At first I was completely opposed to Groupon… after all the economics don’t make sense for the merchant and, if done wrong, the impact on cash flow can be devastating.
I have heard of two stories (interestingly both were related to dental care) that used Groupon successfully. One created an “at-home” whitening kit which they sold via Groupon. If people wanted extra kits they were at regular prices. They could also sell this nationally, instead of locally, yet if the buyer was local, they could also come into the office for professional treatment. I like this example because the main cost was in creating and distributing the kits, so it was highly scalable. The other was for a dentist that offered teeth whitening in the office and then upsold during the visit. They would upsell to another appointment or a product. This dentist knew that a small percent would repeat but it made sense to her to use Groupon to increase her patient count. Teeth whitening is, apparently, a high margin product, so I can see how this would work.
I’m still not a huge fan but I can see how it could work for many business types if … and only if… the plan is well thought out, understanding that some regular customers will buy the Groupon and many Groupon customers have no intention of returning when they buy. In this instance, using Groupon can be a very expensive branding exercise, particularly if there isn’t a plan in place to give them an offer to return. So, if I were running a Groupon, I would want to know which customers are coming to my business with a Groupon in hand as they entered my business. Then I’d train my staff to make them feel welcome and to ask if they have spent money with us before (in different words of course!). I would track how many are new customers versus existing customers. In both cases, I would train the staff to explain the competitive advantages of shopping with us (how many businesses ever do that!?!) and to show them around.
At the point of sale, I’d have an offer for them to join our “Club” whatever it is called. Capture an email or a cell phone while giving them a reason to come back. This personalized service will blow the bargain shopper away. Furthermore, those that liked the experience enough to consider returning will be more likely to give their email / mobile # for more value-added services, special promotions etc. The value is always in your list and as long as you are building a list and wowing the customer, Groupon may work for you.
So how could you deal with a customer that was not a Groupon customer? Make an offer to them too… here’s a scratch and win card, or a free appetizer card or a free alteration etc. to redeem today. Then, also invite them to join our “Club” at the point of sale.
That said… the financial metrics are critical. I created a daily deal calculator, which was intended for personal use. However, if you’d like a copy of it, please insert your name and email. Once you have done that, and confirmed your subscription, you’ll get the calculator and an explanation of how it works.
So, my long answer to the question and the bottom line is that it really depends. It depends on the deal itself (the calculator helps to decide which one is better) and how many people you can convert to repeat customers… and to me, that is the most critical component.
Have you used Groupon for your business? Let us know how it worked by commenting below.