My fiancée is obsessed with Groupon and the vast array of competitors who’ve entered the social promotions space in the past two years. The model is simple: You attract new customers at a reduced rate, in many cases below break even, in the hope that a certain percentage of these frugal couponers will eventually become repeat customers or that you can upsell them into spending beyond the coupon’s face value.
It got me wondering how successful these restaurants, salons and other small businesses are at converting new clients and ultimately achieving a positive return on their investment.
According to a study conducted by Rice University, only 66% of companies who participated in Groupon promotions did so profitably. How can you make sure that your small business lands in the lucky two thirds? Just follow this model:
1.) Make sure your employees are happy. The Rice study cited employee satisfaction as being the biggest indicator of a promotion’s profitability. Make sure you communicate with your employees what is happening, so that they will be ready for the rush. Offer compensation to make up for lower tips and possible longer hours.
2.) Capture contact information upon redemption and ask for the opt-in. Have a comment card, or better yet, iPad available to collect your customers contact information.
3.) Follow up via email/phone/mail. You’d be surprised at how many businesses my fiancée never heard from again—despite having provided contact information at the point of redemption.
4.) Ask for feedback by sending them a quick online survey. Contact customers immediately after a sale or service has been rendered to get their feedback while the purchase is still on their minds.
5.) Keep them coming back. You got the hook; now reel them in with your own Groupon deal based on your terms. Send them a coupon with a discount that works for you. Chances are they have already made up their mind on whether or not they will return, but either way this is a good nudge.
If you are thinking or running a Groupon or any other social coupon deal, the question no longer is: Will it be successful? But rather, how do I prepare and follow through?
What are your thoughts on social coupon sites such as Groupon, LivingSocial, and Bloomspot? Have you had success with social couponing?
Yes I absolutely agree with this article, and feel many businesses do not or are not able to capitalise on coupon deal sites to bring in repeat customers. I will be running my first deal with Groupon soon and will require groupon buyers to submit reservations on my website http://tastytourstoronto.com, which allows me to capture their email for future communications. I’ll let you know how successful my groupon experience was in a few weeks!
Hi Audrey,
Thanks for the comment, I think the reservation idea is fantastic! Would love to hear how it turns out.
Best,
Jason
Using Groupon and its clones could lead to a devaluation of your product value perception. It works pretty well for quick serve and low end restaurants, but when you get into products such as clothing at boutiques, electronics and such it is a real problem.
I think a company called ScoutMob has a better system. You provide the consumer with a 50% discount up to a certain amount and when a customer makes a purchase you pay $3. You also pay per click to your website. It is more affordable for products. Still, if your product is not a commodity this should be used in a limited fashion.
Hi Harry,
Thanks for the tip! Will check out ScoutMob for sure, sounds interesting.
Best,
Jason
Couldn’t agree more. I remember reading an article about how companies were complaining that they weren’t making any money by using Groupon. That, to me, meant they didn’t have a plan before offering the coupon. Sure, they knew they were going to get an increase in traffic, but they should have known what to do with the traffic once it came. It is much easier to get sales from someone you’ve sold to before, if you have a way of contacting them after the first sale. Groupon and the likes are no different than the door buster deals stores offer the day after Thanksgiving. They don’t make money on those products, but on the other stuff people buy while in the store, and repeat sales afterward.
Hi Lionel,
Thanks for the comment. You make several good points! Jumping into a social couponing promotion without proper planning is just irresponsible on the part of the business owner. There is potential for disaster if the promotion is poorly executed as you could easily see a quick surge in bad Yelp reviews, and that would be a nightmare to try and recover from.
Thanks again!
Jason
[...] Social couponing is probably the latest addition to the world of discount coupons. However, unlike traditional couponing you can pass on these coupons to your friends and family members, which in some cases will also help you earn bonus points, which entitle you to further discounts. Websites such as GroupOn and Living Social tend to offer what is termed as “extreme” deals, which mean that the deals you get there are much more lucrative from a buyer’s perspective. [...]
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