Of Groupon And Small Businesses

The only time my wife and mother-in-law have ever been excited about the Internet is when they get a quarterly email from Louisville Originals telling them when the next restaurant coupon fire sale will begin online. The coalition of locally owned and operated dining spots started the time-sensitive coupon deals in 2006 and area diners went nuts. Word of mouth about the 30 percent or more discounts to a really nice assortment of dining hot spots spread so fast, people without computers would rush to sign up and click. Little did Louisville Originals know it was preceding a now national trend in online deals and couponing that has quickly become a hot, yet not altogether perfect, marketing opportunity for businesses.

Groupon, the largest daily deal site and, according to Forbes, the fastest growing company ever, turned down $6 billion from Google. For consumers, you sign up for daily email notices, get invited to a 40- or 50-percent off deal at a business, often but not always a local one, and you buy the deal. A typical offer is something like $16 worth of Mediterranean Fare at Burning Bush Grille for just $8 (the Louisville Groupon deal last Tuesday). You have a limited amount of time to act and the businesses that offer the deals have the option to apply some rules (limit one per person, not valid with other offers, etc.).

Groupon logo.
Image via Wikipedia

But Groupon has its issues. Not only do they almost insist that a business’s deal be at least 50% off or better, they take 50 percent of all revenue generated from the deal as commission. They also stick the business with the credit card fees and (to my knowledge and according to businesses who have used it) won’t allow a cap on how many Groupons are sold. (**Note** This original report was a factual error. Groupon does and always had allowed caps. My apologies for not appropriately checking the fact before hand.)

So, if you’re a small business and think giving away 200 or so 50 percent off coupons will help drive people to your store, you’ll want to proceed with caution. Your one-day Groupon feature might lead to not 200, but 2,000 or more sold, leaving you with no margins or even a loss.

Posie’s Cafe owner Jessie Burke called doing a deal with Groupon, “the single worst decision I have ever made as a business owner thus far,” in a blog post explaining her experience on Sept. 11, 2010. Her Portland, Ore., coffee shop sold over 1,000 Groupons this summer, but because of the service’s aforementioned costs, Burke was left holding an $8,000 monthly shortfall.

The lesson learned in Burke’s story seems to be that you can’t trust a Groupon sales rep and need to account for their commission and your overhead when devising your deal. Sure, a coupon of 50 percent or more sells a lot better than one for 25 percent. But when the sales go to the coupon store, not yours, the bag left held is in your hand, not theirs.

And Posie’s isn’t the only example. There are more out there. And there are even some frustrations from the customer perspective when Groupon and the retailer aren’t in sync.

Todd Earwood, CEO of MemberMinded, the company behind Groupon competitor (and a personal friend of mine) says the negative examples are anomalies. He told me as such for a profile of his daily deal effort I wrote for

“The reality is there’s such a small percentage of businesses that a Groupon deal has done harm to that they’re not really worth talking about. The media and bloggers can’t find a weak link in the armor, so they find an anomaly and make a big deal out of it.”

Touche’ might be in order. A quick scan of the online conversation around Groupon shows a 4:1 positive to negative ratio, but with negatives growing, according to NetBase’s ConsumerBase, a market research partner of SME’s. That could be the result of competitors like TryItLocal bringing better commission rates and more customizable deals to the table. Overall, however, the negative experiences are generally from the few … the businesses … not the many, the benefiting customers. For any of these online coupon networks to thrive in the long term, however, they’ll need to serve both audiences well.

Some media members have been quick to say the problem with customers like Burke is they don’t use Groupon wisely. But when those customers are counseled and cajoled into their deals by anxious Groupon sales people … representatives of the company that gets all profit and no overhead out of the deal, I’d lean towards pointing the finger in more than one direction.

Still, Groupon has its small business successes, particularly with events. Alison Margello with HyperDrive Interactive in Loveland, Ohio, told me her firm helped Krohn Conservatory in Cincinnati with a event ticket deal through Groupon. They sold over 2,000 tickets to their annual butterfly show at half price in just minutes. Ultimately, they only collected about 25 percent of what they would have normally, but drove far more numbers in attendance than expected and kick-started word-of-mouth about the event. “Our goal was attendance, not revenue, so it worked for us,” she said.

Another event-related Groupon success story found its way to me from Carol Ely from the Historic Locust Grove site and museum here in Louisville. They used Groupon to compete with Halloween publicity for their 18th Century Market Fair and sold over 500 tickets, or about 25 percent of the event’s attendance. She reported they made up the difference in ticket sales lost from Groupon’s cut through food or vendor purchases at the event.

Other retail examples of Groupon success aren’t hard to find. The service drives people to your store and is a no-up-front-cost advertising solution. It is perceived as a couponing service, which can cheapen your business’s image, but all the daily deal services like it are measurable mechanisms to drive people to your business. So long as you account for a bit of overhead and do things to entice those newcomers and coupon hounds to get to know you, want to come back or even upsell them while they shop, it’s a potential profit center.

As for alternatives to Groupon, there are a few.

LivingSocial doesn’t have nearly the network or user base, but has a 40 percent commission rate and pays you after 30 days. (Groupon pays in installments up to 90 days after your deal goes live.) They seem to have a stronger local focus, but not to the TryItLocal extent. And apparently you’re not allowed to have concurrent deals running with competitors (also a Groupon requirement). Most other competitors are nearly identical.

TryItLocal, a Louisville-based company, is a different model and seems to have filled the gaps the others have yet to. TryItLocal is built for area Chambers of Commerce and returns 70 percent of revenues to the business in question, helping companies avoid the overhead problem. More than 70 percent of the profits benefit the local economy, too since a commission is routed to the Chamber. The business model for TryItLocal is substantially more stable than its competitors because it offers a higher profit margin for the business, allows more flexibility to businesses for the deals (including maximum capping) and is offered to companies through a trusted partner: their own Chamber of Commerce. Who has a faster path to local businesses? (Psst! Google! Look at these guys, wouldya?)

They also offer aggregated demographic data back to business clients they’ve never seen before. You think your target audience is 45-55-year-old females, but after running a TryItLocal deal, you get to see what demographics were actually interested enough to buy a deal from your store. Surprisingly, the two demos are sometimes different, according to Earwood.

(And yeah, I’m biased. Earwood and I co-founded Social Media Club Louisville in 2008. I worked with him on the now defunct, but forever web archived The Daily Idea. Not to mention we’re good friends. But TryItLocal is a Louisville business and it’s my blog. Sue me.)

Daily deal sites have been around a long time. was probably the first one. It’s been operating since 2004. Groupon added a geographic and general retail layer to the puzzle and exploded. Competitors are finding needs left unfulfilled and hoping to catch a wave as well. That’s a good thing for businesses, large and small.

But if you are thinking about using one of the services to drive traffic or business for your company, be sure you know what you’re offering, how much it’s costing you and how much you will actually get back.

Are you using a daily deal site to drive business? Tell us about your experiences in the comments.

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About the Author

Jason Falls
Jason Falls is the founder of Social Media Explorer and one of the most notable and outspoken voices in the social media marketing industry. He is a noted marketing keynote speaker, author of two books and unapologetic bourbon aficionado. He can also be found at
  • Thanks for sharing both sides of the story. Unfortunately most of those with negative experiences did a typical “$20 for $10” deal and didn’t structure it correctly. It’s not necessarily their fault. No one was teaching them how to do it right. UNTIL NOW…..I know it works because using daily deal sites like Groupon was the key strategy that took my business from $500K in debt to a 7-figure profitable business. I’m so passionate about it I now teach other small and local businesses how to do the same in the Daily Deals for Massive Profits Training Program. Daily deal marketing is a great strategy that can help small business owners get more leads, more customers, more clients, more sales and more money.

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  • I am in a lucky position to have seen Groupon and Clones (yes they are many out there) and saw the bad and the good.  In general I warn small companies for them.   As they present it in a way you will make money and in reality, it is just a way to make publicity, with the as many risks as traditional way of creating visibility.

    On the other hand, I wrote also a  blog with 4 tips to use Coupon deal website In a smart way (

    So my conclussion is
    1. Pay attention when making deals with them
    2. Don’t believe their sales talk, see it as a pure publicity campain
    3. read my 4 tips ;) 

  • Matt

    I have been working with a new start up company that addresses all of the issues mentioned in your posts.  Groupon and all the other daily deal sites don’t give small businesses any control.  They do this because they are ruthless greedy companies who don’t care if they destroy local businesses.  The start up I work for is called  We’re just like a daily deal company in theory, but local merchants have complete control over their deals.  They get to choose when they want to run their deal, what the discount will be, how many Qpon’s they will make available and what audience they would like to share it with.  We literally went live this Thursday, check out our website and please email me if you have any questions or would like to sign up and want to know a little more.

  • Anonymous

    With any cheap front end marketing you need to have a strong up sell or a compelling reason to become a regular.

    Also before doing a deal based sale consider the impact on your staff and reputation.

  • Anonymous

    The group buying platform is not sustainable and doesn’t create customer loyalty. That’s the real problem. We’re in the process of creating a solution. If you’re a business owner and are interested in being in the beta test group or would like to know more please visit and throw your name on the list.

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  • Clive Fletcher

    The things that bother me about Groupon etc:1) Customers will get to expect discounts as a right2) Customers will not return but instead continually seek out the latest deals3) Money is being sucked out of the local economy into the pockets of big business (Groupon)4) Local small business may be drawn into a war of competition with each otherA tongue-in-cheek (also serious) article about Groupon etc.

  • i think it can be very bad thing to do campaign using dailydeals just like groupon if you don’t have all the information that needed. but it’s can be make big impact if you have all the strategy of doing it. check my post about it at 

  • i think it can be very bad thing to do campaign using dailydeals just like groupon if you don’t have all the information that needed. but it’s can be make big impact if you have all the strategy of doing it. check my post about it at 

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  • Zapata

    As the Groupon Groupies continue to grow with dozens of new start ups daily including Yahoo, Google and AOL, I am sure the offer from Google for 6 bil would be welcome now

  • ritasu

    Groupon has lead the trend of internet social website. And groupon Clone is really hot now influenced by the success of Groupon. My friend recently built a Groupon clone website and has achieved a great success. He got the technique support from the company . All of us think they are doing a great job.

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  • Aldorado

    This is article is insane. Groupon is designed to promote your company, not to make any profits. Yes, you might lost money using Groupon service, but you will gain customers which is very essential in the long run.

    • Aldorado

      is* (I apologies for my mistake)

    • Frederik Van Lierde

      Aldorade, I am orry, but this is the way they explain.
      When I bought a welness center in Geneva, the compay was almost bankrupt.  They were working with a big competitor of groupon.  
      The day I took over, I stopped all those contracts.   What happend:  They went to another spa and the customers went also to that other spa.It was very clear how they work :)

  • Hi Jason – Insightful post. Just came across your blog and am looking forward to reading more. – Melissa, The JAR Group

  • Groupon Off

    I agree with you 110%. What I don't understand is why the merchants let Groupon dictate the terms. To have a Groupon, a merchant needs to participate. Merchants – Push Back today and tell Groupon your terms for a Groupon. It's your Groupon, not Groupon's. Why will Groupon listen – No merchant! No Groupon! Please stand-up for your business success and make Groupon work for their share. Ask Groupon to make the Groupon a win-win for both parties and not just a win-win for Groupon and the buyers. Merchant's, ask your Groupon account rep how they can help you to keep the customers coming back. I bet the answer is that Groupon doesn't know. So you are on your own. Again, Groupon's don't happen without a merchant!

  • just shared this link on facebook and your information was enough for them to reconsider and hold off to make sure it was going to be a right fit for them. excellent information

  • Adam

    Interesting article:

    You might want to check out my blog at:

    to continue exploring why Groupon and other companies like Apple and Virgin are pioneering the new models for successful business growth in the future.


  • Frank

    I think it was a big mistake passing on Google's (I thought it was $5B). I think their model's biggest threat is simply other competitors who can reach a critical mass and exploit the 50/50 revenue share. I used an offer for a massage. Normally, $60 per hour, their offer was $30, Groupon takes 50%. So the place sells 600, makes $15 per massage, which doesn't even pay the therapist let alone the owner and they get paid in three monthly installments over 3 months. 600 massages divided by 40 work hours, is 15 weeks of labor, overhead, scheduling issues of 600 on top of clients who pay the normal price. For what? New client conversions. They will at some point adjust their revenue share or it's “gones-ville” in my opinion

    • Groupon-Off

      You are right. It was about $5.3 Billion but there were $700,000 in bonuses to be paid to the Groupon management.

  • We are aggregating many social media deals onto a local map at our web site: We noticed that besides Groupon, there are many many more players in this field. seems to be another great way of generating traffic to local shops. We are working hard to getting all the merchants that have social media deals onto the map for easy locating and also helping those shops close-by that also having similar deals.

  • Nicky

    I've seen several posts decrying the Groupon model (mostly from people who've not actually used it as a business ). As someone who has run a recent campaign all I can say is how pleased I am with the results, the calibre of customers it has brought to me and the great exposure it's brought me. For the record I have also used so-called traditional advertising… whereby I ran ads in certain publications. Every penny of a substantial sum up-front, no guarantees of sales/interest, no calls.
    Clearly many merchants are happy with Groupon – or they wouldn't be running multiple campaigns and Groupon wouldn't be backed up with Merchants for the next few months. But aside from that – Groupon is a great way for businesses to market themselves and bring new people to their dooor but as I said in another post elsewhere businesses have to be strategic and consider what they want to get from their campaign. If you have no follow up and no preparation for the new customers you're probably at a disadvantage from the get-go. Before every campaing Groupon gives tips and guidance for preparations to be made. I already had a newsletter and all my groupon customers who've attended are on our weekly newsletter. Some are now buying our special offer.

    Groupon (IMO) is not for short term money gain but for making money over the long term through your new customers having an excellent experience with your business and coming back paying regular prices and telling their friends. You have to be ready with an offer for them once they complete their deal. Lets not forget that getting a new customer is VERY expensive and in a single campaign you can have hundreds of people who may never have heard of your business come through your door. Not all will return, but it is up to the merchant to sell them on staying. All Groupon does is use their email reach (their substantial database) to bring them to your door… in all of 24 hours. I should also add that the Groupon model isn't necessarily the best for every type of business. Vouchers are loss-leaders and you cannot exist running loss-leaders. And it does not stop businesses marketing as usual. Having said that Groupon can be a small businesses person's marketing dream… as long as they are focused on the right things.

    Also, Groupon has always allowed caps on voucher sales so I am glad you corrected that. I capped mine. And they provide plenty of tools and prep for merchants before their deal goes live.

    My rep was excellent every step of the way and our deal was and continues to be an amazing experience.

    Should people be wondering what kind of business I have,it is called Jive Nation Toronto.


    • Thanks for the balance and perspective, Nicky. Glad to know you've gotten

      mileage out of it and have used it as it was probably intended to be used. I

      agree it can be a great opportunity for some businesses. Just want people to

      enter that relationship knowing what challenges to overcome or avoid to be


      Thanks for the comment.

      • Nicky

        Yes, it's really important to understand the challenges, but it's also like anything in business you have to take some risk and in some cases you don't know until you try. I am glad to be able to provide some balance and perspective. And after all nobody forces merchants to say yes. Merchants have to sign a contract and until they sign it, no campaign can be run.

        Preparation is everything and Groupon does help with that but businesses need to take the time and implement with the tools they give them. Running a Groupon promo can be amazing… but like I said Businesses must ask the right questions of their rep and be more focused on the long-term rather than see it as a quick cash grab.They need to know their business and be realistic about their goals. It is marketing, pure and simple. It is better to cap voucher sales at a couple of hundred than sell 1,000 and have your service suffer… that defeats the whole purpose and nobody wins that way.
        Thanks for the opportunity to comment.

  • I really like the “renting a big mailing list” analogy. What companies need to understand (and too often don't) is that without implementing plenty of hooks to keep your hyper-discounted customers coming back… they won't.

    That means having a plan in place long before your ad runs to cover the following:

    – How will your company minimize the hit on revenue? Only Grouponing high-margin items is a start.

    – How will you try to upsell Groupon buyers? Grouponing items that have tons of complementary items you can try to attach is a start.

    – How can you encourage/empower Groupon buyers to develop a lasting relationship/spread word of mouth? Do you have social media pages? An email list? Are you encouraging every single customer to use them, post pictures of the cool stuff they're doing with your product, etc?

    I can't entirely blame Groupon for taking on clients who haven't done their homework to figure out how to make a 75% hit on revenue work for them.

  • Groupon and the like are an interesting business model. I've investigated Groupon for my client (customized apparel). I think it can be a good deal for the business if you look at the coupon sales as loss leader or an extension of the advertising and marketing budget.

    Businesses with high margin products might be able to at the least break even by offering a killer deal on Groupon, but it most certainly isn't a long term prospect for growing sales. The opportunity, on the businesses end, is to provide a great customer service experience that will hopefully yield repeat business. If you look at the success that American Apparel had with their Groupon offering, it can be done as long as it is from the right perspective.

    If a business owner is in the weeds and uses Groupon as a Hail Mary, well, unfortunately that isn't going to help. A new business starting out might benefit from offering a coupon like that to get some instant visibility in the market place and traffic to your site and/or social networking outposts.

    Lastly, Groupon did recently offer a “do it yourself” type offering where they take substantially less commission, but don't promote your deal as aggressively as they would a full commission deal. For businesses looking to run these more frequently, that might be a better option.

  • Michael

    I run a mobile deal-a-day company called Scoutmob ( We are in Atlanta, NYC and San Francisco.

    The bottom line is that this space is in its infancy. It's just so new. There's no question it's a hugely effective platform for the right businesses. There has never been a tool that drives more foot traffic so quickly to local businesses. It takes all the best pieces of traditional advertising and online advertising and makes them way more measurable and effective to local merchants who generally struggle with marketing (especially online).

    From a local merchant perspective these deal-a-day programs are 100% transparent (legitimate ones should be). Most companies display the number of deals sold and the discount so there's no secret as to the cost. If a local merchant is properly prepared and does their research, they should not only know exactly how much it will cost and what to expect but they should prepare to capitalize on the influx of new customers they'll be seeing over the deal period. We've had many Scoutmob merchants who have cleverly turned first-time customers into regulars by providing them extra service, using it as an excuse to make a personal introduction, etc.

    The biggest question is should these programs be considred commerce (generating revenue) or advertising (getting your brand out there)? Some deal-a-day sites can provide both and some can't do either.

    It's hard to think that a space that has been so popular (from a revenue and consumer perspective) can get any better but you'll see this space change a bunch over the course of the next 12-18 months. Deals will be more relevant and merchants will increasingly have more profitable transactions. Keep an eye out. It should be exciting.

    • Nicky

      @Michael. I like your comment about transparency about these deals in terms of deals sold and the legitimacy of same. It's a very important point. I can say Groupon is transparent because I have the proof of it in my own deal.

      But I have also had an experience with another deal site and all I can say is – I have discovered (to my shock) that some deal sites are not as transparent as you might think and should be red-flagged, pronto. And no, I'm not a Groupon fan-girl – though Jason probably thinks I am :-) There's just nothing in the world like experience.

  • Just had a great conversation with Julie (who I worked with a few years ago on a common client) at Groupon. I need to clarify that they do allow businesses to apply caps on the number of Groupons you choose to sell. I did not fact check that with them and was wrong in reporting it. My apologies. I've clarified in the post now.

    I also learned Groupon does a lot on the merchant services end (putting iPhones for tracking in the hands of businesses, etc.) and reports 96% of all businesses they work with wanting to do another Groupon with them.

    • I really appreciate the clarification to your post, Jason. In our experience, the merchants who do the best on Groupon are those who know their business inside and out, set realistic expectations, take advantage of our merchant services tools and adequately prepare their staff. We've never positioned Groupon as a quick way to make money overnight; it's a marketing tool that generates unprecedented exposure, and one our merchants return to over and over.

      You can see the merchant services suite, as well as case studies and testimonials from businesses across industries, at

      • Nicky

        As long as merchants see Groupon as a way to make quick money or Groupon customers as “cheap” they've missed the point of Groupon. The beauty of it, is, as you say, is that it is a marketing tool among other marketing tools. Only the exposure is huge. But then, I am one of the merchants who took heed of the prep tools, follow up weekly with each customer and treated them as they are… customers who have paid money to give our business a try and who may become long term customers who will tell others about our business. Thanks Groupon! I will be back.

        • Thank YOU Nicky! We love working with your team.

  • Jason –

    Thanks for tackling this. I like what you've laid out, as well as comments by BenchmarkAndy and Katherine. I work for a large brand, so naturally I've had meetings with Groupon and others in the business. When a company has its own tab on TechCrunch, you can't spend too much time doubting its success:-) Clearly the model is here, growing and will remain unchanged until its flaws hit the masses. I look at it very much like the new advertising model as well. Get the name in front of a large user base, maybe repeatedly, give something away, track and potentially make money and gain repeat visitors to your business. My beef is similar to Katherine's, but more so lies in two areas: customer service and the type of customer attracted.

    I've spoken with a few businesses, large and small, who have used Groupon as a marcomm tactic. In most cases, the conversation about how they've prepared employees to redeem them, etc. was non-existent. On the customer side, I've spoken to scores of folks who talk about how disorganized the redemption process, which in some cases has soured the experience. This concerns me a great deal in the overall success rate of the tactic because if the whole business is unprepared then how can the tool really be effective? If they get a deal and are totally jazzed about the deal, the business has a golden opportunity to convert that first time (or non-loyal) customer to a loyal customer, which makes the utilization of a service such as Groupon a big win in the ROI department. If not, it's a huge loss.

    There is major psychology behind 'coupons'. We get them and usually spend beyond the coupon value because we believe we got a deal and aren't 'really' spending more. If this is the case for everyone who's purchases a Groupon, right on, but I doubt it. There is another school of thought that coupon junkies are cheap and unloyal. They seek deals and go wherever they are in order to save a few bucks. Nothing wrong with that by any means, but again, it's not sustainable.

    I'm quite taken with this new model and love watching its implementation into the broader marcomm toolkit. As always, I find it fascinating how many operate tactically rather than strategically. Thanks for your post and getting me thinking:-)

    • Kevin

      I wonder what the breakdown is between hardcore coupon people and users that want to know what is in their area a bit more? To me the editorial and the information Groupon shares is more of a selling point to me than the value in the coupons.

      • Would be interesting to know, wouldn't it? I'm sure someone is out there studying the very subject as we speak:-) That's awesome the editorial content draws you in. It's the deals for me:-)

  • BenchmarkAndy

    I've never really thought of Groupon as more of an advertising tool than a sales tool. Probably should have. It's like renting one of the largest email lists out there.

    • You know, Andy, in fairness to Groupon, that is kinda what it is. And it

      works for a lot of businesses. Well said.

  • Stephanie Schwab:Socialologist

    My husband recently ran a Groupon for the New Year's Eve festival he runs in Providence, Bright Night. He was able to put a cap on the total tickets sold which helped him manage his budget and expectations. Overall he was happy with the results – but he runs a one-night event with (obviously) completely perishable tickets, not a cafe or photography studio, etc. which has to sustain itself year-round. On a similar note, I read with interest that Chicago's Winter Wonderfest felt Groupon contributed to lower revenues this year:…. If I were Groupon, I'd have taken the Google money and ran – because there's no question that their biz model will have to change, likely soon, in order to continue to attract top advertisers.

  • Katherinefaith

    I agree with your perspective and your points. The only thing I think you may have overlooked is the viewpoint of the customer of the business. I am in marketing and know all the upsides and pitfalls of these types of programs, but I also now have the perspective of a patron of a service oriented business that offered a Groupon and then damaged the relationships they had with full-price paying customers because of the influx of half-price paying patrons that caused us to have a damaged experience while still paying full-price for the service. This is where I think some of the greatest potential for damage lies. A business looking to gain customers winds up losing those who helped build their business by paying full price for their services. Just a perspective that I think is getting lost in the debate of “to Groupon or not to Groupon”. I wrote about it a few weeks ago, maybe you'd be interested in my perspective.

    • Excellent addition to the conversation, Katherine. Thank you for that. Point

      well taken.

    • Nicky

      @Katherine – again as a Merchant who has actually run a successful campaign this is where the merchant must think strategically. There are many ways to position a campaign so that existing customers don't lose out or feel left out.

      And one of the best ways is to be looking after existing customers and ensuring they also have special from time to time that reward their loyalty. I do this consistently for my existing customers and they understand that when we do a promotion like this it's to encourage new people to check us out. More people means more business. It's as simple as that.

      If merchants are following up with their customers regularly there is much less chance of losing them in a promo. It goes without saying that the merchant must ensure the same quality of service to all customers for it to be a success all round… some fail to consider this. I also tend not to consider my new customers as “half-price paying patrons” which to me gives this “us and them” picture. Sure, they are paying an Introductory price but the point is they are still important customers with the potential to become ambassadors for my business. Therefore they get treated as do my existing. It is all about relationships but merchants have to think about this before they run the campaign. It has to be part of their business culture.

  • I just ran a Groupon feature for an Evansville, IN area business. Truth be told – I wasn't very impressed with the customer service of the whole thing.

    I only asked for 3 things:

    1. To use the photo I sent over (a quirky “beauty shot” of our featured product)
    2. To use our location in the headline as there are two in town
    3. To run our feature during our slow time (in January/February).

    The didn't do any of those 3. In fact, regarding the headline issue – I was told they “can't put locations in headlines…” and when I challenged it, I was told that's just “standard editorial code.”

    So basically, what I've learned about how Groupon does business is: They've built their list and they'll do business how they want.

    I'm serious when I say Groupon really does take a “We know what's best for your business” approach. It kind of blew me away…and not in a good way.

    I probably will not run another one unless the owner of the biz REALLY wants to.

    • Great feedback, Dave. Thank you for sharing. It's becoming clearer to me

      that Groupon seems to have built their business around the deal purchasers

      and not the businesses offering the deals. That's only going to mean short

      term success for them if it doesn't change. Great to hear another real

      example. Thank you again, for sharing.

    • Nicky

      So Dave, how did the feature actually perform? I never got a “we know best” attitude from Groupon or at least I did not interprete it that way. I did, however, appreciate the benefit of their experience running hundreds of deals and promotions. That means they've done more testing as to what works for maximum exposure and a great promo. They're motivated for the promo to do well… if it doesn't nobody wins.

      I sent along artwork alternatives, 3 of them. They didn't use what I thought they might use (and the one I thought was best) but the one they DID use worked, in the sense that it was much better for the message I wanted to convey and the audience.

      I was in fact in the midst of changing locations (what could be trickier when running a promo like this?) and they helped me position the promo so there was no confusion about locations. The change was smooth.

      They don't use locations in any promo headline I have seen… probably because the locations are always in the deal details. If they don't do it as a rule, why would it be a strike against them because they didn't make an exception?

      In terms of timetable… one of the things with any deal-site is that you often cannot get the exact slot you want because of the demand and the scheduling. You don't pay anything down remember, and so there are some things over which you will have no control. Scheduling is one of them. However, I found that my Groupon rep worked with the schedulers to get me the next best slot. While we wanted an earlier slot the one we did get was almost perfect… we ran in November, had a great response and are still getting a great response today.

      I believe in giving credit where credit is due… and all of this is from my first experience with Groupon. I asked questions and I was realistic (and even a little aprehensive since you don't completely know how your promo will do until it's run). I found Groupon worked very hard to make me a happy customer and they sent very many great new people my way. Compared to what I pay and have paid for other advertising/marketing and given that I paid zero down it seems like a pretty good deal to me.

      • I'm beginning to think I need to ask Nicky to disclose what type of

        commission she gets from Groupon per comment. Heh.

        • Nicky

          LOL… Very funny :-) But ask away and I'll tell you the truth, Jason… zero, zilch, nada – of course!

  • All of these group buying services hurt most businesses. The purpose of a coupon is to give a discount to a potential new customer with the expectation that the person becomes a regular. This may work in smaller cities with fewer competitors in each industry. However, in large cities the market size allows for people simply to live off these discounts destroying any loyalty and the LTV. The campaign ROI is negative because the total CAC (forgone discounted revenue plus associated fees) is significantly larger than the LTV.

    The only type of coupons that allows to come close to breaking even is a discount off a minimum purchase amount (people tend to buy more than that reducing their relative benefit). Such discounts also work for businesses where employees are compensated hourly during downtime (at least some revenue to offset the losses).

  • Parissa Behnia

    Thank you for this post. As with most things, there are three sides to this story: Groupon's side, the small business side and the truth! That said, the conservatory example underscores what many don't understand or realize about Groupon: it's a great driver for foot traffic but awful for money making. The other thing is that when the flood of people do come, small business doesn't always successfully plan for managing the new people to give them a good enough experience to want to come back and doesn't always remember to care for the long time customers who may be inconvenienced by the flood and decide they no longer want to come back.

    As I've said in two of my blog posts, it's like playing Deal or No Deal and playing with scissors:… and….

    The moral is truly be careful what you wish for as you just might get it!


    Parissa Behnia


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