…and the same applies to any other coupon type deal.
Now I confess, that I haven’t paid too much attention to the whole Groupon and online-coupon frenzy.
Sure I was aware that it was going on…
…but it wasn’t directly relevant to my clients.
However, couple of things have made me pay a little more attention.
Firstly, the story of a business that almost went bust after running a Groupon offer…
“When ‘Success’ Might Put You Out Of Business”
…and then in the November 2011 “No B.S. Marketing Letter” Dan Kennedy had this to say…
“…the often disastrous effects of using it and others of its ilk as a means of attracting a lot of new customers is surprising to many. Groupon has quickly created a culture of hit-and-run bargain buyers who descend on a business en-masse for its discounted deal then depart never to be seen again. These are not customers in search of a restaurant or hair salon, etc. to patronize on an on-going basis.”
Dan acknowledges that some business owners have been very pleased with their Groupon results but the message is clear. You need to plan and manage a promotion like this very carefully.
One other thing bothered me a little. Groupon pitch their services as simple, easy and…
…it appears not to cost you anything.
“Put away your wallet. You’ll never send Groupon a dime…We only win if you win.”
That’s because the way the deal works, Groupon takes a slice (typically 50%) of each sale…
…and they control the cash flow.
At first glance, it’s an attractive offer for a business. Let’s be blunt here. Most small businesses HATE spending any money on marketing. So the idea of only paying for something that “works” is…almost irresistible.
But there are costs…it’s just that they are paid out down the line.
Not sure if I would put it as strongly as this, but you might say that…
“Groupon is not an Internet marketing business so much as it is the equivalent of a loan sharking business…(the money a business) gets for running a Groupon is essentially a very, very expensive loan. They get the cash up front, but pay for it with deep discounts over time.”
That’s from this article…
“Why Groupon Is Poised For Collapse”.
Read the whole thing for a better understanding of Groupon and what you’re getting into if you decide to run a promotion with them.
Also, 3 other excellent articles from the same writer (Rocky Agrawal) about the daily deal industry…
“Groupon Was ‘The Single Worst Decision I Have Ever Made As A Business Owner'”
…then some thoughts about Google’s efforts…
“Google Offers Is A Cheap Knockoff”
…and…
“Why I Want Google Offers And The Entire Daily Deals Business To Die”
At this point, let me point out that there are businesses that profess to be very happy with their coupon promotions.
Naturally, Groupon have testimonials on their site (“Groupon Works For Business”).
Without having all the details, I think we can see the outlines of what these successful businesses did.
Looks like they all had a strategy to get the details of the prospects attracted by the offer so that they had a chance to upsell or convert them into long-term customers.
In other words, the coupon offer is a traffic tactic and only the first part in a sequence to create a long term customer.
“Direct Response Marketing 101” you might say.
However, it’s sad but true that most business owners have no idea about the basic principles of direct response.
And it’s those people…
…typically looking for a fast, easy and cheap solution to their marketing problems…
…who seem to have had poor results.
So if you’re going to use a coupon promotion…
…avoid their mistakes and make sure you have an effective conversion strategy in place to take advantage of the traffic you attract.