To Groupon or Not to Groupon

by Casey Campbell, Mission Coordinator

For the past few years, coupon sites like Groupon and Living Social have been changing how small businesses do their advertising, marketing and promotions. Depending on who you ask, these deal sites are either the best or worst things for small businesses. There is the promise of potentially thousands of new customers, but the thought of losing money in each sale transaction scares many away. Before any small business jumps into the world of online deal sites, they first need to ask themselves four questions:

1. Does the deal fit my business?

These deals don’t fit every business. In fact, if you are a pet sitter or interior designer, Groupon will not work with you [1]. Even if Groupon or another coupon site will post your deals, it still may not work for you. If your industry has a quick turnaround between the first purchase and the second purchase then it is easier to get repeat customers, which is the goal of using Groupon.

2. Can you fill orders and provide great service even with the extra traffic?

One thing you can be almost sure of is that when you use one of these sites you will see a big jump in traffic to your store [2]. Be prepared to fill orders on time and be staffed well enough to provide excellent customer service. Even though customers are paying discount prices, they are still expecting excellent service.

3. Is your product or service good enough to get bargain shoppers to come back?

Not only must your product be easy to purchase with great customer service provided, but you must also provide a quality product. While a new business may want to get its name out there right away, it could be beneficial to wait until you know your product or service is perfected. This way you don’t risk negative reviews. Bottom line, if your product isn’t good enough to get customers to come back and pay full price, you will just be losing money.

4. Does the math add up?

Like every business decision, you should do the math before jumping into a coupon site to see if it will be profitable for you. There are many factors to consider, but if your margins are low enough and retention rate high enough, you can make a profit. This article can help you calculate if it will be effective for you http://boss.blogs.nytimes.com/2010/11/23/doing-the-math-on-a-groupon-deal/

As you can see, there are many factors to consider before deciding to sign up with one of these deal sites. You should put in time to research how other businesses in your industry have faired using deal sites. Groupon and sites like it could be good or bad for your business, but that is for you to decide.