Earlier this week, I came across a very interesting case study article from a small business owner describing his experiences with Groupon. Groupon and other group buying coupon sites is one of the hottest trends these days. However, a growing controversial debate is whether there are any actual, long-term benefits to the small business — not the consumer.
There are 2 main things that make Groupon (and similar sites) unattractive to the small business owner.
- One, Groupon takes a huge cut of the already discounted product or service. In this article, he says the Groupon cut is typically 50-60% of the revenue. As a result, in most situations, the business is literally losing money for each coupon sold (and consumed). Therefore, business view Groupon promotions as a marketing investment. It’s a great way to get the word out there about their businesses.
- Secondly, the customers that Groupon drives to businesses are, for the most part, price-sensitive consumers — i.e. cheap bastards. Therefore, are these the customers businesses want to attract? Also, what are the chances of repeat customers, since most products/services offered via Groupon a fairly expensive (without the Groupon discount)?
Now given these odds, the author describes the strategies he used to make the Groupon promotion a worthwhile investment.