Monday, March 28, 2011

Monday, March 14, 2011

Should Your Business Be on Groupon?

The popularity and rise of Groupon and now other similar coupon sites such as Living Social, Dealfind and WagJag, have made many businesses look at these sites as part of their marketing and promotion. I myself have considered using these sites to give a boost to my business, especially during slower periods or to promote a specific product line.

As part of my analysis I looked at the pros and cons of Groupon to identify whether it would be a good fit for my business.


  1. Get a bunch of exposure FAST - the sheer numbers of people who have subscribed to Groupon and other coupon sites is astounding. Getting your name or brand in front of this many people would normally cost in the thousands of dollars. Groupon promotes your business for you with no up-front cost to you.
  2. Acquire new customers - your advertising often hits the same people over and over again. Using Groupon you have the ability to get a whole slew of new customers that may have never been in your business or website.
  3. Increase sales immediately - many businesses are overwhelmed by the sheer number of customers in the first day after their Groupon campaign ends. A Groupon campaign can quickly change what would normally be a slow month to a big sales period.

  4. Many Groupon customers will become your customer - a number of the Groupon customers who visit our business may become loyal repeat customers. Being able to convert these Groupon customers is key to making this type of promotion work for you.

  5. They will spend much more than their coupon face value - one of the important things to consider when planning your Groupon coupon is the face value of the item. If you can provide a face value that is often less than what most people would spend or if you have an opportunity to sell add-on products or services then your overall discount will be less than the Groupon discount.

  6. No up-front cost - the attractiveness of the Groupon scheme is that there is no up-front cost to the merchant. They only pay from the proceeds of the promotion sale and have no other expenses to worry about.


  1. Giving away margin - the minimum discount required to be listed by Groupon is 50%. On top of that Groupon will take from 40% - 60% of the net proceeds as part of their commission. That means that you are giving away from 70% - 80% of the face value of the offer. Unless you have huge mark-ups on the product or you intend to up-sell other products or services, you will go broke using this model.

  2. Groupon has all the information - because Groupon customers sign up through Groupon and not through you, Groupon has all of the valuable customer information such email, address and demographic data. You will need get many of these customers to sign-up for your mail list or loyalty program to justify the promotion.

  3. Everyone wants a discount - do you really want customers who may never buy at regular price and only want to buy at below cost? The Groupon customer is very focused on getting a deal. Once they use up your deal they go on to the next and may never come back to you (unless you offer another deal).
  4. How does this look on me - using Groupon and other coupons sites can help create an image of your business that you may not necessarily want. Do you want to be seen as a discounter, always on sale or as someone that provides value even at regular price?

The bottom line is that you have to decide whether Groupon is right for your business. The pros and cons listed above have led me to take a wait and see approach on Groupon. For now I will resist but I have to admit the thought of having 1000's of customers knocking at my door is very inviting.