There has been a lot said about Groupon. And the concept of a Groupon or a blog post on Groupon is certainly not a new thing considering there are already over 170 Groupon competitors already in the field--and growing. But we still do get the question of "should I do a Groupon for my company?" And with each blog post, news article, video of the owner's experience and announcement of another multi-billion dollar offer, it get's more confusing.
So let's just make it simple: Yes, if you can afford the worst case scenario, you should do a Groupon (or similar group-buying, discount-oriented deal).
But here's the caveat: you better be prepared for a lot more work after the Groupons have all come in to make it a worthwhile endeavor. Actually, on second thought, you better be prepared for a lot more work while the Groupons are coming in.
And here's why in a nutshell: Groupon's customers are theirs….not yours. You have to win them over to you. And the Groupon itself is not the way to do it.
Let's step back for a moment. We may need a quick recap of the pros and cons of Groupon here before going into shopper psychology. And probably explain what I mean by "if you can afford the worst case scenario." Groupon can bring an onslaught of people into your business that has never been there before. It can get you noticed and exposure to a number of people you can't reach on your own, or even with a competitor's list. It's big, it has a cult following and it works.
We can even justify some of the negatives. Groupons cheapen brands. Maybe. But you can't say that a brand is forever cheapened if they offer a mass deep discount. That is up the brand experience itself--and how and how many times it uses Groupon. I don't think anyone would think less of Apple (or insert your favorite brand here) if they did a 50% off Groupon. Now… if they did one every other week, we may start to think they are overpriced and continue to wait for the next one. But a one time shot in the arm isn't going to cheapen the brand.
Groupon has trouble communicating between their sales team and their operations team. Probably. But it's up to you to know your break-even point, the deal, the merchandise and the stipulations you want to offer. If you do a smart deal, you can work through the typical left hand doesn't know what the right hand is doing. That happens anywhere.
And what do I mean by "if you can afford the worst case scenario?" Well, a lot of people that use Groupon think that one or both of the following will happen: (a) people will come into my business and spend more than the amount of the face value of the Groupon; (b) people will see what a great business I have here and become a repeat customer, gaining in the long-run. The statistics tell us otherwise, 25% and 19% respectively (as of November 2010). But what you did get was great advertising. Not only great exposure, but traffic to your store. Very few other forms of advertising bring feet through your door. Not print, radio, TV, Google, or even a lot of new-fangled social media "channels." So the worst-case scenario is an advertising buy. Can you afford it at the level you negotiated with Groupon? Can you afford it if only 25% buy more than face value and only 19% return? If so… do it. I don't know of a better way to get people to come check you out.
But here is the catch. Like any form of advertising, you can't sit back and count the orders. You have to work it. And this goes back to the customers being Groupon's and not yours. The people that redeem a Groupon don't know you. They know the deal. They are loyal to Groupon and follow the deals from one to the next. Always beholden to the 50% off (or greater deal). They don't care about you, your company or your brand. They just want the deep discount. And most of them will then move on after they've gotten what they want out of you never to return.
But with some work, you can stop that. You can win some of the crowd over. If the service is fantastic, if the other products around the deal are irresistible, if you can entice them to come back with another exclusive deal or reward, you've got a chance to get some of them back. You have to really word to get them to fall harder for you than for the deal. It make take more discounting, and some tricks, but if you can get the ball rolling, you have a shot of moving that 19% up to 25%-35% return rate. And if that happens, then you've made a really smart marketing and promotions deal with Groupon.
And if I could get 1/3 of everyone that drove by my billboard to not only come into my store, but then become a repeat and loyal customer… well, I wouldn't be writing this blog post….
Would it cheapen the brand if our agency did a Groupon?