Groupon: How and When to do it.



In the last article about mega-popular Daily Deal site Groupon, I told you about the scenarios that could happen as a result. The news was by and large, not good. It may have left a few of you feeling as though the whole thing was a sham and not worth even being considered. The truth is, Groupon has worked really well for a particular type of business, and again, there’s the stat that “95% of Groupon merchants would use them again.” So it can’t be horrible (at least not at first). In this article, I’ll discuss the type of business you need to be if you want to do a Groupon deal successfully, and ways to make your Groupon feature most effective.

First of all, not every business is suited to be featured on Groupon. As mentioned last time, “seasoned businesses with a steady stream of customers” should probably not use Groupon in the first place, because they don’t need to. Since opening, getting featured on Groupon has migrated from being a marketing opportunity to being “the thing to do”, as made plain by it’s sheer numbers: Some business, somewhere within a city block of you has likely been featured on Groupon. I believe this has resulted in businesses unwittingly getting themselves into trouble because they were simply trying to be cool.

Even businesses that have been around for a good long while are now finding themselves in trouble because, through Groupon, they made a promise they couldn’t keep to their customers. Or if they were able to keep it, it was probably so strained that they lost money on products, produce or staff. Some of them may have even quit.

Case Study: Posies Cafe and Bakery

One of the most well-known cases like this was for a small bakery and cafe in the Portland area called Posies.

The deal went down like this: Jessie, owner and operator of Posies since it opened, was approached and convinced by Groupon to take a 50% hit on her sales for a chance to grow her business. Actually, that’s not entirely correct. She discounted the price of her product by 50% (because Grouponers really respond to big savings, the salesman said) and then gave half of the remainder to Groupon. So she was actually knocking her price down by %75 in order to (possibly) gain more business in the future.

Now think for a second – if you go into a clothing store, where is the stuff that’s marked down by 75%? On the clearance rack. This is the product that they’ve got too much of and need to get rid of it before they throw it away. It is usually not a considerable part of their marketing campaigns because it doesn’t make them much money.

In the mind of her customers, Jessie has told them she’s got so much product, she can almost give it away, and she almost did. By the time her deal was over, she had angered many of her loyal customers (not just Groupon members) and she had to put in over $8,000 of her own money in order to cover the bills she couldn’t pay because she’d cheapened her product so much. She said what I’ve heard a number of times already:

“I’ll never use Groupon again. Worst decision I’ve ever made.”

What to remember about running a Groupon Deal

Now, to her own credit, Jessie had a few bad ideas about her Groupon. I haven’t spoken with her, so I don’t know if these ideas were sold to her or she was simply ignorant of the terms of her sale. There is, in fact, a way to use Groupon that won’t guarantee increase, but will make your chances much better and will at least allow you to pay your own bills. Folks who use Groupon should remember the following:

You get to set the limits. The Groupon rep on the phone is not a marketing expert – they are a salesman. Their job is make sure that the deal swings in favor of Groupon, not the small business owner. If you allow them, you’ll end up just like Jessie – not even able to pay your own bills because you took such a hit in your product pricing. Don’t listen to their baloney story about “you’ll never have to advertise again after using Groupon.” That’s bull. Smart business owners know that they’ll never stop marketing their business. Understand that you have a lot more say than they may let on and be clear about what your goals are. You can control a lot of the aspects of the deal. Don’t want them to take 50%? Tell them. Don’t want to sell your product for half of the normal cost? Let them know. You can even set the expiration date yourself, or put a cap on how many of your Groupons can be sold. If they truth is that 95% of Groupon Merchants would use them again, then they need your business as much you think you need their marketing deal. Feel free to take advantage of that in regards to keeping your lifeboat from sinking.

One of our clients – a local blogging mom named Jenny who calls herself The Peaceful Housewife sells budget-friendly and energy-friendly products. She did plenty of her own research and took in some Rocket No. 9 consulting before deciding to launch her own Groupon deal with some heavily modified restrictions. Here’s what she had to say:

The Groupon deal went well. I sold 41 vouchers. I’ve already had contact with several of the customers and have gotten several orders from the deal. So far, everything is great. I had my check in the mail 4 days after the deal ended, which I thought was spectacular. So far I’m happy with it. As for whether or not I’d do it again, tough call. I’ll have to wait and see if I get any repeat orders or new non-Groupon customers from the deal.

Jenny made it a point to dip her toe in the water of Groupon, not dive in head-first. As a result, she’s not feeling the stress that’s left so many other small businesses in a bind over a single deal. She also is being persistent about seeing the true value of the marketing campaign – to create repeat customers, not just one-time Grouponers. Time will tell if this proves to be fruitful.

What kind of business should run a Groupon deal?

As stated before, a seasoned business with a steady stream of clients does not need to run a Groupon deal, if only to seem hip to “what all the others are doing these days”. There is a special niche of folks that I believe can actually benefit from a Groupon deal, because of what it’s made to do: drive a load of traffic to your door on a short-term basis.

Here are some of the folks who could benefit from Groupon:

  • A small retail or restaurant business that has just opened up shop and is looking to make a splash, and has money to spend.
  • A business sponsoring or endorsing some sort of event, where foot-traffic is more important than revenue.
  • Someone needing to create awareness of an event, promotion or particular product in a short amount of time. And is willing to pay for it.

Knowledge is Power

I don’t believe that Groupon deliberately sets out to kill the businesses they’re involved with – it’s ultimately the fault of the businesses for biting off more than they can chew. If you’re considering going Groupon in the near future, I hope this short series has enlightened you to the advantages and possible harmful effects of using this or any other Daily Deal sites. With the knowledge of how to harness the terms of your deal, you can make it work out best for you.