10 Jan 2011  Research & Ideas

Is Groupon Good for Retailers?

For retailers offering deals through the wildly popular online start-up Groupon, does the one-day publicity compensate for the deep hit to profit margins? A new working paper, "To Groupon or Not to Groupon," sets out to help small businesses decide. Harvard Business School professor Benjamin G. Edelman discusses the paper's findings. Key concepts include:

  • Discount vouchers provide price discrimination, letting merchants attract consumers who would not ordinarily patronize their business without a major price incentive.
  • These vouchers also benefit merchants through advertising, simply by informing consumers of a merchant's existence via e-mail.
  • For some merchants, the benefits of offering discount vouchers are sharply reduced if individual customers buy multiple vouchers.
  • As a marketing tool, discount vouchers are likely to be most effective for businesses that are relatively unknown and have low marginal costs.

 

At first blush, the two-year-old online start-up Groupon seems a bit audacious.

For starters, there's the news that the deal-of-the-day website turned down a $6 billion acquisition offer from Google last month.

Then there's the company's business model: selling discount vouchers to restaurants, spas, paintball parties, etc., at a major markdown—up to 90 percent off a retailer's usual prices—and then requiring the retailer to pay a big chunk of the voucher revenues back to Groupon.

But the Chicago-based firm is "the fastest growing company in web history," according to Forbes, and may file for an initial public offering by the end of 2011, according to the New York Times. "Groupon has attracted remarkable interest," says Harvard Business School professor Benjamin G. Edelman. "With the economy lagging, consumers are increasingly responsive to discounts. And Groupon has found a way to feature small businesses that haven't traditionally advertised online."

For consumers, there's an obvious appeal to scoring a $50 meal for 15 bucks—especially in a recession. But for retailers offering the deals through Groupon, does the publicity compensate for the deep hit to profit margins? A new working paper, To Groupon or Not to Groupon: The Profitability of Deep Discounts, sets out to help small businesses decide whether offering large discount vouchers is a profitable decision.

HBS Working Knowledge recently discussed the topic with Edelman, who cowrote the paper with Harvard graduate students Sonia Jaffe (Department of Economics) and Scott Duke Kominers (Harvard Business School).

Carmen Nobel: How can a discount voucher service like Groupon benefit retailers?

Ben Edelman: Our paper looks at two distinct benefits a discount voucher service can offer. First, discount vouchers can provide price discrimination, letting merchants reach customers who value the merchant less than the merchant's ordinary customers do. For instance, some customers are willing to pay full price for a given restaurant—great! The restaurant would like to keep charging those customers full price, while charging a lower price to new customers who aren't willing to pay as much but who are still willing to pay something above the restaurant's costs.

Second, vouchers can provide an advertising benefit—announcing a merchant's existence to thousands of consumers en masse, and potentially building buzz among consumers above and beyond sales to the consumers who actually buy the vouchers. This effect is more difficult to measure, but many merchants perceive it to be real. Where it exists, it's an important source of value that a discount voucher service can deliver.

Q: Explain the theoretical model you describe in your paper and how it can help retailers decide whether a voucher service like Groupon makes sense for them.

A: We present a model of online discount vouchers that [offer deals] to consumers who may or may not value the merchant's offering. Importantly, some consumers already know and patronize the merchant, so a voucher discount combines multiple effects—it attracts new customers but it may also offer an unnecessary discount to existing customers.

We then extend the model to consider both the possibility of merchants raising their prices in anticipation of offering discounts and the possibility of consumers buying multiple discount vouchers.

By demonstrating the importance of these factors, and exploring the relationship between these factors, we hope to help retailers predict whether a discount voucher promotion is likely to be profitable for them. Our approach can also help retailers design discounts that better serve their objectives.

Q: You recommend that retailers disallow the purchase of multiple discount vouchers from a single customer, or else run the risk that the customer will never come back and pay full price. Are there some practical steps that merchants can take to prevent multiple purchases?

A: In practice, it's not easy to prohibit the purchase of multiple vouchers. A voucher service can configure its systems so that a single account only lets a user purchase a given offer once. But then users can open multiple accounts—a tactic that consumers have already used at many online retailers. And industry norms let consumers find ways around almost any rule intended to block multiple purchases. For example, even when consumers are limited to a single voucher, they are typically permitted to buy additional vouchers as gifts for others. So if three customers each want three vouchers, each can buy one for himself and one for each of his two friends, complying with the rules but obtaining multiple vouchers.

Q: What are some of the other risks that businesses run when deciding to participate in a discount voucher program like Groupon? What steps can they take to mitigate those risks?

A: Stories abound of consumers who try to game the system. Consider a customer who wants to dine on a weekend using a voucher valid on weekdays only. Some consumers surely make that error by accident, failing to read all the terms and conditions. Sophisticated consumers might try to game the system by posing as customers who failed to read the "small print." What exactly is a merchant to do when a consumer violates one of various small-print rules? Requiring customers to present vouchers before ordering is one solution, but they understandably dislike this approach, finding it especially tacky.

One first step is for merchants to review the exact text to be shown to consumers. Be wary of vague language: "excludes special offers" invites disputes over whether the chef's special and a child portion are eligible; "not valid on major holidays" raises the question of which days are "major." We've been surprised to see such imprecise wording on vouchers, and we think merchants and voucher services can do better.

Merchants should also confirm their legal obligations when accepting discount vouchers. Once customers prepay, they often enjoy consumer protections with regard to gift certificates-including special rules as to expiration and partial refunds. Here in Massachusetts, a gift certificate that is 90 percent used may be redeemed in cash if the customer so requests.

Even sales tax can be complicated: if a customer pays $20 to eat food that costs $35 at a restaurant's menu prices, should the customer pay sales tax on $20 or $35? (In Massachusetts, the Department of Revenue has confirmed the former—though in my experience, few restaurants follow that rule.)

As retailers gain experience with discount vouchers, these matters may become routine. But for now, there's ample room for error, creating important risks for retailers that fall short of applicable consumer protections.

Q: How does the service affect business with existing customers who historically have paid full price?

A: We've seen two main effects. First, some discount voucher services send users to merchants en masse. The day after a Groupon is released, hundreds of buyers tend to swamp a small business unprepared for the rush. That barrage of customers can disrupt service to full-price customers, who may end up waiting for service. That said, we don't think this kind of disruption is inevitable; other services have found ways to spread customers over time. For example, Restaurant.com sends customers on an ongoing basis rather than all at once.

Second, full-price customers may be unhappy when they realize others are getting large discounts. We've all had the experience on an airplane of talking to a nearby passenger whose fare was vastly different. But that's a new experience at local retailers. Existing customers might "revolt," becoming less willing to pay full price once they realize that others are paying less.

Q: When Groupon first came on the scene, most of the participating retailers were small, local food- or service-oriented businesses. Eventually, though, we started seeing Groupons from national retailers such as The Gap, which sold some 400,000 Groupons in a single day. Based on what you've learned, do you think discount vouchers make sense for large retailers?

A: Discount vouchers seem to be most compelling for merchants with a low cost of goods sold and with a highly perishable product. Restaurants fit the bill in that ingredients are often just 30 percent of menu price, and every hour a table sits empty is lost revenue that can never be recovered. So too for spas, gyms, hotels, and many other services.

Retailers of durable products, like manufactured goods and clothing, are in a somewhat different position. Typically, their business requires a higher cost of goods sold, giving them less room to discount. And if they don't sell a product one day, they can hold it in inventory for future sale. So marginal business is less urgent for them.

We're not prepared to say Gap's Groupon was a mistake. Getting customers into Gap stores with a Groupon might lead to big sales—above and beyond the voucher value. Plus, those customers might tell their friends. And we suspect that Groupon charged Gap less than its usual fee. Still, Gap might have been able to run a similar promotion itself, without going through Groupon; Gap's established brand would have attracted substantial consumer interest. Other large merchants can also handle their own offers; the Groupon-style brand and infrastructure are most valuable to smaller firms.

Q: Explain how the efficacy of Groupon will change in the future, especially if more and more consumers continue to use these vouchers. How do you expect Groupon and its competitors to respond to these changes?

A: One natural change is for fees to drop. Groupon has charged merchants a remarkable 50 percent of voucher purchase price, but it seems that competition is already driving fees down.

A major problem for discount voucher services is that as they grow, their customers necessarily come to resemble the general population. So long as discount voucher users tend to be low-end customers who are unwilling to pay full price, voucher services can offer retailers the ability to price discriminate-charging some customers more than others. But once discount voucher services become known to most consumers, price discrimination will become considerably more difficult.

In principle, discount offers can be customized for—indeed, targeted to—individual users. For example, a restaurant could tell a voucher service that it wants to offer a discount only to customers who live more than a mile from the restaurant's location, on the view that customers in the immediate vicinity already know about the restaurant's offerings.

Furthermore, since spas and gyms know their customers' names, they could give discount voucher services a list of consumers to exclude, preventing an offer from reaching existing customers. On one hand, this kind of targeting would make voucher services less attractive to users. But if merchants are confident that existing customers won't receive discounts, then they can offer larger discounts, which will increase consumer interest in voucher services. We think these targeting innovations are feasible, and if Groupon doesn't offer them, a competitor may.

Q: A decade ago, Microsoft cofounder Paul Allen threw millions behind a start-up called Mercata, through which online customers would sign up en masse to buy the same product, and the price of the product would fall as more and more customers signed up. After about a year and a half, Mercata shut its doors. Other than timing, what is it about Groupon that would make it succeed where a company like Mercata failed?

A: Mercata focused on general merchandise, where retailers have a high cost of goods sold and where low perishability lets merchants hold inventory for an extended period. In contrast, recent discount voucher services have focused on sectors with low cost of goods sold and high perishability. We think this altered focus has been the key to success of current discount voucher services.

Q: Do you have any plans to continue researching this subject?

A: Absolutely. We're currently talking to merchants that have used discount voucher services, and we hope to conduct empirical analyses of discount voucher profitability and demographics.

Have you seen success or failure with a discount voucher service like Groupon? Please share your story in the Comment section.

About the author

Carmen Nobel is the Senior Editor of HBS Working Knowledge.

Comments

    • Freddy J. Nager
    • Founder & Fustion Director, Atomic Tango LLC

    If you look at Groupon from an advertising perspective, then it's not a bad deal. It generates word of mouth, requires no money up front by the advertiser, payment to Groupon is based on performance (something more and more advertisers are clamoring for), and the results are easily tracked. (Clickthroughs, sales, and redemption.) Consumers gain awareness of retailers they didn't know existed, and they think more about retailers that they're already familiar with.

    From a financial perspective, Groupon also offers benefits. Customers pay up front (providing cash flow and float opportunities), and there's the possibility of breakage (failure to redeem). Those have all been extolled as benefits of gift cards and gift certificates; they're now just translated into an online medium.

    Groupon deals also boost market share (at least temporarily), since customers will now purchase from that retailer as opposed to the competition.

    Groupon's benefits extend beyond just the sales.

     
     
     
    • Carl Nielson
    • Consultant, The Nielson Group

    Some low performing companies, on the verge of bankruptcy, have been using Groupon to create cash flow. Some have filed bankruptcy and closed their doors before the coupons could be redeemed.

    Other deals have fine print restrictions (it might not have been fine print, but mixed into a very busy web page) that surprised the buyer after they bought the groupon. I sense the big excitement is starting to drop. Groupon is losing some of the perception as the "great deal" for consumers mainly due to a loss of consumer trust.

     
     
     
    • Reena A Jadhav
    • Founder, CEO, nuAlerts

    Thanks for a good read Carmen. Groupon is creating a radical shift in customer acquisition. More importantly Groupon has successfully deployed a model for acquiring and monetizing the toughest segment of all - small business.

    What's exciting is the emergence of new billion dollar opportunities due to Groupon's success. My company is about to pilot a new application that rewards loyalty with deep discounts and converts buyers of Groupon into loyal customers. Next few years should be very exciting for companies in this space!

     
     
     
    • Mark Mackaman
    • VP Operations, ComputerGear Inc.

    As a small niche internet retailer, I find Groupon interesting and we are considering testing it. My biggest concern is offering discounted prices through Groupon, then having these purchasers never purchase again or only purchase when another discount price is offered.

    Many years ago there Sears did a study where they found that many of their Craftsman tool buyers waited for the weekly sale flyer and then only bought the tools which were on sale. If the tool they needed wasn't on sale, they waited until the tool was on sale to buy it. The net affect was that Sears effectively lowered their overall selling prices but didn't increase the number of overall buyers. They effectively taught their customers to wait for the sale (I was one of those customers).

    We have had a similar experience at ComputerGear. Those customers who buy discounted or sale merchandise typically only buy one time. Those who do buy again, only buy discounted or sale merchandise again. Less than 10% come back and buy a full-priced item (along with sale and discounted items).

    My concern with Groupon is will a Groupon buyer come back and buy paying full price or will they always need a price incentive to buy? If it is the later, then eventually most full-price customers will learn to wait for the Groupon price incentive effectively lowering overall prices as what happened at Sears.

    I think the jury is still out whether the Groupon discount customers will come back an pay full price. Groupon makes money, but is it good for the retailer? I don't think so.

     
     
     
    • Patrick Dillon
    • President, Deal Current

    The one group that Groupon may have clearly had the biggest impact on so far is established media. Whether good or bad, Groupon has changed the publisher landscape for good. They've swept up an entire category of advertisers that had categorically little confidence in them in delivering measurable results, but they've also opened the door to their biggest threat. Groupon is about to face their biggest competitor, and it's coming at them from all sides. It'll be very interesting to see how an IPO shakes out.

     
     
     
    • Jon Carson
    • CEO, BiddingForGood

    The issue is going to be whether Groupon and others habituate consumers to only purchase when there are deals. I know of several folks who no longer ever pay full price at restuarants anymore- they only dine on discount vouchers.

    But kudos to them for innovating this model. What will be interesting will be how the model further innovates. Our company is securing vouchers to put into charity auctions so that the $$ raise money for charity thereby reducing the discount impact on the brand and giving a halo effect.

    Jon Carson CEO, BiddingForGood

     
     
     
    • Mitch Tobol
    • Founder & Partner, CGT Marketing LLC

    We advocated using Groupon for a client, a regional fast food retailer on Long Island in NY. The decision to push them to use it was two reasons.

    1. First and foremost Groupon promises to attract a younger demographic which is a strategic priority
    2. Traffic, traffic, traffic. Groupon promises to bring traffic

    Our results so far show ? Roughly 60% of the "redeemers" spent over the coupon amount ? Roughly 10% spent under This results in reducing the acquisition cost of a customer to walk through the door. A key metric for meeting marketing objectives.

    We have yet to finish our analysis of the 6 month Groupon however it appears that the cost of driving customers does not compare favorably to existing media tactics. We are not done yet and we only have qualitative information to assess whether or not a younger demographic came into any of the locations.

    If you would like the final results feel free to contact me. I find Groupon's business model fascinating and wonder if it will last given the stress most retailers are under.

     
     
     
    • Mike Platt
    • CEO, Platt Enterprises

    I have been involved with two dozen restaurants I've the past 25 years. We used 2 for 1 coupons in the Entertainment book periodically. Generally we stopped after we observed that their use did not build long term business. And probably hurt our value among regular customers. I think Groupon should have grabbed Googles $6MM offer!

     
     
     
    • Frans J. Kok
    • President, Middleburg Tree Farm, Inc.

    We are a Christmas Tree Farm and contemplated using Groupon or other discount coupon web based services. Ultimately we opted to offer our own coupon on our own website. When prospective clients signed up for our e-mail service we offered a $5 dollar coupon and/or when they recommended us to their facebook friends they received an additional $5 coupon. Our average ticket is $60 per tree. The discount amounted to 16.7%. The response was excellent, our sales increased 64% over last year and we doubled the number of families who joined our e-mail list. Our product keeps from one year to the next but has to sold within a 4 year window before the tree is too tall for the general market (6 ft to 10 ft). We were very pleased with the results of the coupons. It shows that the retailer has cheaper ways to increase sales and maintain control over traffic and margins than to use Groupon like services. The discounts were actually paid for by ch arging an additional $10 per foot over 8 ft for trees over 8 ft. Our average price remained at $60 per tree, the same as last year.

     
     
     
    • Richard Shepherd
    • VP Market Research, International Development Corporation

    I have yet to take advantage of opportunities to have my nails done, to do unlimited yoga, to have my eyelashes extended, or to travel across NYC to save a couple of bucks on a hormone-free hamburger made from humanely raised angus beef.

    Give me a break! Job for 50% off and I might bite.

    I don't think anyone has to concern themselves with whether Groupon will be another Google or Facebook.

    But following it for the rest of its life over the next few months ought to keep some folks busy writing about it.

    That is, if I'm not wrong about it.

     
     
     
    • Anonymous

    I am starting to see medical providers offering discounted services through Groupon. The true value of a patient in a medical practice comes with a long-term relationship. Do you think this is a viable external marketing tool for physicians?

     
     
     
    • Anonymous

    Two flaws in these voucher deals

    1) Vouchers are too manual, text ads. there is no smartness ...thus use of small print, legal texts etc ... Actually, having a really electronic voucher where these conditons are set and verified at time of booking ( as well as redeeming) is feasible.

    2) sending a daily deal mail to millions of users end up being real spam ...targetting is really an issue here. Wonder how many mails do users receive, before booking one deal.

    Otherwise, great innovation in commerce logic and local business ad.

     
     
     
    • David Wallace
    • Managing Partner, gamechange LLC

    Another soft Groupon benefit that was hinted at, but not discussed in detail, is market research for companies looking to scout new sites (geographic) or offerings (hours, services) by creating a giant "focus group" and the response -- both purchase AND redemption.

    Thanks for reaching back all the way to Mercata. Other group buying efforts aimed at price drops have had the effect of freezing buyers who are unsure of the final price or last-minute snipers who come into auctions at the last minutes. There are always "value" shoppers who wouldn't make a purchase without a promotion -- but I wonder if the economy made Groupon, LivingSocial, buywithme -- in the same way plenty of auction models and online marketplaces chased eBay.

    Might you two also Q&A about retailers using location-based games or prizes such as 4Square, SCVNGR or other "check-ins" to drive social messaging and peer buying choices?

     
     
     
    • Mi Herzog
    • Marketing Consultant

    For retailers, I see the validity of testing Groupon to communicate newness of a company's product offering.

    When retailers change their product line or target a new demographic, Groupons can generate a visit to a store. Getting those feet in the door is invaluable!

     
     
     
    • Clayton Beaty
    • President, Beaty Fertilizer Co. Inc.

    Will this concept work for mail order nurseries who often have an oversupply of highly perishable plant?

     
     
     
    • Nancy Edmunds
    • Groupon Customer

    Allow me to chime in among the experts: I definitely value the incentive Groupons provide to try new places, especially as someone who has recently relocated and is looking for things to do. Some businesses have seen me return as a full-paying customer, and some have not, but it consistently feels like a win-win situation. I try something new, and the businesses have an opportunity to impress me enough to return and/or to send friends their way.

    One thing I didn't see mentioned is the benefit to the business of unredeemed Groupons. I've allowed at least two Groupons to expire, despite having received reminders to use them.

     
     
     
    • Peter
    • Senior Consultant

    My belief is that Groupon's model is unsustainable.

    This is why. The discounts are too big and the cut to Groupon is so high that it would appear that most businesses would lose money on Groupons. So if they lose money on the Groupon, the hope is that they will have generated interest in their business and perhaps some future customers. But I don't think the evidence for most businesses suggests this. A lot of people buy Groupons because they get the email and feel a sense of urgency to get the deal. This means it's probably not something that those people would buy ordinarily, and probably not something they'd buy at full price in the future.

    Groupon is doing well right now, but I don't see this success, particularly the growth, continuing in the long term. They want to go public? Why would any long term investor buy this stock? Groupon will likely reach saturation quickly, and then begin the inevitable decline. Remember there are many competitors out there; they may not approach the penetration of Groupon but they will surely dilute the value - most likely by driving down the percentage share that goes to the coupon company, or at the very least, limiting its growth.

    Once the metrics start coming back from these studies that show whether or not Groupon (or other similar companies) is worth it, we will see what Groupon's future looks like. It will be interesting to read the followup research to this paper. I think what is likely is that businesses will figure out which types of business benefit and which don't; at which point, Groupon's customer base will plummet. Right now this is an experiment for most businesses and there are plenty of businesses willing to experiment, particularly in a bad economy. But in the long run, with more analytics, and a better economy, this will not be the case.

    Groupon and the whole model will probably survive, but there is no way they will maintain their growth and scale. There are hundreds of similar companies nipping at their heels, and now local newspapers are getting in the game. They should have sold to Google when they had the chance.

     
     
     
    • Joe Domeier
    • Owner, The Art Store

    I just signed a contract with Groupon for custom framing. We are the first custom framer in the Des Moines market. $100 voucher for $50. We split the $50. I expect this to break into a more web savvy individual who might not think of my business for framing. We are known/branded as art supplies. Framing is about 20% of our annual revenue but has the highest profit margin.

    The sales staff will be asked to up sell more during the promotion. If you have ever had any print or art framed you know it's hard to frame anything for under $100 so I expect to reap extra cream from the top. The $25 from Groupon will cover my cost of goods and labor on a $100 order. I sit on no inventory for this promotion as materials are all ordered at the time of purchase.

    MOST of my existing framing customers have no idea of who and what Groupon is so I do not expect it to effect everyday business. This should drag some folks from the big box Michael's stores into a FULL SERVICE framer who says "hello" to all who walk in the door. Who knows, we may even get one or two customers to buy some art supplies! Traffic, traffic, traffic.

    I'll try to post the result after our first run.

    Joe

     
     
     
    • Anonymous

    This reaffirms to me yet again why the hybrid Saveby.com model have so much more to offer. Let consumers bend together around things they actually want and need and commit to the deal. Broadcast these deal opportunity to merchants (reversed Groupon) and have merchants take on deals they find attractive; just like consumers do at Groupon. This way merchants eliminate their risk and moreover, they get instant funds for the deal. It's fantastic for merchants, great for consumers, and Saveby wins too.

     
     
     
    • Randy Moyer, DC
    • Owner, Moyer Total Wellness

    I have run massage deals on several of the daily deal sites and am currently in a contract with one of the biggest.

    I see the daily deal sites possibly lowering the price points for the services that typically run on these sites, even it is only temporary, due to a slow economy and, just to a subset of the population (daily deal users).

    As a new business, everyone is a new client, so we do not really have any conflict in pricing with existing clients. This has created "foot traffic"though our wellness center. We are in a non-retail business park with no signage (read low over head) and we have to advertise for people to find us.

    Because of our industry and location, we can actually come out ahead by doing these deals. So, you can say our business model can thrive as a partner of these sites.

    Our recipe for success is simple: we have great service that would bring people back...if the price is right of course. So, we allow all of our customers to become "members" and then they have access to the same services they purchased, for the same daily deal rate. And they do comeback. We no longer pay the commission to the site for these customers, and when we do run again, our current customers will not need to purchase the deal...the hope is that they would never need to purchase a similar service again from the sites.

    The daily deal sites have created successful advertising strategy for their customers. No cost up front, and you always get new customers...and, it is pretty predictable.

    I operate a Wellness Center in Denver, CO and have run many times on these sites, each time I ran on one of the big ones, I sold 800 services.

    Because of the daily deal sites, I have a viable business plan. I have already expanded my current location and am planning multiple locations....for business with good service and low overhead, the daily deals work.

     
     
     
    • Bruce H
    • Consultant

    Regarding existing customers getting annoyed - shouldn't be an issue since Groupon is open to all equally - not like the Byzantine airline pricing rules.

    Regarding reducing the perceived value of your services - could be an issue if a merchant runs frequent Groupons (the Sears effect mentioned above - also true of cars - isn't there ALWAYS either cash back or very low financing available these days?). Particularly if the Groupon is for hard goods. I can put off buying a widget but I can't put off getting my hair cut (at least not for too long!). Amazon runs into this sort of problem since they let you put items in your cart "on hold" and then gives you an updated price every time you come back. When I see the price drop I make my purchase. (of course, the price can go up too!)

     
     
     
    • Greg Cook
    • Teacher, East Somerville Community School

    I can say... My partner and I have had both sides of the groupon consumer experience. It's taken us to some great local haunts that I would have otherwise overlooked. We've also seen "groupies" descend on my girlfriend's gym and elbow people out of classes, only to disappear after the groupon was played out. It's definitely a tricky balance. And as an aside, bully for them for spurning Google's advances. Really, what won't Google buy?

     
     
     
    • Anonymous

    As a consumer, Groupon gives one the oppotunity to try food/services they may not typically try/use. From seller perspective, they may not have had this consumer at all vs. with Groupon, they have the potential to gain a new client. So, it can be viewed as upside to the seller in terms of future business.

     
     
     
    • Jeff Russell
    • Executive-Director, International Association for Physicians in Aesthetic Medicine

    I think a business needs to look at the expense of running a Groupon ad similarly to how Zappo's looks at their free shipping, as a marketing expense. Having said that, I think Groupon should not be viewed as a long term strategy for most businesses, it's something you do once to generate new customers (which hopefully you will convert to long term). If you offer it regularly, people will wait for the next coupon (I love the Sears Craftsman analogy above). So before a company makes a decision to proceed with a Groupon ad, they need to have a very focused strategy on what they are going to do with the customers when they arrive (i.e. get their email address, get them to join their Facebook page, give them a special deal on a complementary product/service where you actually make some money).

    I actually think restaurants are the worst candidates for Groupon, for me it's a way to check out different restaurants that I may not go to otherwise. However, there just so many restaurants advertising, that I haven't gone to the same one twice in the past year. As been said by Ben above, if you have food that is perishable and empty seats, it's better to cover your cost than lose money. It'll be interesting to see how this plays out, I also agree they were very foolish to not take Google $6 billion! I see this as a business that is easily duplicated (wonder when the patent trolls will arrive for their share!), and doesn't offer a long term strategy for their customers (once people see they are not getting long term customers, they are not going to keep using Groupon).

     
     
     
    • Anonymous

    Our Casino recently offered a Groupon to try and attract new visitors of a younger demographic. We found that it mainly appealed to our current Players Club members, many of which hadn't visited in recent months or even years. Only a few guests were actually new Players Club sign-ups. Our research so far shows that the majority of these people did spend over the Groupon amount.

    Our market is new to Groupon but we were still very impressed with the results, becoming the highest selling Groupon offer. The detailed market research on the buyers was of good value and we were impressed to see that the majority of people bought 1-2 additional Groupons as gifts. Since we required ID for these gifts we were able to see that there was a diverse group redeeming. A lot of our younger buyers appeared to buy extra for their parents who may be less Internet saavy.

    It will be interesteding to continue to monitor how many of our Groupon buyers were new PC sign-ups but so far we have been content. It helps businesses like ours with older clientelle to tap into a younger target market and allows us to remind them that we offer shows and dining in addition to gaming.

     
     
     
    • John Handler
    • owner, JLJ Restaurant Group, LLC

    I own two restaurants in Chicago. We did our first Groupon for one of the restaurants in April 2009 when there were only 15,000 subscribers. In January of 2010 we did a Groupon for our other restaurant, they then had 300,000 subscribers.

    The average 2010 Groupon ticket was 2.5 covers spending a gross $61. Less the voucher we received $31 well above our hard costs of $18 (30% for food). 62% were new customers and 21% never redeemed their vouchers.

    Having been in business fifteen years it was great that 300,000 saw our name and that we were still around. As we learned in marketing you have to touch them 6 to 8 times before they hear you. Now we'll send them an email blast and a Facebook poke, only three more times to go :)

    Next week we'll be featured again on Groupon, this time for both restaurants.

     
     
     
    • Gad
    • Director, Novostrategy

    As others have mentioned, I suspect that Groupon works well for some businesses and not so well for others. Filtering out the poor performers will be tricky since a baseline for how well the business performed before and after the offer will be difficult to measure. As one commenter noted, some companies may decide to be more aggressive in upselling during a redemption period which is a change in behaviour. Perhaps an indirect benefit (short term) is the anticipation of a redemption by making the retailer more focused on upselling and customer retention.

    In addition, it will be interesting to see how Groupon uses the data it is amassing to personalize and further innovate through the use of analytics. I believe this (and moving faster than their compeition) will be key in determining their ability to outperfrom in the long term. As it stands, I am hard pressed to understand the recent valuations at $6-15 billion.

     
     
     
    • Philip von Stade
    • Retired, VSI

    Very good, but I especially liked the variety and depth of the comments! My gut feel is these guys might not be around in 12 months. Too many other big fish in the coupon/voucher/marketing world can get up to speed fast and kill margins. The biggest problem is that they're dealing with almost exclusively with small, local companies. When you get entrenched with the BIG national marketers, it's another story... and I don't think this is that story.... But glad to see they've gotten everyone interested in better ways to market local businesses.

     
     
     
    • Paul C.
    • Managing Partner, Berry Freeze, LLC

    Our Frozen Yogurt store (in Coolidge Corner of Brookline, MA) did a Groupon this past December and we were disappointed overall, mainly because of their recent change of offering side deals and targeted subscribers.

    Groupon first approached us during the summer of 2010, in which we decided to pursue this advertising opportunity in the winter as business slows down. We discussed terms with their sales associate (i.e. 50% deal split, 1 cert. per customer, 6 month expiration, etc) and finalized the deal in November, although our deal was not featured until the first week of December due to their marketing team being "busy" with many deals.

    During the day of our feature, we found out that our deal was actually a side deal and was simply a text-link rather than being the main featured deal of the day. Upon discussing our frustration with the Groupon sales associate for the Greater Boston region, he explained to us that featured deals on the home page were decided based upon what Groupon estimates to be most profitable for them. Since our deal was $5 for $10 worth of frozen yogurt, tea, smoothies, coffee, they featured a Boston walking tour worth $30 for $15 since each of their $7.50 commission per buyer was worth 3 of our buyers, which makes financial sense for Groupon but we were never informed of the changes they've made offering side deals.

    The sales associate tried to make us feel better that our deal was sent as a featured deal to targeted subscribers in the Greater Boston area, but that only amounted to 110,000 out of the 500,000+ total subscribers in the Greater Boston area.

    We sold about 1,350 total Groupons, which wasn't bad based on our estimate of 1/2 - 1% buy-ratio which assuming 1%, would be 1,100 out of the 110,000. However, we were expecting 1/2 - 1% of their 500,000+ subscribers which would be 5,000. We take a loss on each groupon sold actually, but since the cost is spread over time and some certificates get lost or unredeemed, it wouldn't have been a bad way to reach 500,000 subscribers with that one deal. We did have some of the same buyers, such as one person who had many accounts and bought 7 groupons as he went around the 1 certificate per customer limitation.

    We've had about 200 redemptions in the first month with about 25% being new customers. So did we get new customers with Groupon? Yes, but far less than what we were expecting. Would we offer another Groupon even if we were the main featured deal? No, the cost of new subscribers is not worth it to us and by doing multiple deals would cheapen our product and brand. When I see businesses offering deals frequently, my first reaction is that their business must be doing poorly, otherwise why would they need to keep offering deals to attract customers? How come I haven't seen a Groupon deal for Ruth's Chris, Abe & Louie's, etc? My guess is that their business is just fine, at least for Ruth's, since their earnings or EPS is still in positive territory.

    If any small business were to ask for a recommendation on using Groupon however, I would say "it depends". If they are unable to obtain new customers through other methods, say, hiring high school students to pass out flyers in strategic, high foot-traffic locations, then perhaps Groupon may be a good advertising method. If anyone wants to learn more about our business or experience with Groupon, feel free to email us at our general inbox, info@berryfreeze.com.

     
     
     
    • Luis Pascoal
    • CEO, DPaschoal

    I find Groupon interesting, but my concern is offering discounted prices at a large scale to everyone for long time can be dangerous. If we multiply the Groupon concept, it can be a threat to retailers.

    Reasons:

    1) Purchasers never purchase again or only purchase when another discount price is offered;

    2) Sears found that Craftsman buyers waited for the next sale flyer and then bought the tools which were on sale;

    3) Many promotions similar to Groupon didn't increase the number of overall buyers;

    4) We had a similar experience at our company, when our sales became very dependent on promotions and we lost our long term customers;

    5) Customers who buy discounted or sale merchandise typically only buy one time or only on sale;

    6) There are some studies about promotional days, like the Black Friday, as a big problem for retailers;

    7) Zara and Apple are very profitable and successful companies and they don't promote;

    My concerns are: will a Groupon buyer come back and pay full price or will they always need a price incentive to buy? Eventually full-price customers will learn to wait for the Groupon price incentive effectively lowering prices. Groupon makes money, but who is really paying for it? It can be good for the retailer only for few weeks or months. But.......

     
     
     
    • Phil Hood
    • publisher, Enter Music

    I agree with those who are skeptical about Groupon. 1. It spams you. Selectivity is needed. 2. Groupon's cut needs to come down. I know several businesses who had cash problems fulfilling Groupon customers. 3. The Groupon audience is not everyone. There's a limit to who is interested. 4. Like so much of the web, the buzz is already dying. Even dealhunters get fatigue. You can only be excited by half-price massages once or twice. Then it becomes your regular price and you don't jump at it. 5. It is good advertising and I would advise the physician to try it. There are definitely folks who stay away from doctors due to cost.

     
     
     
    • H. Lynn
    • friend of Groupon groupie

    Enjoyed the article, and the comments, too!

    I have two friends, of very different demographics who buy Groupons so often they expire on them. One of those friends has offered me several of those Groupons that were about to expire. That same friend and I used a Groupon for our favorite Ethiopian restaurant in Chicago, and to us, it was a bonus that we could go to one of our regular haunts and get a discount. We even tried more food, because we had the Groupon. But we certainly won't WAIT around for another Groupon for the place to eat there again. It's just too good.

    Maybe some people don't return to some of these places that offer Groupons because they aren't that good, or there is another place right around the corner that is just as mediocre, and offering a Groupon. Nail salons and Thai restaurants are in no short supply in Chicago, and many are interchangeable in service and product. If they are all about the same, but nothing spectacular, customers won't become loyal and won't go without a Groupon.

     
     
     
    • Henry Maigurira
    • Executive Secretary, Pachi Develpment Foundation

    It seems the idea of reaching out to retailers and consumers is characterized by a process that is cost effective and money saving. Consumers who want to pay more for product would do so at liberty on product quality, i am sure Groupon has measures to adequately address the pricing mechanism adjusted on CPI.

     
     
     
    • Anonymous

    Around Chicago it's rumored that Google actually changed the terms of the deal to discourage Groupon from accepting the $6b offer. Seems Google got cold feet after the negative publicity that accompanied press leaks of an impending deal.

     
     
     
    • Paul A.
    • Manager

    I work for an ice cream franchise and we tried two types of vouchering systems. The first was the wildly popular Groupon, which sold well over a thousand and we looked at it as an advertising opportunity. These were $10 vouchers for $5.

    The vouchers tended cover the average price of cups, cones and drinks, but we found a lot of redeemers were using their vouchers for pints and quarts. Not only were these customers buying something with a higher cost to us, but they also weren't staying in the store, there was less opportunity to upsell, and less of a chance that they'd come back.

    The other service we used was DealQuad which was working with Harvard university and specifically targeted students and staff there. This time around, instead of selling a voucher for a specific dollar amount, we ran the deal as $5 for two waffle cones. This strategy works well for us because the variety lies in the flavor, rather than the item, but may not work as well for a restaurant with a full menu.

    I'd say using a service like Groupon takes a lot of consideration. There are definitely better ways to use these services, like targeting specific demographics that are more likely to return, and setting your deal for specific products with low overhead in order to make it work better for your particular business. Assess what you want to get out of a service like this and find one that's right for your business. There's a smart way to use them, but if you're not careful they probably won't be everything you'd expect them to be.

     
     
     
    • Anonymous

    Great article and comments! Groupon's business model is simple and certainly not immune to the dangers of competitors performing and improving the same type of service. Even Groupon is recognizing shortcomings in their model where only 1 in 7 applicants for listings are actually posted. They are starting a business storefront model to alleviate this block.

    Since Google is introducing Google Offers to compete against Groupon, it will be interesting to see if rejecting their $6bn dollar offer will be remembered one of the most regretted business decisions in history.

     
     
     
    • Anonymous

    I'm an avid user of flash sales and daily deals, and work in the travel flash sale space. I think we'll see one or two companies come out on top in the end, but they certainly aren't going away.

    Totally agree with Mr. Jeff Russell. Offering a Groupon is a marketing event. As a business you should ALWAYS pump the numbers first, then decide. Don't just do it because everyone else is, first make sure it will work for your business. Be prepared for the rush.

    From a consumer prospective, these deals introduce me to establishments I would have never entered otherwise. Approximately 50% of the businesses I have bought deals for I have returned to and am now happily paying full price.

    Bottom line, deals and flash sales can be great for business as long as you have done your homework and are prepared.

     
     
     
    • Anonymous

    It was noted above that Groupon has many equivalent competitors. What separates Groupon from the others is their mailing list (also name recognition and pricing). Provided Groupon has more subscribers than the competition, they can maintain premium pricing power. As the competition signs up more accounts, does pricing, rather than potential eyeballs, become the basis of competition?

    Also, many eyeballs do they maintain? How many times have I opened a Groupon email to find an offer for Nails, Yoga and a Brazillian Wax? (or for the typical girl - paintball, tailored shirts, and a discount on chicken wings) At some point, I stop looking at every Groupon that comes through my inbox, which eventually hits the junk folder.

    Based on the above, I think the future for Groupon may lie with closer intergration with the social media space. As Groupon's offers become less targeted (from a consumer perspective, I mean sending me an offer on a product in which I have no interest) I become more likely to look at a deal only if I hear about it through a friend. The result of this is the competitive threat posed by FBook, if they decide to go, like Google, and offer a Groupon clone.

    As for deal fatigue: for Canadian Tire (similar to Sears) I don't get out of bed for less than 50% off. I agree with those who have posted to use a Groupon sparingly, and search for innovative ways to retain customers. As a customer: keep the cheap stuff coming...

     
     
     
    • D Ward
    • Marketing Analyst

    From a practical perspective, and speaking as one who has made the foolish decision to use Groupon's "services", I find their product to be lacking.

    At first, upon hearing about Groupon, I was excited to learn that unique and desirable products/services might be obtained for substantial discounts. I acted on several of the daily deals. However, when I tried to redeem them I encountered problems. Resolution of the first issue resulted in no net cost savings to me. The second attempt at Groupon redemption failed completely due to an inability to log in to their website, coupled with their complete lack of response to e-mails addressed to customer service and technical assistance groups. An attempt on a 3rd deal has not been a complete wash-out (yet), although I have been unable to redeem the deal on two separate occasions (and requests for customer assistance again were largely ignored).

    As mentioned early in the Comments, "Groupon is losing some of the perception as the 'great deal' for consumers mainly due to a loss of consumer trust." I could not agree more. Perhaps mine are the isolated experiences of one unlucky consumer. Nevertheless, due to their inaction and apparent disregard for the end-line customer, Groupon has lost me as a candidate for future business. With any luck, all future soliciatations will find a home where they belong -- the spam folder.

     
     
     
    • Helena Collins
    • President, Life in Syergy

    Being in the target market for the Groupon discount model, I own a fitness studio and have tested a variety of these group discount companies as a means of pay for play advertising. My prediction is that Groupon will soon begin to lose their majority market share. As mentioned in a previous post, it took almost 4 months to close the deal with many delays, basically years in small business terms. A newer player in the market buywithme, was much more responsive and did a much better job in the overall marketing and understanding of my message. Translating to 3x the volume and a deal closed and up within a week. Groupon is running the risk of taking a fast idea and slowing it down to a corporate crawl.

     
     
     
    • Anonymous

    Why is Groupon worth $6 billion? Wouldn't it be easier and cheaper to build a better business on the same model for so much less?

    Jon LeClere Beamingsun.com

     
     
     
    • James F
    • Buyer of Groupon Coupons, Public

    I recently bought four Groupons for use at a local attraction (about 50% off) that I gave away as birthday presents. When I redeemed the Groupon at the attraction the manager there told me that they had 12,000 Groupon sold in that one day promotion.

    I agree with the sentiment that it might affect full price paying customers, but as a marketing tool, Groupon is very effective.

     
     
     
    • Anonymous

    While all the users and their buying behavior is owned by groupon what is the incentive for the business? They don't have the reach of the customer and don't own them beyond the consumption of the one time coupon...Do you folks see a growing business in white labeled Groupon like services for the businesses to try their own luck so they don't loose too much on the margin?

     
     
     
    • Linda Rouyer
    • Principal, Source Solution Group

    I think that for the right business Groupon can be "part" of a good strategy, but a few things have to happen.

    One is that the retailer has to offer an exceptional product or service - it can't be just so so. There are so many options and so many coupons/vouchers that with the economy in the state it is - people will always have "another deal" - So the question is "why go back?" Well if it's just okay - there is no compelling reason and the retailer will in fact be disappointed that they didn't convert any new visitors into "regulars"

    But my real questions that begs to be asked and would be the another major factor is ... Did the retailer have a strategy to get you back? My experience is no - they don't

    Something I think that retailers can do is to use the influx of new visitors as an opportunity to spring board into a more complete and sustainable strategy.

    I don't know about you but I have never had a retailer reach out to me after I used a groupon??? Why not - some of them where pretty good - but with so many options in the market place if you are not extraordinary then you better have a good solid marketing plan to stay connected and top of mind to those who have experience you.

    I think using groupon as a stand alone strategy in todays market is not going to deliver a sustainable result

    But think of it like this - there was a day (and some still do) that people regularly spent huge amounts of money to have ads in magazines or newspapers - this static imprint was a far cry from having a live body in your establishment - with an opportunity to begin a relationship.

    I think as a retailer you need to really look at how you would use groupon and have a realistic approach to what it can do for you.

    Delivering the traffic is just the beginning!

     
     
     
    • Anonymous

    Groupon: A retail manager's experience.

    The company I work for ran a Groupon special a few months ago. We have multiple locations in a major metropolitan market. They sold around 3000 of these coupons. We have a non-perishable product and the true worth of this venture with Groupon was the exposure. Yes, the deal was attractive, with real savings to be had, but again, it was the exposure that was truly the desired end result. The following are my observations;

    1) 40% of the customers I worked with were quite rude. They were obviously part of the nomadic tribe of coupon users that flock from one retailer to another based on the coupons they have in their wallets/purse.

    2) 90% purchased the minimally priced products as to criteria stated in the "fine print" of the Groupon coupon.

    3) 15% were existing customers taking advantage of the savings offered.

    There was one common thread among all of the coupon users and that was the fact in all of the sales I transacted, with the exception of only one customer, nobody bothered to read all of the coupon information in regards to what products were being offered, and what products were not included. This clearly pointed out to me that the only thing most of these consumers saw was the discount being offered. My daughter works for the Gap and she related to me that the Groupon coupon turned into a real fiasco. She also had heard of customers being incredibly rude, demanding (not asking) that certain items be included for use with their Groupon coupon, even though it clearly stated that they were not part of the offering.

    My personal feeling about Groupon is that I believe they made a very huge mistake not taking the $6B and running straight to the bank with it. As stated in one of the above comments, this may be a decision by Mr. Mason that he may soon regret. I don't believe that Groupon has the staying power to last more than the next 2-3 years, all things considered.

     
     
     
    • Dan Hosford

    The problem with Group buying sites and the awareness and trial that they generate is that they 'anchor' all new customers to a low price.

    http://en.wikipedia.org/wiki/Anchoring

    These customers are very unlikely to rebuy at a higher price unless the product is exceptional and unavailable for cheaper elsewhere

     
     
     
    • Jeffrey
    • Director of Sales, Youswoop.com

    As one of the top competitors to Groupon in the Chicago Market it is sad to read some of the obvious flaws that are written by people who have not spent time in the industry, but rather studying it from the outside. Though some of there analysis is correct, most of those statements are blanket statements and are known by a college student interviewing for a position in our industry by simply researching the industry. There is a science to every feature structured and I am sorry for the groupon business owners who wrote above that they got crushed by working with Groupon. Without sounding negative, it's unfortunate that you had an account executive that was more interested in their commission, their company rules or quotas ect. The reason you won't find a single word about our company ever having a negative impact on a merchant in the press is because we started in the industry in '09 by limiting quantity, mitigating financial r isk to our merchants, managing expectations of our "Swoopers," and counting down the certificates instead of counting up which creates urgency as well provides our members with a feeling of exclusivity instead of just being one more unrecognizable face in the crowd who purchased amongst thousands of others. Check Crain's in Chicago (which our CEO was featured in last week), NBC, The Sun-Times and more and you will only find YouSwoop has done nothing but the best things for the Merchants we work with. The reason is simple, we focus on mitigating the merchants risk in terms of finances and fulfillment, we create fun compelling features for our members to see daily and our account executives make themselves available to the Merchants they partner with 24 hours a day, 7 days a week. Our customer service and follow-through is impeccable.

    Feel free to email me with any questions you may have about or industry as it is clear from the answers above that the paper is written by intelligent individuals who basically know very little about our industry. Unfortunately it is a phenomena and not something that is understood without the proper explanation.

    Good luck to all who have read this article and posting.

     
     
     
    • Linda

    Recently Groupon presented an amazing offer to the Ft. Lauderdale community featuring the Vatican Splendors Exhibit at the Ft. Lauderdale Museum of Art. The deal was essentially two entries for the price of one. I bought one for a friend and me, my mother bought one for herself and my sister. I paid full admission for my daughter and we spent a good deal of money afterward in the Gift Shop. After leaving the museum we stopped at a nearby Bistro and spent over 150.00. We also stopped at another store and bought some trinkets.
    A few days later a friend of mine called me and mentioned a French restarant featured on Groupon that looked interesting and was right down the street from me. Up to that point I had no idea it even existed. Neither of us bought the deal but were curious enough to go for lunch a few days later and paid full price. I also recommended the place to a friend who went and paid full price. I stopped in the other day and bought some pastries for a dinner party I was hosting.

    My friend also bought a deal on either Groupon or Living Locial for a beading class. She took the class and made a bracelet which was all included in the deal. She loved the bracelet so much that she went back the next day and paid full price to make another one and met up with a woman who was doing precisely the same thing. After leaving the bead store and on her way to the car she noticed an adorable little cafe that she had never seen before and stopped in to have a lovely cup of tea and pastry. Now I can't wait to go to that little cafe and see what she was raving about.

    So maybe this Harvard study should measure the benefits to ancillary small businesses and the economy in general because if my few stories are multiplied by the millions of deals going on per day than this may account for some of the upswing in consumer spending recently.

     
     
     
    • Robert Weekes
    • Founder, Next Door

    Trust me, if Groupon is turning down multi-billion dollar offers from Google and Yahoo, I'm pretty sure their future is safe. Between the market research that those 3 giant companies have undoubtedly performed, the projectijons must be looking good. Even if businesses lose out in the short run, and don't recoup their losses as quickly as they would like, they can always adjust their offers in the future and find a harmonious balance somewhere. Free enterprise is like life, it is very flexible and always finds a way to flourish.

     
     
     
    • Varun Raj
    • MBA Student, Birla Institute of Management Technology

    What happens when most of those small scale retailers have already given Groupon a try? It would be like a saturated situation when they would like their customers to pay the full price. The number of retailers opting for Groupon would reduce. Basically, its going to be a fad.

    Secondly, with the customers coming to know that the service can be provided with even 90% discount would simply make them wait for that offer to come up on Groupon the next time. Groupon themselves say that they have a huge repeat base of retailers.

    This means that Groupon is setting a base price in the minds of the customers at which the service can be provided.

    In the long run, i doubt the sustainability of the business Model

     
     
     
    • Thuha Nguyen
    • Partner, www.marketingzone.com

    Advantages of using Groupon include a quick way of generating brand awareness and a low-cost promotion to jumpstart your business. But there are disadvantages as well.

    If you consider participating in a Groupon, check out this article about the pros and cons of using Groupon:

    http://www.marketingzone.com/2429-groupon-pros-cons-small-business

     
     
     
    • Anonymous

    Having used Groupon both as a buyer and retailer, my observation is that the update is only as good as the product offering itself. For a small competitor in a competitive industry though, a Groupon offering to a retailer is often a cost effective way of breaking into the industry; and to get conversions from viewers to buyers quickly when cash-strapped. For small local businesses, it can be the difference between survival and going under purely due to cashflow issues.

     
     
     
    • Gary Riding
    • Owner, www.garyriding.com

    For small businesses in out of town locations, then I can see the benefit of raising a profile without a huge advertising spend. However, in larger retail areas, the opportunity for consumers to voucher hop from one offer to another may actually be counter-productive. The innovators of the internet marketing world have generally moved from the deep-discount model, to an added value model. This seems to encourage lasting relationships and social media capital. It also allows for more creative sales pitches - what Seth Godin would call The Purple Cow.

     
     
     
    • Jamie sabang
    • College student, AJE

    For me, Groupon helps a lot. Especially for those who only has a limited budget for a vacation. Just like us, we've been transacting with groupons company since then.

     
     
     
    • Anonymous

    Regarding existing customers getting annoyed - shouldn't be an issue since Groupon is open to all equally - not like the Byzantine airline pricing rules.

    Regarding reducing the perceived value of your services - could be an issue if a merchant runs frequent Groupons (the Sears effect mentioned above - also true of cars - isn't there ALWAYS either cash back or very low financing available these days?). Particularly if the Groupon is for hard goods. I can put off buying a widget but I can't put off getting my hair cut (at least not for too long!). Amazon runs into this sort of problem since they let you put items in your cart "on hold" and then gives you an updated price every time you come back. When I see the price drop I make my purchase. (of course, the price can go up too!)

    Visit http://www.jaysadvertising.co.nr for more info on the above

     
     
     
    • John
    • Owner, Wok With jon

    I did a Groupon on 30 of October. I have had 23 come in so far out of the 90 that were sold. I am not sure yet if it has help or hurt my business. I did see new face only 2 out of the 23 were old customers. But except for the old customers I have not seen any repeat business as of yet. The over the coupon sales have been small. Please included me in your "continue researching this subject?"

    Wok with Jon. 4115 Neptune RD. St Cloud FL 34769 407-891-wok9 407-891-9659 Store http://wokwithjon.webs.com/ Blog http://wokwithjon.blogspot.com/ Facebook http://www.facebook.com/pages/Wok-With-Jon/195467853837360

     
     
     
    • Gail
    • Company owner, E-Marketing Matters

    If is vitally important to understand the psyche of coupon clippers or customers who search for and buy deals online. Their primary modus operandi is to find a deal, whatever that deal might be, and that will drive all of their purchasing decisions. As a result, they are likely to move from one deal to the next. The likelihood of a merchant getting repeat business from these customers is marginal. Yes there is no upfront advertising cost but there is the cost of running what is often referred to as a 'lost leader'. Add to this the dissatisfaction experienced by existing customers who are either unable to use the service due to increased traffic at the establishment or are annoyed they have paid full price and you will quickly see why the numbers simply don't add up. If the consumer carefully reads the terms and conditions, it is possible he or she will score a good deal. It's far less likely the merchant will be in front if they add all the costs associated with the deep discounts against the small amount of repeat or increased business they are likely to receive.

     
     
     
    • Henry
    • National Sales manager, Advershares

    Advershares, is a new and up and coming player in the market and creates a loyal customer by the merchant offering discounts they can afford to give, and give it each time the customer shops or eats in their place. The program also pays consumers to tell their friends about the program. Merchants can sign up their own customers and get paid for referring them into the network as well. So when your customer leaves your ice cream shop and picks up his dry cleaning you get paid etc.. No other program does this. This pust the buying power into the hands of consumers and merchanst give only the discount they know they can afford to give. It's A win, win.

     
     
     
    • Dale Vega
    • Program Director, Community Clearinghouse Agency

    We are a volunteer based 501-C-3 social service helping abused women, seniors, veterans and families in need since 1995. To raise funds for our volunteer program, how can we start selling coupons and/or vouchers to local business.

    Any tips - ideas?