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.

8 replies on “The Groupon dirty secrets: Should your business join Groupon”

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.

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 …

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 …

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 !!!

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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