Relationships Drive Business

Strengthening Customer Engagement to Propel Your Business

Groupon – The Good and the Ugly September 23, 2010

Too-good-to-pass-up deals in your city, emailed to your Inbox.

Groupon is the latest wunderkind of social networking. In the last 3 weeks they’ve been the feature of stories in everything from Fast Company to NPR, Today Show, Good Morning America, and was named the #1 Hottest Website for 2010 by Fox Business News. They offer hyper-local marketing in 140 markets in the US. Offering one too-good-to-pass-up discount everyday to their email audience. Here are some past offers.

Today I read a horror story from Posies Cafe. It got me thinking we need to talk carefully about who it’s right for and how to strategically plan for wild success and its aftermath.

How Groupon Works:
1. Each day they feature something from an advertiser, something cool to do at an unbeatable price.
2. The offer only goes live if enough people join that day… so inviting friends is encouraged.
3. Check back the next day for another awesome Groupon.

Groupon Target Audience:
They’re socially active, both online and off. Here are the demographics.
– 50 percent go out twice a week or more
– Habitual users of Facebook, Twitter, blogs, and other social media tools
– Savvy Online Shoppers

What the Groupee gets:

Exposure to highly targeted audiences.

– Sales at deep discount.

– Payment before the end user gets the product or service.

What’s in it for Groupon:

Groupon takes a commission on every sale. They provide the audience and the distribution channel. They process all the transactions and take a cut. Usually it’s 50%.

How it’s changed business

Groupon’s model rearranges payment’s spot in the transaction. Payment happens in advance of the consumer using the coupon at the retailer. It moves you getting paid closer to the front end of the process. That could be good for your cashflow.

In deciding if Groupon is right for you, look at it from all angles. Run the financial scenarios for 50 sales for 500 sales. Ask yourself these questions:

  • What will you do with the exposure when you get it?
  • How will you stay in touch with the new customers it brings you?
  • How will the influx of business affect existing customers, and can I live with a worst case scenario?
  • What are my true costs of the deal?

Groupon’s biggest competitor is LivingSocial. Some of the details are different, but it’s based on the same principles of group buying power, and people sharing good deals with friends.

Other articles to help you decide if Groupon or LivingSocial is right for your business:

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