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Could Groupon Kill Your Biz?
Groupon has been touted as one of the fastest growing businesses ever on the Internet, but has received backlash from merchants who were not satisfied with the outcome of offers on the site. The owner of Posies Café in Portland said in a blog post that Groupon is the “single worst decision I have ever made as a business owner.”
She’s not alone in her rejection of the coupon site. A recent study by Rice University found that of the 150 Groupon clients interviewed, 66% found Groupon’s program profitable, but only forty percent of the respondents would not participate in another Groupon deal.
Other findings include:
Among the service businesses, restaurants fared the worst and salons and spas were the most successful.
Businesses with unprofitable promotions reported low rates of spending by Groupon users beyond the deal’s face value and low rates of return to the business again at full price.
Rich touched on this same topic earlier today.
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Gerri on October 4th, 2010 2:52 pm
I don’t think it will kill business. The way I see it, it all depends on what kind a promotion you run on Groupon and how you run it. Its a good way to market yourself – look at it like that.
Kevin Norman on October 4th, 2010 2:56 pm
Group buying can be a very powerful way to market your business – but as the saying goes “Good advertising can be the quickest way to kill a bad business.” There’s a huge responsibility for group buying sites to give sage advice to their clients before they let them run a deal because tons of new customers can be bad if a business owner isn’t ready with a strong strategy to retain them. Unfortunately many group buying sites including Groupon have been guilty of not working closely enough with their clients to craft offers that are good for their business. I am proud of my company, LivingSocial, for releasing their merchant bill or rights (http://livingsocial.com/merchantrights)since Groupon has brought on bad press for the group buying category.
Angela Shupe on October 4th, 2010 2:59 pm
“Businesses with unprofitable promotions reported low rates of spending by Groupon users beyond the deal’s face value and low rates of return to the business again at full price.”
They should take a look at why these people choose not to come back. I doubt Groupon is killing them, it’s more likely that these people are not coming back because the full cost/service/etc. is not quite what they had hoped. For example, I might try a new restaurant if I got a good deal but I wouldn’t come back if the food was bad. They need to look at themselves before they assume Groupon is the problem.
egreene on October 5th, 2010 7:37 am
Groupon is just like any other coupon- it’s designed to get people in the door. If the Groupon users like what they offer, they’ll likely be back- if not, they probably won’t. It’s simply a way to get people to discover your restaurant. Most businesses, including my own, had to start out with loss leaders to get the word out and get references, etc. I’d say try it once or twice and then offer less deeply discounted specials in the future and that should bring people back who are willing to pay profitable rates for your offerings.
Daily Success Place on October 5th, 2010 12:33 pm
Unlike most people, I haven’t used Groupon yet as either a customer or business.
Thanks for starting the discussion. I’ve learned important things to address when thinking about using Groupon to grow my business.
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