Who pays full price for anything nowadays raise your hand.
Okay, yeah so no one.
As consumers we’ve learnt that there is always a promotion around the corner, whether its the Spring Sale, Mid Autumn Fashion Sale, Stock-take Sale or the company’s birthday. (I wish it was Ben and Jerry’s birthday every day…. *sigh*).
So when Groupon entered the market it just made everything that. much. better.
I have a friend that went on a 2 week holiday to Vietnam through Groupon purchases, INCLUDING FLIGHTS AND ACCOMMODATION!
For those who are unfamiliar, Groupon is an online service that has a whole bunch of daily local deals which are available to customers only if a certain number of customers purchase the deal.
Their proposition is simple — companies get free coupon advertising without paying any upfront costs. Merchants sign up and agree to certain promotional limits, and Groupon does the rest.
What makes it sound even better is that Groupon will write the advertising copy and publicise the offers to its substantial client base. So the merchant can sit back, relax, and let Groupon do its thing.
So each merchant can decide how much of a discount it wants to offer, and then Groupon will sell the coupons, collect the money and send the coupons to the customer’s email addresses.
Groupon gets a 50-50 split, but the merchant also pays for the credit card processing fees. Annnnnd if your minimum-sales figures aren’t reached, then the deal doesn’t take effect. Sounds pretty good right?
Groupon is #ontrend when it comes to being updated on the restaurant and marketing trends. Groupon will adapt quickly, by implementing updated versions of its apps to reach people who use their smartphones for restaurant searches. So, local campaigns will reach the people whom restaurants most want to attract.
But there are some issues with the coupon system, especially when it comes to restaurants.
Although Groupon was initially designed to attract new customers, it’s deals often appeal to existing customers. Your existing customers might buy the coupons to save on their regular visits and customers might resent the fact that other diners are only paying half price. The problem is that you’re giving a discount to those people who would buy from you at regular price anyway.
There’s a few ways to avoid this; you can limit the offer to first time buyers, or instead, set the geographic distribution of the coupons outside your normal target area.
Also, when you think about who the usual clientele of coupons are, its usually those who are bargain hunters and don’t want to pay full price. Like Leanne from accounting…
Therefore there’s a high chance that Groupon customers might be dabblers who just want to try a more expensive restaurant without ever planning to return and pay full price. Furthermore, by using such heavy discounting, you might devalue your business.
And here’s the a fundamental flaw in discounting – People who pay one price for food one day, hesitate to return a few days later and pay twice as much for the same meal.
Soooo….where do we go from here?
Well, for restaurant owners, its important that you do some number crunching and then craft your offer accordingly. You could try restricting the coupon to the most expensive menu items or poorly selling items.
For other businesses; don’t forget, if the customer is smart (and don’t underestimate this), they’re also considering what it will cost them over the lifetime of use. For example, one month free phone service is pretty insignificant compared to the long-term expense.
So is it Groupon or Groupoff?
Well, if you want to attract new customers quickly and efficiently, Groupon is the leading website offering the kinds of daily deals that will get you exposure. You’ll also get access to the customers’ email addresses for direct marketing, which for a digital marketer is like gold.
Managers and Digital Marketers should measure, the profitability of the deal, the impact on the business reputation, the price perception sensitivity, and the “cannibalisation” of full price paying customers, against maximising short-term revenues or capitalising on extensive exposure to a new pool of clients. Woah that was wordy!
Basically if you can craft your order intelligently, up-sell to customers when they arrive, and limit your advertising to rare occasions, Groupon can be an effective marketing tool.
What do you think? Have you ever bought anything on Groupon and been a returning customer? Do you think Groupon is a good idea for businesses?