5 Steps to Making a Groupon Promotion Successful

Groupon and Groupon style promotions are growing at an astonishing rate. The size of the Global opportunity is enormous. Originally developed out of the concept of the power of group buying, Groupon is now so large that it is now more about the exploitation of deep discounting to bring in new customers.  Using this kind of marketing is by no means a sure thing. A recent study by Rice University Texas has highlighted some of the downsides of using Groupon. So what can you as a business owner do to maximise your chances of success?

First; do the numbers.  The typical Groupon discount is 50% from which Groupon will take 50% of that leaving you 25% of the sales price. Calculate how much loss you will make on each sale. Its not quite as simple as this because some of the coupons purchased in advance will not be redeemed so you will get some revenue for nothing, a reasonable estimate would be about 10% of coupons will not be unclaimed although it will vary by product.

Second; using the numbers that you have calculated in the previous step calculate how much you are prepared to invest in this promotion, and therefore the number of discount vouchers you want to offer in this promotion. It is important that you set a limit as some businesses suffered serious losses because they underestimated the amount of take up of their offer and by not setting a limit had left themselves with an uncapped liability. By doing this you will also be able to identify how many extra full price purchases you'll need from your promotion to break even on your investment. Whilst it may not be important to you as an objective, it is always worth understanding the performance of your promotional activities. 

Now you have set up the parameters your third step is to prepare your staff. Let them know when the promotion starts and the potential number of addition customers that might visit your premises. You want your staff to be ready to meet any sudden influx without a reduction in service levels. You also need them to understand that a significant number of  clients will be paying by coupon, so you need to have a process in place to handle this efficiently.

Fourthly, plan your upsell programme, Groupon sales are only worth the investment if you can get these "Groupon" customers to purchase products at the full rate. Decide what and how you are going to upsell and encourage your staff to make this offer to everyone. A good way to do this would be to have a competition to see which member of staff has sold the most.

Fifthly; have a proper follow-up plan. If social media and CRM have taught us anything then it is that we should create a dialogue with out customers which will encourage new sales. 

Exigent Consulting specialises in providing Business Turnaround, Sales, Marketing and Mentoring to the Small and Medium Business. We help Business Owners improve the profit performance of their business.

Tweet

To Groupon or Not To Groupon That Is The Question

Image via Wikipedia

Groupon has been, and indeed still is, a business phenomenon. Its growth across the US has been explosive. It is now growing rapidly in the UK. Its message is to use the power of groups to get big discounts purchases of goods and services. In reality it is a careful repackaging of the discount  Coupon.  

For those of you who may be unfamiliar with the this company Groupon's business model is "group coupons": If enough people sign up, the deal "tips" into action (because Groupon is so large, and has so many followers almost all deals now tip).  Groupon now has more than 50 million subscribers and aims for 150 million by year-end. Its revenues—about half the value of total transactions—were an estimated $760 million last year and should hit $2 billion or more this year. In addition there are a growing number of "Groupon" like competitors springing up. The market for this type of promotion, currently at least, is huge.

Many companies have benefited from Groupon style promotions but it does present longer term issues for business and particularly smaller businesses mainly because it is purely a price based promotion. Typically Groupon will want you to provide a 50% discount on normal price as a promotion. Groupon will then take 50% of that discounted figure. So a £10 meal nets the merchant £2.50.  The objective is of course to encourage the Groupon diners to come back for a full price deal. The evidence for this is however patchy. A recent study indicates a growing number of "Groupon Customers" who only frequent establishments featuring Groupon deals and will only spend the minimum required. Still with those businesses with high fixed costs such as Restaurants and Spa's, getting additional customers in on slow days in the hope of converting them to full paying customers is relatively low cost marketing approach.

The longer term issue as I indicated earlier is that it is purely a price based promotion which will lead to a reduction in brand loyalty as customers recognise that they can return as new on the Groupon discount.  Leading to a steady fall in the number of true new customers, matched by an increase in the number existing full price customers converting to Groupon customers to obtain the deep discounts.

Evidence is appearing that Groupon is excellent as a tactical marketing ploy, but increasing repetition could have a significant negative impact on a businesses longer term profitability. 

For the smaller business a very careful analysis of the true cost of using a Groupon style promotion needs to be undertaken as getting it wrong could prove very damaging for your business

Related articles

• Does Groupon Erode Price And Is Groupon Right For Your Small Business? (toddstechtalk.wordpress.com)
• Groupon Down 30% (coverboom.com)
• Is Groupon a tool for price discrimination (iterativepath.wordpress.com)
• Why Groupon May Not Make Strategic Sense for Your Business (socialmediaexplorer.com)

Exigent Consulting specialises in providing Business Turnaround, Sales, Marketing and Mentoring to the Small and Medium Business. We help Business Owners improve the profit performance of their business.