Groupon Pros & Cons for Small Business

For people who sign up (it's free), Groupon sends an email every day with a "Groupon", a coupon for a price off deal at a local business in the city where you live.  If enough people that day decide to accept and pay for the Groupon, then everyone gets it.  If enough people don't choose to buy, then the offer isn't valid.

Forbes Magazine describes it, "Groupon, a name that blends "group" and "coupon," presents an online audience with deep discounts on a product or service. Act now, says the pitch: You have only so many hours before this offer expires. That's a familiar come-on, but it's coupled with a novel element: You get the deal only if a certain number of fellow citizens buy the same thing on the same day. It's a cents-off coupon married to a Friday-after-Thanksgiving shopping frenzy."

"What's in it for the vendor--which might be a museum, a yoga studio or an ice cream shop? Exposure. Since the resulting revenue is not only discounted but shared (typically, 50/50) with Groupon, the vendor may scarcely break even on the incremental sales. But it now has customers who might never have thought of patronizing the business. Groupon gets its offers in front of eyeballs by buying ad space through Google and Facebook and via the word of mouth of its 13 million subscribers."

Sign up with Groupon yourself to see how it works.   That's the best way to understand if this is something you want to participate in as a merchant or retailer.

Learn about who the target audience of Groupon subscribers is. 

It's mostly women aged 18-34.  Is this your target audience?  Check this site SocialShopping.com for more data. 

Pros about doing a Groupon coupon

 

1.  Groupon has a huge base of email subscribers — more than 150 million

2.  No marketing costs for small businesses that use Groupon to make an offer.

The cost is offering something at a deep discount to thousands of people and paying Groupon up to 50% of revenues. 

"While LivingSocial has become a strong number 2, just ask the 400 other independent daily deal sites that have launched since Groupon. While they have been able to get traction and are building strong businesses, only a handful have scaled to a million users and none of them have scaled to double-digit millions of users. User acquisition has become too competitive and thus too expensive.   While there’s no barrier to entry in the space, there’s now a barrier to scale and Groupon has scale."  This is from a blog post from Vinicus Vacanti, co-founder of Yipit, a site that aggregates the deals from hundreds of deal-a-day sites and recommends the most relevant deals to their member participants.   

4.  Offering a Groupon can create a lot of brand/company awareness

Essentially they send an ad about your product, company, restaurant, service to everyone who has signed up with them in the city where the offer is being made. 

They only make one offer a day so you aren't sharing the spotlight with someone else and the writing they do is very catchy and several paragraphs in length.

5.  This may generate a lot of trial and new business.  Business owners report thousands of people who redeem these coupons.

6.  The people redeeming the Groupon coupon may bring in people with them who buy at regular prices.

Next page - cautions about Groupon, new services from Groupon 

and the best articles online about Groupon