Should I Use Groupon? Don’t Be Tempted By The Dark Side

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The other day, a friend and I were chatting about our wedding linens business and the topic of Groupon came up in our conversation.

For all of you who are not familiar with Groupon, Groupon is a service that offers a really great deal for a product or service once per day.

They have an email list of over ten million people and if you contact Groupon to be included on their “deal-of-the-day”, you can get the word out about your business to millions of people you would otherwise never be able to reach.

There are usually huge discounts involved (50% or more) to incentivize buyers and the general idea is that by offering a big discount on your products or services, people will try out your offerings and keep coming back for more.

On the surface, it sounds like a great way to market your business and I was really excited about the idea until I thought about it some more and did some analysis.

While Groupon might work for a small subset of local businesses, here’s why I don’t think Groupon is a good fit for the majority of small businesses out there.

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Using Groupon Will Cost Your Business An Arm And A Leg

You might have read some Groupon horror stories already, but the reality is that Groupon is extremely expensive.

If you look at their faq, they give off the impression that running a Groupon campaign is free. They collect the money online from prospective customers, send you a check and mail out the coupons automatically.

What is not explicitly spelled out is that they take 50% of your revenue as a fee for using their service. So given that most Groupon campaigns offer the end customer around 50% off, let’s run some numbers here.

Say your product retails for $100. By giving a 50% discount to customers, you will only make $50. After Groupon’s 50% cut, you only get $25 for something you normally would charge $100 for.

Depending on what your markup is, it better be more than 400% otherwise you could potentially lose money on every transaction!

What’s attractive about Groupon is that they run the campaign for you and simply send you a check. It’s not until later when you have to fulfill orders with these ridiculous discounts do you realize how much money you are potentially losing out on.

For our online wedding linens business, most of our customers are one off wedding customers and the other half are party planners and small business owners. It is questionable that taking a huge loss on thousands of orders would prove beneficial to us in the long term.

Groupons Don’t Make Your Business Memorable

From experience, I’ve used Groupon a few times as a consumer and you know what? Both times, what stood out in my mind after my purchase was not the business itself but how great of a deal I got on the product or service.

In fact, I remember bragging to a colleague at work about what a killer deal I got at this local restaurant and tried to convince him to sign up for Groupon as well.

Not once did I mention the quality of the food or any details about the restaurant. I was too excited about the bargain itself.

Using a Groupon takes the spotlight away from your business. After all, it was Groupon that provided your customer with the coupon and the unbeatable deal.

It was Groupon that made your customers’ purchase exciting and fun. As a result, customers are more likely to brag about the groupon and not your business.

Groupon Deteriorates The Value Of Your Business

Whenever a store offers an incredible deal or discount, there is this perception that the markup was already ridiculously high. If company X can offer a 50% discount and still make a good profit, then they must be jacking up their prices.

Once a customer receives a large discount, it trains them to wait for later coupons and deteriorates the value of your products and services.

There is this dining card I sign up for almost every year called “The Passport” card which entitles the card holder to a free entree at select restaurants when another entree is purchased.

The card lasts exactly one year until it expires and you have to pay to reactivate it. One year, we decided to let the card expire and you know what?

We refused to dine at “Passport” sponsored restaurants during this period because it didn’t seem worth it without the card. We were so used to getting a free entree that we didn’t want to pay full price again.

While this principle applies to coupons in general, the price erosion caused by a Groupon are infinitely worse because the discounts are so steep.

Groupon Hurts Loyal Customers

Don’t you hate it when you are a loyal customer of a product or service only to find out that the company started issuing huge discounts for new customers only?

This happens all the time with cell phone carriers and it really pisses me off. Using Groupon has a similar effect on your regulars and your loyal customer base.

By taking a loss using Groupon to obtain new customers, you are essentially forcing your loyal customers to make up for your losses. And this is counter-intuitive to the way you should be doing business. Your regulars should be the one rewarded with discounts and perks.

There are 2 possible outcomes when a regular customer sees one of your Groupons and both are bad. In one case, your loyal customer could get pissed off and consider shopping with a competitor.

But more likely, your regular customer could buy a S@$% load of Groupons and only pay a fraction of the price for what they normally would spend at your store.

In effect, you would be losing out on future business with this customer because you would be taking a loss or breaking even on what could have been a 4X profit!

Conclusion

Outside of the issues I’ve already covered, the main problem with Groupon is that the longer term effects are extremely hard to measure. It might be possible to measure repeat business somewhat but it’s almost impossible to measure the word of mouth effect.

To sum it up, I think of Groupon as a shortcut with major consequences. The attraction is that you’ll get a lot of customers upfront, but once everything is said and done, you’ve lost a lot of money and the long term benefits are questionable.

My general philosophy in business is to focus on the long term. Instead of trying to get a one time flood of customers, why not put forth your efforts on making your business stand out?

Be the store that everyone wants to shop at because you are awesome and not because of a coupon. Be the store that offers the best customer service. Be the store that gives customers the best shopping experience.

Giving a one time discount isn’t going to win over any followers.

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103 thoughts on “Should I Use Groupon? Don’t Be Tempted By The Dark Side”

  1. Siu says:

    Good post!

    Price promotions are an easy tactic for short term gain. But, from a marketing standpoint, it’s always a better idea to focus on how you can better meet customer needs through those other ‘P’s’, e.g. through improving the product/service mix and looking at promotions that add value to the brand, rather than potentially erode value, etc.

    I have run a few promotional discounts on my own site, but it’s good to control how these are carried out. When you use a third party, I think it could potentially get out of hand. One thing that I have been thinking about is using a similar website service (a high traffic style site) to run a competition, where I can take advantage of the scale of their traffic/email list and their carefully targeted demographic audience.

  2. Bunyan says:

    I have to agree 100% here. Especially on the impact to your existing customers. Reward the heck out of them but in the end especially as a small business trying to compete on price is a no win situation.

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  4. George says:

    Hi Steve,

    Sorry, but I have to disagree (for a change!). From my own experience, I have used Groupon and become a loyal customer for a store. I got a discount the first time I bought, but have paid full price every time thereafter. It’s a win for the business because they got a new customer. It’s a win for me because I have a great place to meet a demand.

    Also, I don’t think promotions reduce the perceived value of a product or service. We are bombarded all day long by promotional pricing for everything, and it is normal. This includes many luxury items like cars.

    Yes, it’s true that the business owner can lose money on each Groupon. But deciding whether it is worth it depends on the business owner. If the business is a low-margin internet retailer, then the cost could be fairly high. But many real world stores offer goods and services at margins of over 50%.

    Besides that, all successful businesses spend money and effort on marketing. How much are you willing to pay for a new customer? What is the LTV of a new customer? What is the value of having a customer that might promote your product on their blog, Twitter or Facebook?

    I think many business owners would be willing to pay $20 or more for a new customer.

    Also, another factor is your own expertise and success. 99.9% of business owners will never achieve your level of success. So, for you, the value may not be there. But I think that many other businesses could benefit. They don’t have blogs. They don’t understand social media. They don’t have the time or inclination to put together great marketing campaigns.

    However, all those reasons leave out one important fact: perspective. You are speaking from a first-hand business owner’s viewpoint. I am just imagining the benefits to business owners who might benefit. So I think that your position may be more relevant.

    1. kei says:

      you are a rarity, not the norm.
      Groupon is not a bad idea, just generally not a good idea. It takes some tact to know what to do to make the most of an offer.

      Generally, the higher profit margin you have, the more likely you have something to gain with offering a Groupon. Like the article said, it’s almost like giving people 75% off your regular price.

    2. J Western says:

      Great post! I have used Groupon a few times and never once returned to a business even though they were great. I can be pretty cheap I suppose, and am willing to drive a little further for half off. I don’t even go on Groupon anymore because they rip off small business so bad and unnecessarily. My kids will still get me a Groupon occasionally but again, I never go back to the businesses. Now that Groupon has joined with living social, it’s especially concerning.

  5. Sophia says:

    EXCELLENT post again Steve… I was just wondering about this recently and I am VERY thankful for this insight from you and I actually agree. I was hesitant about groupon and didn’t know why. It seemed like a great deal to get your name out there, but you are right… it doesn’t put the spotlight on the small business… among the many other things you mentioned! Wonderful info! THANK YOU again!

  6. Anna says:

    Hello, I just wanted to let you know it is hard reading your blog because the text is too small and the color is too light. I wanted to read the Groupon post but after a few sentences, I decided to write this comment. Thank you!

    1. Steve says:

      @Anna
      Thanks Anna. I will look into increasing the size of the fonts on the site

  7. Sandy @yesiamcheap says:

    As a retailer that’s considered and been invited to do a Groupon, I have to agree with a lot of what was said here. When I did the math it made no sense to me to do the Groupon unless I wanted to consider it a loss leader to possibly attract more customers.

    In fact, once I had done the math, it occurred to me that I should jack the price up above what I normally charge, in order to not lose out completely. This means that I would risk alienating my current customers because my whole shtick is that I already charge low prices.

    Groupon can be a decent deal for the consumer, but for the business, unless you look at it as a marketing tool and highly limit the amount of the product being offered, I’d pass.

  8. W^L+ says:

    @George,

    The reason we are constantly bombarded with discounts is because they work, and because many customers have been trained to wait for them. What Steve is saying is that overly-steep discounts may cost more than the new customer brings in.

    In the late 1970s/early 1980s, rebates and very low-percentage financing promotions came into fashion in the automobile industry. The best, most well-off customers learned to wait until rebates and low-percentage financing deals are going on. Only those who have to take what the dealer offers (those who are financially borderline) go in and buy at other times.

    It is not for nothing that the big Detroit companies have had existential crises every 2 to 5 years ever since that time. It is because they have forgotten that customers want a good product at a fair price every time they go into a car dealer’s lot. If your prices are higher (like autos tend to be), customers also do not want to face “Monday morning regret,” where they go to work on Monday bragging about the deal they got, only to find that someone else got a better deal than they did.

    For some businesses, Groupon may indeed be a good deal. For others, it may not. As I read it, Steve is telling us to proceed with caution, rather than to step on a potential landmine. I think that’s good advice.

  9. Carla | Green and Chic says:

    I have used Groupon several times over the past year and became loyal customers to at least half of the stores and restaurants I purchased deals for. What stood out to me wasn’t necessarily the 50% discount (though it helped get me in), it was the food, service, merchandise, etc. I guess being new to Portland, its a good way to explore local digs.,

  10. Carla | Green and Chic says:

    What I did not mention in my previous comment was how it feels being on the other end of Groupon. I never used Groupon for my business, but I used a similar company recently. Though I did like the influx of sales, I doubt I will have that many return customers (no matter how much ass kissing I do). Its the nature of the beast: Customers want cheap, to spend as little as possible, not pay for shipping, etc. If you’re not discounting your store within an inch of its life, they will move on.

    1. Steve says:

      @Carla
      Excellent point Carla. The cheap customers are the ones that you don’t want for your business. The best customers are the ones who recognize value and are willing to pay for it.

  11. Rob says:

    This is a good warning post Steve, but it’s pretty harsh. If you approach Groupon as a marketing tool more so than a sales leading tool, there are some benefits…as long as you structure your deal well, you can raise awareness and avoid losing money…it’s not all bad!

    1. Rina Shaffer says:

      I agree with Rob. For me it seems it entirely depends on your angle and your business. I am considering it for my new business to 1. have people find me that might not otherwise (marketing) and 2. my business is new and I NEED referrals and testimonials and i’m willing to lose money initially to get them. 3. my business is a service that does not depend on returning customers so again, getting those initial folks in, wowing them, and then encouraging them to share my service with their friends in the end will benefit me.

  12. Leslie says:

    Steve,

    I think the businesses who use Groupon and LivingSocial and the like are banking on people buying the coupon, but then not using it withing the timeline allotted (1 year, 6 months, etc.) becasue they simple forget…

    Taking your example, let’s say 5 people buy a $100 groupon at 50% off ($50). So, Groupon will take in $125 and you get $125. But let’s say only 1 person actually then uses the Groupon and gets $100 worth of items/services from your business. Then you’ve actually netted $25…

    I think more people than we realize buy Groupons but forget to use them before they expire…I wonder if there are some stats on that…

    -Leslie

    1. Steve says:

      @Leslie
      That’s a good point. I’m curious as to what the statistics are for unused Groupons. However that being said, since Groupon is a marketing tool, if they don’t use the coupon, they don’t get to try your product and service which defeats the purpose. I’m curious how many stores actually make money using Groupon.

      1. Online Store Help says:

        The other point to this, if they don’t use the voucher, the only group that gets the money is the state. Since the paid portion of the voucher (lets say $50 of a $100 voucher) is essentially a gift card, you are required to escheat that portion to the state if it doesn’t get used. It is not like its free money for anyone…

  13. Evan says:

    Maybe for info products where each extra product costs pretty near zero. Apart from that I think it is a terrible idea.

  14. Xing says:

    I’ve used groupon a couple of times and I have to say most of the time I will keep going back to that company if the product is good. For instance, I had been meaning to find a Beard Papa for so long, though there is only one in the city as I found out from the ad, I bought 2 groupons, shared with my friends and now we are dying to go back!

    The only bad experience I had was with a package of dance classes that the studio wouldn’t honor shortly after the expiration date, and would even let me use them as credit toward full price classes. I was trying different dance schools but held out on going that studio since the experience left a bad taste behind, but that could have easily resolved on the company’s end.

    Though I agree, for wedding products why use Groupon?

  15. Jennifer says:

    I never thought about it before but you are right. I’ve used Groupon as a customer a few times, mostly for spas. I love going to spas but hate paying a lot for it. So I keep buying the Groupons for spas. I won’t go back, even if I like a place, because I’d rather wait for the next Groupon deal from another spa. Why pay full price when I don’t have to.

  16. Ricky says:

    Groupon are not good by these you can get huge focus at once but not much regarding future perspective people will look for another similar deal from you and most of them would be single time consumers. But its true that Groupon can be a very effective technique to enter in new market .

    1. Steve says:

      Overall, I think if you offer a truly unique product or service and you can really stand out among the crowd, Groupon is a worthwhile investment. But if you blend in with your competitors and just want to drum up some business, Groupon could put you in the red. The latter category is probably where a lot of businesses lie.

  17. Seb says:

    In my previous business we sent out coupons every month. The one benefit to Groupon that I think I see ( maybe I’m wrong) is that there is no initial cost. ie you don’t have to mail them out. After that it seems they are very expensive when used. A massive discount. I seem to remember that the couponing really started around 25 years ago. I was in the restaurant business then as well and the Entertainment book was the first big coupon push. We tried not to get involved for as long as we could. It’s interesting that eventually even McDonalds had to get on the coupon bandwagon, at least in Canada.

  18. Te says:

    I actually love Dealfind/Groupons. I don’t own a business – but when I see a business I love, I buy. It’s a dog eat dog economy and frankly – they are gaining my business and taking my business away from another restaurant/ merchant. The fact is – they may not make a tonne of money, but the staff still makes tips, the alcohol usually is marked up…etc. I definitely will return to the restaurant/ store if i love the food/ experience/ merch.

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  20. Christopher Bellacose says:

    This is indeed a tricky one. The business should know the value of a customer. Hopefully it is a repeat customer or have the ability to upsell that transaction.

    Often times advertising costs without bringing in any revenue. Even if you lose money on the transaction, you should get the customer’s Name and contact info to market to them at a later time.

    Best,

    Chris

  21. Jerrick says:

    Groupon become a trend now buy go for it to bring new customers but do not go for to many time. Just like a shopping complex, one day sales, everyone will go for it. If you keep doing one day sales, then everyone will wait for your one day sales and you already change their human behavior on your product.
    I been try to enter in Groupon promotion but too bad it only provide to business , that is foods, entertainment and relax purpose.

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  23. Jay says:

    @carla what is the name of the similar company you use instead of groupon?

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  25. J Su Yin says:

    Thanks Steve…still deciding whether this applies to businesses like mine, which are online membership based? I think you’re right, however, that if one is selling a scarce good or service, Groupon may only be a good deal for the consumer…and for Groupon, of course! 🙂

    1. Steve says:

      @J Su Yin
      Not sure about membership sites and how that would work for Groupon. I don’t believe that I’ve ever seen a Groupon for a product that requires a recurring payment but that might be something worth pursuing. There are other groupon-like sites for online business services like AppSumo which you may want to visit as well.

    2. Alicia says:

      Hi J Su Yin, Just wanted to chime in here. If you are doing an online product and the cost of delivery is literally $0 then yes you should run on a Daily Deal Site! You’ll get more leads, exposure, traffic and buyer leads ( and a check from the Deal Site ).
      What’s common is to offer 3 months for the price of one. Archives.com does it very well, dangerousguitar.com, flying photo school and many others. Imagine the upsells you can do as well as the list building you’ve done.
      Done correctly – it will be a huge win for you!
      Good luck!

  26. Greg says:

    Why not use Groupon as a way to extend your contacts? Sell your Groupon vouchers, when the customers come in explain you used Groupon as a one-off to gather names, you will do more discounts, but *NOT* via Groupon – if they leave their email you will tell them directly when they can get the same deal again. That way you:

    – include your existing customers in future deals
    – freeze Groupon out of the loop after the initial subscriptions, so save money
    – make sure you *do* get repeat business from the exercise

    Using Groupon without thinking how you’re going to leverage the service is the biggest mistake. If you just dumbly sign up and give away a load of cheap services blindly then sure, you’ll lose money for no real gain.

  27. Lane says:

    That is why other companies are making efforts to work more with businesses to offer daily deals that work for them…..and the ability to run more deals more often for different deals. Quirpo.com also is a marketing company that will do online seo for the business to increase their online exposure long term.

  28. prosfores says:

    guys, do you know if groupon, or other social buying sites like groupon, in the US, accept a limit on the maximum number of groupons?? for example, can a small business owner negotiate with groupon that the deal is validated if groupon sells from X to Y coupons? (no less than X and no more than Y). Does Groupon accept that??

    1. Alicia says:

      Yes, you just tell them that you want to put a limit on the deal. They will want the highest limit possible. (so that everyone makes the most money as possible)

  29. prosfores says:

    very useful post, thanks……

  30. προσφορες says:

    I agree that Groupon will cost your business an Arm and a leg and no one will remember your business.

  31. DailyDealsBroker.com says:

    Good points, as always, about when to not use Groupon or other sites. But there are times when it works great. There is a “cost of acquiring a new customer” and when adjusted for in the “loss” on the voucher, a business can come out way ahead. We’ve seen plenty of businesses launch from near zero via Groupon. (and others shut themselves down!)

  32. Caroline says:

    Great post. I have been thinking about doing a groupon but this post has made the decision for me. I could give 50% discount to get some new customers, but to then lose 50% of that, I don’t think so.

    Thanks for the warning.

  33. Angelg says:

    I came up with the exact conclusion when I looked closer at Groupons. I’ll go a step further and say …. Thieves!

  34. John Yaeger says:

    Groupon can actually work to one’s advantage if we just know how to think outside the box and tap its potential.

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  37. PhilIMS says:

    I hear this theory quiet often.

    Let’s remember Groupon is a marketing tool (expense) and not a revenue center. Try traditional marketing it is quiet expensive and not always measurable. Groupon is a billion dollar marketing machine because people love it and it works.

    Truth is – if you’re not utilizing it most likely your competitor is. No sane person feels ripped off after receiving a great deal at your establishment, remember they only compute the price they paid not the portion going to Groupon behind the scenes.

    Hopefully they have a pleasurable experience and you may just come to mind next time they have need of something your business can provide them. I personally would give every person who came in a certificate for 10% off there next purchase to further encourage retention…

  38. Leon Williams says:

    I agree with PhilIMS

    From what I understand about marketing through promotions the best way to deal with this is not to look at profiting up front per se. The way to profit is on the back end. For example. Give the initial customer a promotion to get them in the door. You treat them exceptionally well with a great product and/or service and then when they redeem their coupon you give them another discount for inviting friends the next time. And give their friends a referral discount when they invite more friends, and so on, and so on. You see word of mouth is absolutely the best advertising you can get. I think it’s best to look at this as a long term business solution not as an immediate cash fix.

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  40. Tony says:

    Groupon is bad for business owner and consumers. Because business owners have to mark up the original price or cut down the quality or service to make up their discounts and Groupon fee.

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  43. Jenny Chen says:

    Groupon sent me an email every day, however, I only purchase one deal per month. I’m always curious to check out the restaurants, spas, activities. I guess for a business owner, to raise awareness, letting people know your existence is not free. I remembered that when I had my business, i have to spend $3000 to put a half page ads on a magazine to raise awareness. So even if nobody buys any Groupon from the deal you offer, you get your name out to Groupon subscribers. If you wanted to buy a mailing list from marketing company, I believe it is $500 per 2000 emails.

  44. YesPearl says:

    Great post, but after reading all the reply here, still cannot decide if I should use it to promote my small business. I used groupon as a customer a few times and like some people said here, I really do not remember the store’s name. Can some body please tell me do I have to mark down 50% on price? does Groupon charge anything if it doesn’t sell? If I decided to sell through them, when do I need to ship my product to them, I am selling high quality pearl jewelry, are they going to be save on their warehouse? Thanks.

  45. Mayank says:

    Groupon is good to get new business in the door, what you get is 10+ million eyeballs, but you pay heavily for that.There are two key issues with Groupon:
    1. They cost service an arm and a leg.
    2. You do not connect with customer… even the payment directly goes to Groupon.

    My take is build your customer base organically, I use mobile platform like FlashBind… It is like Groupon, but free. Also it builds my customer network… I can share my card with my customer and it is there with my customer for ever…. I can provide deals to my customers directly.

    I am hoping this platform (or similar platform) gains momentum…Everyone will benefit from such platform.

  46. mick says:

    Lol..i have never bought from groupon. but to give them a taste of their own medicine I will open a coupon site but only charge 20% …Im not greedy like they are. 🙂 and i will advertise my deal on groupon…lmao, people buying advertising space in my groupon addy i will offer of another 5% off to repeat customers.. 🙂

  47. Brett says:

    Great article, thank you. What did you think about a business starting out? I’m starting an outdoor group training business and was considering using groupon as the price would be around what would be appropriate for an ‘introductory’ or opening sale. I definitely agree that it usually hurts loyal customers.

    Thanks

  48. Discin Dude says:

    I tried Groupon for my small business and I’m glad I did research beforehand. Groupon and other “buy one for 1/2 off” deal sites need to be used as an enhancement to one’s client base. If you’re looking at making money by using Groupon you should be making certain to capture the new client information when they redeem their coupon, then turning around and actively marketing to them.
    My marketplace (disc golf) is fairly specialized and I was able to track the response pretty closely. Groupon give you tools to assist in tracking usage but now that the deal is done I have the opportunity to continue to market to those new clients that would have otherwise not even known of us. Our client retention rate is pretty good (80 – 90% return rate), and one needs to understand that its the SECOND VISIT where you start to reap the benefits of the Groupon deal.
    We sold 400 deals within the allotted time frame, and of those there are still 95 deals that have ‘lost’ the promotional value. These vouchers still retain their original purchase price (I think forever), so a $20 for $10 deal is now only worth the $10 value but at that price I don’t lose on my investment and may glean even more clients from the left over redemption.
    The key is to capture the client information for future use. Take a look at what it costs to gain a new client and I think you’d be surprised at how the Groupon style of promotion all of a sudden becomes an easy way to gain exposure.

  49. Dea says:

    I am a small business owner and someone suggested I use Groupon. Short version of my story is i didn’t like the fact that they after all the fees have been deducted a business owner only receives 25% of the total price. The payment schedule is unheard of. 33% in 7-10 days, 33% in a month and 34% in two months. Those numbers were from A groupon rep in my email. Exposure for your business is the only good thing about Groupon.

    1. David Amos says:

      Hi Dea, did you find something better to promote your business, rather than Groupon?

  50. Mary says:

    Thanks for the article. After reading a few different opinions of Groupon I have to say I think it depends on the kind of business you are running. I think sites like Group and Restaruant.com are great for businesses who can get repeat customers fairly easily, like midlevel retail stores and restaurants. I personally always like to use things like Group to try a new place I have never been, then if it is great I keep going back.

    I don’t believe it would be a good idea for a high end business since part of the appeal for your customers is that your business is exclusive due to the price. You probably would only get new business from deal seekers and nothing else.

    I have a client who I use the trail offer tactic for a lot. She does makeup for weddings, prom, etc and we post on facebook right before wedding season and prom about getting a free make up trial run for liking her page. This tends to be especially effective with brides because they get to try you once and then they love it and use you for the big day as well as for the bridal party. I have considered trying an offer like this on Groupon but need to get more details. I was glad to read more about how Groupon charges businesses for their services.

  51. Amie says:

    Thank you for this blog! I just received an email from Groupon and have currently been working on marketing for my online business and thought “oooo Groupon would be great”. After reading your article I agree with you that it could deteriorate the value of my product and business. I also had NO idea they took a 50% cut! Knowing that now is definitely going to make me take a closer look at the products that are offered on Groupon and question the quality of them.

    1. David Amos says:

      Hi Amie, are you looking to improve on your outreach for your business instead of Groupon?

  52. Mary says:

    Groupon is not worth the hassle. Yes they make you discount your services down to less than half and then take half of that. And yes the Grouponers (bottomfeeders) are loyal to Screwpon, not to your business. Screwponers expect the most, tip the least, are problematic in every way and are most likely to give you a bad review even after you’ve bent over backwards to make them happy. And yes Screwpon will “refund” the Screwponer even after the promotional value has “expired” and yes even after they come in and used your service. Screwpon will charge the merchant back and give the screwponer “groupon credit” never do they actually refund, they just screw another merchant so Screwpon never loses.

  53. Beena says:

    Hi,

    I am developing a mobile phone app to directly link small businesses to local consumers, no middleman!

    I would love to run the idea by small business owners to see what you think about it. If you are interested to know more about the app, please let me know.

    1. Ashad says:

      i will be interested in please provide me with more detail. Thanks

    2. Alicia Burbano says:

      Definitely interested

    3. Virginia says:

      Yes, Im interested! Tell me more…. About to start small biz.

      1. Devil's A says:

        Okay, this is a hypothetical sales situation…….

        Geo-located, direct marketing app
        Free app for consumers
        Merchants pay a flat fee for monthly usage.
        Fee Tiers are defined by the number of people in the outreach
        Performance is trackable (outreach to “opened deal”)
        Merchant deal template is user friendly and easy
        Deals are time sensitive

        Are you willing to pay for this monthly via CC?

        Let’s say the bidding starts at $500 per month and you get an outreach of 5000 people…….

    4. Elizabeth says:

      I am interested how far you got with this app. I am a new small business owner. Thank you!

    5. anna says:

      Yes im interested.

  54. Some Other Guy says:

    My wife did 1 Groupon and 2 Living Social deals about three years ago with her bed and breakfast.

    She made a profit on all three and walked away with a large hunk of cash each time.

    The secret with her is that she never ever bought into the claim that you have to give away your initial service at a loss because you will end up with repeat customers who will pay full price later. That isn’t true at all, because those types of customers drawn to deals are (from what I have seen) notorious cheapskates who also have extremely high expectations and are active about complaining via social media when they are unhappy and like to just go from deal to deal because the DEAL is the experience for them.

    She avoided channel conflict because she was offering the groupon / living social deals locally, and most of her regular guests are from out of town.

    In the end though, she still had to work her butt off to turn over and prepare all of those rooms for a very small amount of money per room night, compared to her regular rates.

    But I think she netted $30K that year from the set of three deals in a row, so it was real money.

    I would say that my wife is the exception to the rule about that kind of thing though, because she’s a CPA and MBA and former banker who understands all of the numbers and the model for innkeeping.

    Innkeeping is sort of like airline seats. If the room is empty for the night, you get nothing. If you fill up the room with a $75 guest, at least you made $75 minus the incremental cost of turning over the room.

    She structured it so that deal customers could only book on weekdays, when she is often empty anyway.

    It makes me extremely proud to know that my wife went head to head with two different value destroyers and turned a profit.

    1. Sheila says:

      Great… It takes a well thought out plan of execution. You can make money with coupon companies like Groupon and Living Social, you have to know the numbers that WORK FOR YOUR BUSINESS!!! Great story…

    2. Tamara Rogers says:

      So pleased to hear of people having success with the program.

      I guess at the end of the day it is a marketing tool to expose yourself to new customers who otherwise may not have found you in the sea of competitors. I do think it’s a good tool for this.

      Depending on your margin this may work out in your favour or cover your operational costs at least. Better than an empty shop.

      I think everyone here has paid for either SEO, flyers or such marketing that has either netted them zilch or can’t quantify the value, if any.

      I am a rep for Lyoness and although we have an existing large customer base in North America I could see how you could use groupon in combination…. ie get a flood of new (or returning) folks through the door and then have the opportunity to bind them to your business for an ongoing relationship or a piece of their future merchant purchases, even if not yours.
      It would be my pleasure to support your business success.

      1. Tamara Rogers says:

        Free mobile app included for small biz; along with your own Rewards Program card to use throughout your community.

    3. Elizabeth says:

      That’s awesome! Good for her. Great advice too

    4. Hazel Gazzetto says:

      That is what we are doing here at our SALT WAVE salt spa in Canada. It has help ed us in a very big way.

  55. Peter says:

    thanks a lot for sharing your experience.
    I have a small electronic online shop selling portable gadgets like speakers,solar charger….
    do you think approaching Groupon for advertising my business is a good idea in those niches?
    thanks guys for reply

  56. KIKI NG says:

    I would like to sell my products at groupon, but I dunno how can I do.
    Wish you can reply me as soon as possible.
    Thank You Very Much.

  57. jacko says:

    The people who buy Groupons are not what you should consider typical loyal customers; these are people who are just looking for a deal and they are all over the map on what businesses, products and services they will try. Also these “deal finders” are the most difficult people to please because they don’t tend to be the care so much about quality and experience as they do about getting a deal. The grouponers are not loyal customers, and can actually depreciate the experience for those loyal customers, by not providing good feedback to sites like yelp, everyone is disatisfied, and they merchant could find themselves starting to resent the grouponers, which may become visible to those loyal customers.

  58. Pingback: The Right Way To Use Groupon And Living Social For Your Business
  59. adi says:

    it is depend on your business.

    example:
    i know china by heart i go there often.
    i use groupon to sell what ever product, even 25% from normal retail price, still leave me 500% earning.

    it is all depend on what business you are in.
    you can have groupon work for your benefit

  60. Pingback: What’s the Deal with Daily Deals? | FiveStars Blog | Small Business Advice
  61. karl says:

    Do you think these deals would be an idea for a new business only starting out? Not for the repeat customers (the area we are going into will not have repeat customers) but for word of mouth and genuine reviews? We can afford to break even on the deals provided we dont give hundreds of them away (we were thinking about 20

  62. Pingback: What’s the Deal with Daily Deals? | FiveStars INSIGHTS
  63. SmallB says:

    Don’t fall for shiny Groupon. They refused Google buyout offer since they make almost 50% of your revenue. For small business owners just stay away from using Groupon. Also like someone said above you will not get loyal customer from Groupon. The customers you will get from Groupon is the last batch of customers who might have looked at every single web site to pinch penny. They simply care less about your business except their pocket and it will be extremely headache experience to deal with them.

  64. Terry says:

    I never wanted to use them as customers start to get what I call the “Walmart Mentality” and will always look for deals from your business. It’s bad enough that I did a few coupons early on and posted them on retailmenot and people complain that they expired and ask for the latest codes. I haven’t done any discounts in the past few years but I can still look back and see it as a negative.

    I was approached by Groupon a number of times to do a deal and still get sales calls from these guys. I tell them I don’t like their fees and discounting my services by 75% causes more headaches than benefits in my mind. Also, a search of your business will link to your Groupon reviews usually on the first page of Google.

  65. Rosemary says:

    I am a massage therapist and just started working at a new spa. I really like my co-workers and working environment and the owner is great to. But I just found out the owner offers groupon package deals for massage and spa and on a groupon customer I am getting paid only about $10 an hour. I am used to getting more like $30/hr. Massage is hard work and that is not worth my time and energy so I am thinking might be time to move on. Too bad because I really like working there otherwise.

  66. john son says:

    you would be better to place a coupon add on your website for 75%
    or take 10% of your revenue and dump it into adwords, and 10% into website content and good written articles.

  67. Smartlinks says:

    thank you for this weblog! I just received an email from Groupon and feature currently been running on marketing for my on line enterprise and notion “oooo Groupon would be first rate”. After analyzing your article I trust you that it may become worse the value of my product and business.

  68. Pingback: How to Setup a Groupon Deal for your tutoring business. - Clever Apple - How to Start a Tutor Business
  69. Debi says:

    I kept track and out of 17 sold groupons (spa chemical peel) 3 tipped…3!!!!!! NOT GOOD!!!!

  70. Kelly says:

    I am a small business owner and recently tried groupon myself. After 3 months of selling no Groupons, I decided to contact them to end my campaign. I sent several emails asking to cancel and they told me to call in. I called to speak with a representative and they basically said they had spent money advertising my service and I have sold no Groupons so basically I was indebted to them. They were incredibly rude and tried to convince me to lower the price of my deal, but I told them that their contract says that I can end my deal at anytime and I would like to end it now. The gentleman was very rude, said he ended it and hung up on me. Moral of my story is, I would absolutely never do a Groupon again.

  71. Kenitra Parks says:

    Groupon is down right terrible for businesses in my honest opinion. They prey upon businesses that aren’t tech savvy and/or very little money to market with. There are some who say it can be beneficial but I haven’t heard of one business in my area who is really experiencing success with Groupon marketing. I highly suggest a business look into other forms of marketing like SEO, Social Media, and other internet marketing tactics before giving away half their profits to Groupon and other deal sites.

  72. Tulay White says:

    We have a small entertainment business in a small town (110.000). We do have like $0 for advertising and marketing…looking for creative ways to spread the word, without going bankrupt before we started….People who see or hear of us, seem to love our concept, however the revenue is not what we were hoping for. How can advertising in Groupon help our business? Any suggestions are welcomed please. THank you .

  73. Stephen Irvine says:

    Interesting article. I wasn’t actually sure of the fees involved. To make only 25% of a sale could be really bad for business but like someone else commented there are probably clever ways of making an offer look like a good deal, especially if it is not well known. Good info though. Thanks

  74. TRICIA MEARNS says:

    I have been wondering about the Groupon in comparison to Val Paks, door hangers. I searched this topic because my company offers another advertising tool.
    The Proxee is a blue tooth marketing tool. The device sends out a broadcast 200yds onto smartphones on the Google network and some Iphones.
    We are offering a promotion currently. The device is $239 and $46.50 a month.
    If you are interested reply for more info. This technology has been used in stadiums, zoos and the big name stores. We have made it very affordable for small brick and mortar and online businesses.
    Just think how much money you would save with a Virtual Marketing Assistant that never took breaks, working 365/24/7.
    Hit me up!
    Good luck on your business endeavors and we wish you great success.

    1. Christine says:

      I’m interested, I would like to post my business in Groupon, please contact me on 0452517033 my name Christine
      Thank you

      1. Trish says:

        Hi Christine,

        I don’t sell Groupons. I have another advertising tool called the Proxee. It’s bluetoooth proximity marketing.

        Let me know if you are still interested.

        Thank you.

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