Is Groupon Worth It – A Guide To Groupon For Small Business Owners
Groupon has been in the news a lot lately and if you haven’t heard of it yet, your customers probably have. With recent announcements of $950 million in funding, its Superbowl commercial, spurning a $6 billion buyout offer from Google, being named the fastest growing business in history, and revealing that earnings were 23 times higher in 2010 than in 2009, Groupon is the hot company these days.
And while that’s all well and good for Groupon, how about the small, local businesses actually providing the discount services and merchandise to all these customers?
That’s what we’ll be looking at today. The Pros and Cons of a Groupon deal and the best practices for Groupon to make sure it turns out to be a win-win-win and that everyone gets to go home happy.
What kind of businesses is Groupon appropriate for?
There are a number businesses that Groupon works for though you’ll most often see restaurants and spas featured in your city. It works best for businesses that depend on repeat business from their customers or have a high transaction value from their services and you have to offer something people want to buy, not need to buy. For example, while people use plumbing services all the time, it’s not what they want to spend their money on while nobody needs to spend money dining out at the latest downtown restaurant, but they want to so they do.
Only Groupon can make the final determination on if your business is a good fit for Groupon and I’ve certainly seen a big variety myself after watching the daily deals in my city for about a year now so if you think you’re a good fit, you just have to apply at GrouponWorks.
Should You Actually Do A Groupon Deal?
In many cities there is a long waiting list to get your business featured as the main, front page, deal so there are plenty of business that want to do a Groupon daily deal but whether you should actually do it is another question entirely. In this section we’ll look at some questions you need to ask yourself before you sign on but first, let’s take a look at the Groupon demographics as it has a lot to tell us.
Groupon Customer Demographics
Groupon has an attractive demographic profile when it comes to the people who actually buy the daily deals offered on its website.
If you’re looking for females with household incomes above $50,000, disposable income, and in the 18-34 age range, then you probably want to get yourself aligned with Groupon as soon as possible.
Over 70% of Groupon users have incomes of $50k or more while 29% have incomes over $100,000 per year.
77% of Groupon users are female which makes sense since females tend to be the “coupon users” and Groupon is marketed as a social shopping coupon site.
They’re also a young group with 68% of them falling in the 18-34 years category and only 3% are older than 55.
They’re also highly educated as a whole with 80% having a bachelors degree or higher and only a very small percentage have never taken any college courses.
They’re big users of social media in general and nearly all have Facebook accounts and many also use Twitter, blogs, Youtube, and other social websites.
Turning Them Into Regular Customers
The real trick with Groupon isn’t getting customers in the door – once you’re featured that part is typically taken care of.
The hard part is getting them to come back and become a customer for life.
As part of that younger generation, customer loyalty isn’t all that high on their list as it is with those who are in their 50s or older. They’re far more interested in trying different things and having new experiences. That doesn’t mean you can’t turn them into regular customers, just realize it won’t happen by accident and that you’ll need to be proactive and make sure you’re doing what you can to get them to come back again and again.
Providing a Wow experience
If you’re going to do a Groupon deal, then you need to be prepared to offer an over the top “wow” experience when they come in. They may have paid 50% but they don’t want you to deliver a discount experience – they want to be treated just as well (or better) as your regular paying customers
They want to be catered to like they’re royalty and want to feel like they’re special and that their business is appreciated. If your staff is already overworked and at the breaking point, you’re not going to deliver that amazing experience they want and they’ll soon forget about you and move on to the next deal.
Remember that many Groupons are not actually profitable – over 1/3 are actually done at a loss which means that in order for it to be a profitable and successful campaign is to get some of those people to come back again or to get them to tell their friends or better yet, do both!
Many of those who have negative experiences with Groupon (about 40% of businesses would not do it again) weren’t prepared for the rush of customer that Groupon would bring them which leads to a bad experience for the business and for the customer and bad customer experiences mean they’re not coming back and they will probably go to your competition instead.
You need to be super prepared and make sure that everyone who works for you is prepared as well. Make sure you have extra staff on hand – get temps or hire more people, but the last thing you want to be is understaffed.
Getting All You Can Out Of Your New Customers
Once you have that new customer in the door, you need to make sure you’re doing what you can to maximize the revenue of that customer. You probably want them to spend more money than what they spent buying the deal.
That can be accomplished through upsells when they do arrive. These are people who like a good deal so if you keep that in mind while crafting your upsells, expect a high sell through rate.
Bribing Them To Come Back
Of course, getting them to come back is more than just delivering a great experience. You need to give them a reason to come back. Smart business owners realize that getting a new customer is expensive but getting them to come back is far cheaper so when they get a new customer in the door, they do everything they can to get them to come back again.
That means you need to get their contact information so you can keep in touch with them. That could be as simple as getting them to “like” your Facebook Fan Page as we’ve already established that nearly all of them have Facebook accounts. Of course, you should also try to collect their address and phone number so you can send them offers in the mail (still works even with the younger generation).
If that means you need to bribe them with more free stuff – so be it – do what you can to get that information.
You could also give them a coupon while they are there for another discount or free offering on their next visit. You already know they like and are comfortable with coupons which makes this a particularly powerful offering – it’s like you’re speaking their language.
Not everyone will come back again – that’s unavoidable – but if you really prepare your business and have a plan in place for getting those people to come back, your next Groupon offering could be a successful way to promote your business.
Who Groupon works best for
Those who have reported the best results with Groupon are business that aren’t yet well established in their city yet. Running a Groupon is a great way to get a lot of new people to try the business and to generate plenty of buzz.
It is also good for businesses that have seasonal slumps. For example, your business may be busy in summer and dead in the winter or maybe it’s the opposite like where I live. Downtown is pretty quiet during the summer but in winter it’s a mob. Either way, running a Groupon during the slow season can get a great way to keep your business busy during traditionally slow times.
For those running special events, it can be a great way to sell tickets and get more people to visit and you can set a limit to the number of tickets that will be sold if you can only handle so many guests.
A few more considerations
A successful Groupon can generate several hundred or even a thousand or more customers that will all be patronizing your business in a short window of time. If your business has very limited capacity to handle new customers, you might want to be wary of running a Groupon.
Also, be mindful of your current customer base. They’re the ones already paying full price and you don’t want to alienate them or make it difficult for them to patronize your place of business just to accommodate a large influx of discount customers.
In the end, it’s up to you to decide if your business is a good fit for the young, tech savvy, crowd. If so, then by all means give Groupon a try. If not, there are plenty of other ways to successfully promote your business like using Facebook, Google Maps, Search Engine Optimization, and Pay Per Click Advertising.