There has been a lot of hype surrounding Groupon, the two-year-old deal-of-the-day company founded in 2008 in Chicago. Customers love it! The business press is fascinated—after all, the company showed a profit after only seven months! Competitors galore are copying the model? Merchants are clamoring to climb on board the Groupon train! But there is a danger for merchants who enter blindly into a Groupon offer without seriously considering the potential downside.
Any marketing practice based on steep discounts is a two-edged sword. Yes, you attract lots of new people to your venue, products, and/or services. But you are giving them such steep discounts that you can’t be sure if they would ever buy again at the standard price. And servicing hundred or more customers at pennies on the dollar can result in a big financial burden that may never be recouped by the hoped for up-sales and returning customer business.
Our look at the Groupon business models highlights both the positives and negatives and offers tips for both consumers and merchants.
Confessions of a Groupon Addict
Great for Customers, but Merchants Beware!
By Ronni T. Marshak, Sr. VP and Sr. Consultant, November 4, 2010
Groupon must really be a mixed blessing for a lot of businesses, given how little revenue most of them receive from Groupon and how much strain a Groupon can create in a short period of time.