How to Get Groupon Right: A Retailer’s Guide

Groupon and LivingSocial offer businesses opportunities to bring new customers in the door, but often at a high cost. How can you make the most of these discounting services for your business?

Let me start by saying that as a consumer, I love services like Groupon and LivingSocial. (Going forward I’m going to use “Groupon” as an umbrella term for all these discount services.) The sometimes jaw-dropping discounts that are offered help mitigate the high cost of babysitters at Chez Brooks.

As Ben Edelman from Harvard Business School notes, Groupon offers “price discrimination,” meaning you can bring in more frugal customers by offering discounts specifically for them without reducing the price for people willing to pay full price.

Additionally, Groupon offers you increased visibility through their popular email newsletter and by buying up Facebook ads in your prospsects’ newsfeeds.

That being said, there are plenty of horror stories for retailers that have used Groupon:

Attracting one-time customers who are interested in discounts, not in your product,
Customers who don’t read the “fine print” and want your Sunday – Thursday discount after they’ve finished dinner on Saturday night,
Too much success, when so many customers take the offer that regular, full-paying customers can’t get a table.

If you’re considering using Groupon to grow your business, here are some tips from the trenches that should help you grow your business without killing your profitability.

Offer discounts on services people will need again and again.

There’s a reason why your Groupon is filled with offers for massage, yoga and personal trainers. Once is rarely enough.

Giving a discount on something that I might want every ten years won’t turn me into a loyal customer. Unless you can still make a healthy profit on candlesticks or framing after a 55% discount (plus your payout to Groupon), try a different tactic.

Play to their frugality.

People subscribe to Groupon because they want deals. Many, if not most, are more loyal to discounts than your service. To turn drive-by samplers into long-term customers, offer them a deal right after they’ve redeemed their Groupon.

Recently I used Groupon to get a $10 kettlebell training session. If you’ve ever tried kettlebells, you know that it takes more than an hour to master them. When the hour was up, my trainer told me that they normally offer 10 hour-long sessions for $400, but for Groupon customers they would offer me the same deal for $250.

I bought it on the spot.

Of course, this only works if you’re still making a profit at this price, but it can be a great technique for turning Groupon customers into YOUR customers.

Bonus points if you can also get them to subscribe to your email newsletter.

Don’t commit a technical foul.

The other night Cybele and I cashed in a Groupon at a local restaurant. We sat at the bar—better energy and better service—and chatted up the bartender about their experience with Groupon.

He told us that while it had brought in some new business, it also came with headaches. They were offering $40 of food for $20 on parties of two, or $80 of food for $40 on groups of four.

The problem was that parties of three would show up, have dinner, and then try and redeem their $80 Groupon. The waiter or bartender then had to explain that it wasn’t valid for parties of three, only for parties four.

Invariably, the group would get upset. Couldn’t they read the small print? Well, maybe they could, but it’s small for a reason. Whether they knowingly showed up with a plan to scam the restaurant or just didn’t know isn’t the point.

While I’m sure there’s a reason why it makes financial sense for the restaurant to require four people to be sitting at the table to get the discount, it can’t make up for the loss of good will they served up when refusing the Groupon.

In my mind—and undoubtedly the customers’—it shouldn’t matter if a party of one shows up to use the discount…they paid to use it. Don’t make it so difficult that they don’t want to come back when your service is full price.

If you must limit how your Groupons are redeemed, make it part of the name of the coupon so there’s no question.

Not valid during lunch? “50% off Your Dinner.”
Not valid Friday or Saturday night? “55% off Any Sunday through Thursday Meals.”
Not good for manicures? “Our Toe-Tally Awesome Discount: 75% of Pedicures!”

Takeaways

Groupon and services like it are a double-edged sword for businesses. To make the most of your marketing dollars and maximize your return, you’ll need to be strategic in how you roll out your discounts:

Make sure your discount leads to repeat business,
Offer a deal while they’re redeeming their Groupon, and
Don’t make the discount so difficult to redeem that you generate resentment, not sales.

For more good reading on Groupon and discount sites check out:

If you're looking for ways to increase leads, customers and sales, be sure to contact flyte today for a free consultation.