Groupon and Social Coupons
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If you are having trouble understanding what all the buzz is about Groupon and what it is think of it this way: “Group Coupon”.
Their name explains it all and because of this social coupon craze Forbes has called Groupon the fastest-growing Internet company ever.
Like Facebook, Twitter, and Foursquare, Groupon is the most prominent of the social coupon businesses and their idea is changing the world. For consumers this new form of marketing can only be a good thing. But as a business owner, you need to figure out whether social coupons will help or hurt your business. These social coupons can drive an awful lot of people to your business, but would your business be prepared for the onslaught.
Social Coupons are fun, feel exclusive, and count on social buzz and deep discounts to succeed.
What is a Social Coupon?
A social coupon is a highly discounted deal that’s available in limited quantities for a limited amount of time. Usually it is targeted towards a specific demographic or geographic area. Since these deals are so good the coupons only become valid once a certain number of people commit to buying it. Hence “group coupon”. This guarantees the business sells enough to make the deal worth it for them.
How do Social Coupons Help Consumers?
As a consumer, all you have to do is sign-up at Groupon with your email address and geographic area. Then each day you will be alerted to what deals are available in your area. It could be a $35 voucher worth $70 towards dinner at a local restaurant or a full day spa treatment at half-off.
Here’s how it Works
If you sign up for a deal that requires a minimum of 50 people and they sold 60 coupons, you get charged for that service and it’s up to you if you follow though and use it. If only 35 people signed up for that same deal, then the coupon isn’t valid and you don’t get charged. If you think the deal is excellent and want to make sure enough people sign up, then share the deal with your friends over Facebook, Twitter, Foursquare, and other social media websites so your friends can sign up too.
What Does this Mean for Small Business?
Exposure! No matter how you think of it, Groupon is advertising. It gets you in front of a targeted mass audience. Groupon does a great job of bring people to your store, restaurant, or place of business and gets your name out there. Now it’s your job to impress these new customers and turn them into regulars.
As part of the deal with Groupon, they promote your product or service to their subscribers in exchange of 50% of whatever you sell. Now don’t forget that you’re also offering your product or service at a deep discount of 50% or more.
Although there is no upfront cost for small businesses, it can be very expensive in the end. Once again, Groupon is advertising. If you don’t need or believe in advertising, there is no reason to consider using social coupons. It costs money. Instead of writing a check for an ad, you are choosing to lose money on sales. Check out my Social Coupon Tips for Small Businesses and find out if it will work for you by doing some Groupon Math
What to Consider before Signing Up?
Before you sign up for one of this social coupon sites, you should do the math on how it will affect your business. Take into account some of these variables:
- Does the customer spend more than the face value of the coupon?
- How many existing customers purchase a coupon?
- What percentage of discount customers become regular customers?
- Home many coupons are sold to each customer?
- What is the true cost of delivering the additional sales driven by the coupon?
Would Social Coupons Work for your Business?
If you have a business with mostly fixed costs and few variable costs, this kind of promotion works pretty well. Take a photography seminar for example; whether there are 5 people in the seminar, or 20, the cost of delivering the service is basically the same. Here are some things to consider:
- What type of business do you have?
- How many potential customers in your area don’t know about you?
- Do you have excess capacity?
- Can you handle a surge?
- Do you believe that by giving out a large discount you risk damaging your brand?
And then there is the math, which may be the most important factor. If not done properly, it can result in very misleading conclusions.
Groupon Case Study: Expert Choice Cleaning L.L.C.
Justin Nayman is the owner of Expert Choice Cleaning L.L.C. located in Piscataway, NJ. For over two years, Justin has been earning loyal customers throughout New Jersey. In April Groupon showed his coupon of $65 for $130 towards a Whole-House Cleaning. The deal became valid after 10 people purchased this deal. In the end he had 266 deals sold and new clients to impress. Here’s what he had to say about his experience:
What made you decide to promote using Groupon?
Justin: It was a great way to get our name out there, especially with us being a fairly new company.
What results have you seen since launching your Groupon Campaign?
Justin: We received close to 5000 hits to our website in addition to nearly 200 calls as well as Emails and blog posts. We were doing the best we could to answer everyone as fast as we could. If our service area was greater than the 20 mile radius that was set we would have doubled the amount we sold.
Would you use Groupon again?
Justin: I would deffinately use groupon again considering the amount of regular clients we have gotten out of the deal as well as our name is now familiar with that many more people throughout New Jersey. I would definitely structure the offer a different way the next time to target a different group of clients.
Groupon and Social Coupon Conclusion
Groupon isn’t the only social coupon site out there. Because of its popularity others have sprung up. LivingSocial is probably the second largest social coupon site and recently Facebook threw its hat in the ring with Facebook Deals. Over time, it’s likely that more competition will force sites like Groupon to let retailers and business owners keep a higher percentage of the sales and perhaps the discounts offered won’t be as low.
