The Groupon dirty secrets: Should your business join Groupon

My friend has a small business. He asked me if Groupon or any other group buying solutions was a good idea for his business.

I had no idea. I know that Groupon is the new cool thing but something was not right in my mind. My guts were saying it might not be the best deal.

I had no stats to back it up until today. I discover this article from allbusiness. I found many interesting stats that I can play with.

Groupon might be a good deal because out of 150 businesses in 19 cities from June 2009 and August 2009, 67% made a profit.

groupon numbers profit

At this rate it might be a good thing to try Groupon.

However another local survey showed that 40% had a bad experience with Groupon and they will not use the service again.

groupon numbers experience

So 67% made a profit but 40% will not use Groupon again. Groupon attracts not great customers.

Those “new “customers will not comeback in those businesses without the crazy 50%++ discounts.

It means that a business owner will devalue his product or service to attract new and not loyal customers.

“To the business owner I say beware,” Lowe says. “Steer clear of these online offers unless you need quick cash.”

It is clear that you will make a profit with Groupon but you will not be able to attract new and loyal customers. Therefore it is not a great deal.

Of course Groupon has his own numbers.

groupon numbers

From Groupon numbers, 95% of business owners are satisfied with Groupon. I guess because most of them made a profit.

“Groupon is a marketing tool, and we’ve never positioned it as anything other than that.”

This is from Groupon. It is a marketing tool only and nothing else.

Now I can answer my friend.

He should use Groupon once to make more money. He should not use it more than once because it will devalue his service. Also Groupon takes a huge part of the business

Again it is hard to justify a 15 billons valuation with such negative feedback from the market.

Group buying services are great for customers and customers only. Unless they find the right balance for Business owners, I will not believe in this model. It is still possible to beat Groupon.

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  1. I think customer loyalty is more important than attracting new customers. You make a decent argument in this post. If your business can convert 10% of it’s customers into “super” customers who come back in twice as often as other customers, you’ll be better off in the long run. I’m working on a service to do exactly that, called Punchd. You can read more here: We’re focusing on bringing customers back in, rather than just attracting new ones.

    1. ok great!!! when you publish the comment I was about to say do you have a example but now the video is up or at least I get the idea…. However you do not have the discovery factor from Groupon ( it’s ok ). From what I understand you need to become a loyal customer first to get the card or maybe not … It is not clear …

      1. True, we aren’t emphasizing discovery. Groupon, Foursquare, Yelp, etc are handling discovery pretty well right now. We’re more in the business of bringing people back more often 🙂

        1. I would to love to hear about the progress of your product because I love the idea …. I’m sure it might help a lot of business owners …

          I’m not sure it is possible right now but is it possible to get a discount to invite a friend with your system just by sending an invite from phone to phone….

          example: I’m a loyal customer at this coffee shop but if I bring a friend I get more points or something like that … Groupon and many other similar service does this kind of referral program to make their service viral …

  2. Did your friend go with Groupon deal or not?

    It would be interesting to see your friends numbers after the deal.

    1. He picked up the Groupon deal… it is very interesting so far…. I’m coming with numbers very soon…
      Spoiler alert : the deal was so good that he attracted so many people and interest that his website is completely down …

      I cannot wait to see how many people are ready to pay the full price after… From what I see so far Groupon might a great deal if you play your cards right !!!

  3. I did groupon and will never do it again. After gross sales of almost 13,000 on my groupon customers i figured out that i had given a 38% discount on those sales. That’s horrible. i made slightly more than the cost of the inventory.! again, that’s horrible and a lot of these groupies i’m pretty sure will not be back-they were strictly looking for something for nothing. a lot were already my customers. a lot spent a good amount of time (some of my time too) finding items for just the dollar amount of the groupon. I felt so used and i didn’t even benefit from it.

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