Running a Groupon Promotion is a deceptively simple way to get clients. Offer a limited period discount, win new customers, increase your customer base. Your business incurs lower costs, increases engagement, and you get better returns. Right? Wrong. There are a lot of unintended consequences of Groupon Promotions that businesses should consider before diving head first into running it. Here is what you need to consider.
Cutting into Profits
This is expected when you run a discount promotion. However, what is important to understand is the Groupon’s USP is offering heavy discounts. So, when your business runs a Groupon promotion, you have to offer discounts in the bracket of 50% or more in order to attract a sizeable number of customers. Then, Groupon will charge its commission, which is an additional 50% of the revenue that you generate off the deal. So, your gross income will be slashed by 75%! This is without taking out your business expenses and overheads. Put simply, if you don’t have employees you’re going to be busy as hell working for peanuts and if you do have employees it is going to cost you more to service the client than you will receive in total revenue. Now, if a high percentage of these people were to become regular recurring clients then it could be worth it.
Relationship with the Acquired Client
The relationship that you have with a regular client verses the relationship you have with a Groupon-acquired client is likely very different. A regular client visits you for the quality of the product, your service or the uniqueness of your offering. However, a client from Groupon is primarily choosing you because of the heavy discount you are offering.
In business, the value of your product or service is as much as the customer is ready to pay. When the customer has already paid a heavily discounted price, they won’t find your product as appealing for a higher price. So, these customers are unlikely to be repeat customers or long-term patrons for your business.
You run a Groupon promotion to get more customers, but it can quickly become a bad thing.
If you do not have enough staff or equipment to cater to the rush Groupon is going to bring your way, you won’t be able to deliver the same experience to every customer as per your regular standards. These are also expensive customers; you are getting them to your business for a high cost.
Getting the rush may work against you earning you a lot of negative reviews. You paid up 75% of your income to get negative reviews.
In short, don’t run a Groupon. It’s a headache and it’s not going to help you build your business.