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Is Groupon a Good Idea for Your Business?

Lately, you may have been hearing a lot about something called “Groupon,” from its controversial Super Bowl ads to its rejection of a billion offer from Google, Groupon has been in the
news a lot. But when it comes to using Groupon as a marketing strategy for your small business, is it a good idea?

How It Works

Groupon (as in “Group Coupon”) is a deal-of-the-day website that offers coupons to subscribers living mostly in major cities. For each daily deal, a certain number of people must pre-purchase a coupon online, and when the minimum number of coupons (set by the merchant) has been sold, the coupon is considered “activated” and the purchasers are then free to redeem their coupons. The ideas is that everybody wins – customers get a great deal, Groupon gets a pre-set fee (which happens to be 50% – read more on that below), and the business owner, in theory, generates new sales and gets a bunch of new customers walking through the door. Sounds great, right?

Well, like many things in life (and small business marketing), the devil is in the details. Here are some upsides and some (big) downsides of jumping in on the Groupon craze:

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Upside #1: Huge online exposure – Groupon (at the time of this writing) has tens of thousands of subscribers in most major cities around the world. Using Groupon exposes you to countless consumers that may not otherwise ever know about you.

Downside: Groupon is not available in all cities, so you may not be able to use the service in your local area.

Upside #2: Visibility and Buzz – because Groupon is currently so popular, the deal-of-the-day coupons can create tons of online “buzz” and are widely shared among users and their friends, families, and contacts. The more creative your coupon offer, the more buzz it can create, and the more your offer will be spread all over the web.

Downside: Your business could potentially get swamped if you don’t set a limit on the number of coupons you will allow to be sold. If you don’t have enough staff and/or product on hand, a successful Groupon could overwhelm your small business with too many customers all at once.

Upside #3: Quick Sales – With a successful Groupon offer, you could potentially get hundreds (or thousands) of new sales very quickly.

Big Downside: Groupon takes 50% of the value of your offer, plus 2.5% interest per transaction. Plus, you must offer at least a 50% off deal-of-the-day to participate in Groupon. So if you offer a item for , Groupon will take , you will get , and the customer gets your item for .

Think It Through Carefully

Before you consider using Groupon, you must make sure that your margins and pricing work out so that you can balance the increase in new sales with the hefty cut in your profit margins. To help you determine if Groupon would work for your business, you can use this Groupon ROI calculator.

What Do You Think?

Of course, Groupon is not going to be right for every type of business. But given the enormous popularity and growth of Groupon, there is clearly something exciting going on with the “group coupon” buying model. Whether it turns out to be a lasting hit or just a passing trend, however, remains to be seen. So what do you think? Is Groupon a good idea for your business?

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If you want to be considered one of the big search sites these days, you’ve got to yourself a daily deals feature. Bing is the latest to launch a coupon aggregator to take on the likes of Groupon and LivingSocial (not to mention AOL’s Wow.com, Yahoo Local Offers, and Google Offers) and announced Bing Deals this morning.

The tool is the creation of Microsoft and The Dealmap, which works to find the best discounts in your area from a host of different websites. The final product will be available on PC and smartphone, and of course you can expect to be seeing it pop up in Bing search results as well. Which has the possibility to be both annoying and helpful: Hastily trying to look up a restaurant address could be buried beneath coupons, but maybe one of those will actually be of service to you. It’s the trade off we’ll all begin to pay more and more as local deal aggregators’ popularity continues to surge.

One feature of Bing Deals that does seem to simplify the process is its integration with Open Table, so users can buy the coupon and book their table (given it’s a restaurant discount) simultaneously. It’s a competitive daily deals tool, and one that is immediately available. Google is still working to get Offers rolling by partnering with local businesses in various cities (we even got our hands on a recruitment letter for on-site representatives to reach out to local vendors) and doing the leg work itself. Bing Deals may be letting the middle man do that work for it, but at least it’s up and running. On the other hand, that may mean in the long run Google is able to create a better and more established product.

Bing recently solidified its spot as second only to Google when it comes to worldwide search. Pushing Yahoo out of the number two spot has been a long time coming, and it looks like the Microsoft search engine has no plans of slowing down. It recently expanded its Facebook integration, something it can lord over Google from here to eternity it seems (or at least until the Google-Facebook data wars come to a close).

However, there is one immediate issue: As one disgruntled user points out, Bing mobile is currently only available for the iPhone and Android. “Seriously, do you guys keep up with your own company? This should not have launched without Windows Phone 7 support,” commenter John Bailey writes. Another user points out the Bing needs to unify its mobile platform, seeing as some features are available on its app while others are on its mobile-optimized site, m.bing.com.

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What is the future of daily deals? The proliferation of web sites in the past 3 or 4 years that offer tremendous savings or deals at local businesses is a strong indication that the business is still growing and people are making a lot of money with these sites. The industry generated less than 0 million dollars of sales in 2009 and has grown explosively in only a few years. In fact, conservative growth rates of 35% per year project sales to reach billion dollars by 2015. With few barriers to entry and everyone trying to get a piece of the action, is this marketing concept ready to take the next step forward or is the bubble about to burst? It is obvious that the original concept of giving away 50% off coupons on everything from dinner to resort accommodations is not sustainable. However, with a few adjustments and some creative thinking, the future of daily deals still has plenty of potential.

Take the most popular daily deal site currently on the web. Groupon reported million dollars in 2009 sales and that number skyrocketed to more than 0 million just one year later. They have become the clear industry leader and are positioning themselves to possibly be acquired by a major player or try to grow even bigger by becoming a publicly traded company. While there are thousands of small, local daily deal companies springing up every day, it appears most likely that the industry will be dominated by Groupon and a few of the other large companies like Living Social and Google Offers. Having massive scale and being able to sustain such great offers is crucial to survival. Since all companies do the same basic thing, only the strongest will survive.

The danger of over-saturating a market is very real. There are only so many businesses that are willing to participate in a daily deal offer and they will go to the company with the best reputation and proven record of positive results. Customers will always be attracted to offers where they get a meal for or can stay in a luxury resort for less than 0 per night. However, businesses may not want to offer such promotions in the future, especially if the economy recovers and they can attract customers at full price. It seems that sales are good right now, but how long can they last? Just like there was a tremendous surge in the housing market, eventually, that house of cards collapsed upon itself. Just like people made fortunes in high tech stocks in the late 1990s, by the beginning of the 21st century, the bubble burst and fortunes were quickly lost. Greed and a lack of diversification led to the downfall for many investors. In order for the daily deal industry to survive, there must be innovation and ways to assure continued growth.

A company like Woot.com has been paying attention. Instead of scattering all sorts of offers, they have developed a strategy for targeting specific groups with their offers. It is a small distinction that will keep them near the top of the industry. Living Social targets specific cities or regions. More research into public consumption habits and making the offers appealing to targeted markets appears to be the future of daily deals. How long that strategy will last is not known, but it should give the smartest managers a chance to refine their business so they do not become irrelevant.

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A groupon clone site is a unique way to make money online. It allows you to use local marketing and local businesses as your main ways of pulling in a profit; a significantly different business model than most websites. For those who have connections in their local community, it’s a great way to exploit them to get your site into a profitable position. There’s nothing precluding you from offering national sales, as well, but the local model offers some very interesting opportunities.

A groupon buying script allows the users to accept an offer made by a local business and to encourage their friends to do the same. From the site owner’s end, you work with businesses and let them persuade the customers. You can work with local businesses to come up with great deals. The groupon clone site allows your visitors to accept the deal and, if enough other users do the same, the business owner will validate all the coupons that come in. The groupon close script takes care of all the heavy lifting where handling the customer sign ups and other tasks are concerned. Most people with some web administration experience should have no trouble operating a group buying script.

A groupon clone site can be an excellent way to get a niche market online, one of the hardest things that marketers struggle with. Your city becomes you niche market and, of course, it’s pretty easy to market to a city, particularly if you live there. This is one of the newest ways that people are making money online by promoting products and, if that’s something you’re interested in, you may want to start giving the idea of setting up a site with a group buying script a serious look as a business model.

The groupon clone script is a powerful tool for monetizing a website. These scripts are based around providing a sort of cooperative buying environment for visitors. The scripts provide numerous other functions, as well, usually by way of modules. This model of doing business is very new and is rapidly becoming very popular.

A groupon clone can be installed on any web server. The script adds functionalities to the site. They may be programmed in several different ways. Generally, the most popular and stable products are made with some variant of PHP, a programming language designed specifically for the web. The user doesn’t have to know anything about code to install these scripts, however.

The scripts are generally made to auto install. The group buying script, in the best examples, will also check the server for problems or compatibility issues. These scripts are being developed by private companies, so there is generally support available. This means that the scripts are updated as new and better ways of providing services are developed, as well.

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The groupon buying script can monetize a site by providing a new way to sell advertising space. Coupons, of course, are advertising materials. A groupon allows the site’s visitors to buy into a deal being offered by a business. The flexibility in this is that the business can offer any type of deal they want. It’s up to the site owner whether or not it’s right for their customer base. Some of the best groupon clone scripts allow users to login with their credentials from social networking sites, which means that the business’s potential demographic reach from the advertisement is truly astounding.

Because these advertisements allow an essentially win/win arrangement between customers and businesses, the groupon clone is becoming increasingly popular with both. This means that site owners stand to make a good amount of revenue off of sales to businesses.

Many of these sites are monetized for a regional niche market. This allows an Internet site to be very local in its reach and provides a new way to market a site for the site owners. A group buying script can be the basis for a very successful site. Because they’re designed to provide a type of commerce, not a particular niche product, the demographic that the site draws is entirely up to the owner and based on how it’s promoted.

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