Should You Offer a Groupon Promotion?

Jan 25, 2011 — Allan Pulga

Groupon, the fast-growing online group discount service, was in the news last week, as Google announced it was pursuing a coupon service of its own.

“Google is working with small businesses on a trial of a prepaid offer or voucher program, a business similar to that of Groupon, a growing company which the Internet giant tried to acquire last year,” wrote Jeremy Kirk of IDG News (Jan. 21).

The fact that Google is trying to emulate Groupon’s business model, at a failed attempt at buying the company out for a reported $6 billion, makes it pretty clear Groupon is doing something right.

But is a Groupon Promotion the Right Approach for Your Business?

“If you’re subscribed to Groupon, or one of the now umpteen other daily e-mail blasts offering discounted products from businesses in your neighborhood, it often feels like just one more thing to clog your inbox,” concedes Erin Zimmer of Amex Open Forum. “(But when consumers take Groupon up on deals), how do these deals actually affect the small businesses on the other side?”

Zimmer reports that according to Groupon, 95 percent of merchants are pleased with the service and want to run another promotion. “A study out of Rice University tells a different story: it’s more like 58 percent.”

Zimmer spoke with a number of restaurateurs who agreed that:

  • Groupon is a good way to promote your brand.
  • In order to be effective, your business must be able (in terms of inventory and personnel) to serve a sudden surge of customers responding to your Groupon deal.
  • Since Groupon keeps half of the money generated by deals, the primary objective is about hooking in repeat customers – making that good impression upon their first, deal-motivated visit.

Considerations for Wireless Retailers

Because a Groupon deal doesn’t actually kick in until a minimum number of redeemers hop aboard, a wireless retailer could offer a deal on a new handset upgrade for customers who bring in at least one friend who’s also due for an upgrade on the same carrier, for instance. And the more friends that come in at once, the greater the discount per person.

It’s also relevant for wireless retailers to consider how customers use Groupon apps on their smartphones in order to track and redeem discounts. Naturally, (just as with mobile Twitter communication, Foursquare or other types of mobile coupon promos) it makes sense to promote your business to customers on the actual device you sold them.

Last fall, Groupon actually created a Merchant App designed to speed up the redemption and redemption tracking process, thereby reducing the number of errors associated with hand-entering coupons or using paper notes. “Members can just scan the barcode on the Groupon and the database will be updated automatically,” wrote Christina Warren of Mashable.com (Nov. 3).

Topics: Retail Operations, Wireless Trends, Mobile Industry, Retail Marketing

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