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.
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.
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.
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.