Everyone loves a great deal, whether it’s for a casual restaurant or luxurious spa. If you’ve been living under a rock, Groupon is a convenient online site that finds these steals for consumers without clipping coupons. It claims to help struggling local businesses gain new customers and sales, but merchants in the service industry must beware that Groupon may potentially hurt their business instead of improving it. The online site looks out for the consumer’s best interest and not the business.
Local businesses look to Groupon as an alternative to traditional advertisements. Groupon will draw in merchants by creating a promotional deal up to 50 percent off in which they promise sales increase and new clients. According to Huffington Post writer, Amy Lee, “one merchant proclaimed that signing up for Groupon was the “single worst business decision” she had made. Her story echoes other merchants who have claimed that Groupons result in unprofitability, administrative nightmares, and, to cap it all off, that they don’t result in new regular customers.” Groupon makes it hard for merchants to profit from these low deals. In some instances, businesses in the service industry end up losing money.
I’ve had the experience of working with Groupon at my current salon job. The company has been struggling so they thought it would bring great opportunity to gain new customers and increase sales of monthly memberships. I believe bringing Groupon into the company had the opposite effect. I’ve found that most of these customers already existed in our system and only handfuls were new. In addition, clients who seek bargains will wait around for the next deal to pop up on Groupon. I kept seeing the same, reoccurring customer purchase one Groupon deal after another. They would never sign up for memberships after their deal was used or expired as the company anticipated. After we would stop running the deals, majority of our clients would discontinue using our services and search for better deals elsewhere. In this case, I believe Groupon did not work in our favor and devalued our company even more than developing it further.
Sources:
http://www.bu.edu/today/2011/groupon-bad-for-business/
http://www.huffingtonpost.com/2011/06/10/groupon-merchants_n_874896.html
http://www.pdco.com/node/88470
Although not speaking from personal experience from an owner standpoint, I believe groupon definitely has its advantages as a marketing tool. Some customers may just come back for the recurring deals, however some may purchase a groupon, have a great experience, and be a lifelong customer because of this. There are always two sides towards any discounting marketing effort, even when it comes directly from the company in forms of discount codes, promotional e-mails, etc. While forfeiting maximum profit per unit, a company should also place a value towards its marketing and customer return ratio as it applies to their revenue model.
It is an interesting article. I have been using groupon for a while and I do it for different services products. I think that the problem with your company was that they structured the deal with groupon in a wrong way. Instead of offering a one-time deal they should have offered a discounted membership. That way I that would get prepaid revenue that they could use, and I think that a lot of people do not utilize their memberships so I think that company would have gained more in revenue.
I use Groupon quite frequently as well, and I truly love it. It gives you amazing deals, and when that one is over you move on to the next amazing deal. This however, is only from a consumer point of view. I can definitely see how businesses struggle, and it can be easily assumed that a relatively small amount of client will actually continue being a client after the Groupon ends. Nonetheless, its still additional clients that the company did not have before.
Like many of the previous comments, I can only comment on the consumer point of view. I frequently browse the deals on groupon, however, I have never actually taken advantage of one of their deals. Looking more for deals on restaurants, I have found that groupon advertises the restaurant to look great, but after googling the location, I find it looks much less appealing. Due to this difference in advertising I have found myself hesitant to take advantage of their deals.
Although I have no experience with Groupon as a company, I have used Groupon a few times as the customer. The idea of Groupon seemed great when I first heard of it but now with mulitple bad experiences I try to avoid it at all costs. My first experience was to a tanning salon and the groupon was two spray tans for the price of one. I went in for my first spray tan and they took the paper and never issued anything else so it was pretty much useless because I ended up paying full price for the one.
Nice post. I have never used Groupon, so I am not that familiar with their business model. I definitely see it as a weak marketing tool. The biggest point you made is that Groupon users are just looking for a deal; they do not care to continue purchasing products after the deal is over.
Personally, I have never used Groupon. But, I work with someone who is consistently on it. I had never thought of the negative effects that Groupon would have on businesses. I always thought the opposite in fact. Considering that it promotes companies and drives in new consumers; I had thought it was a great thing. But, now I can clearly see the dark side of this.
The title of this post really got my attention. I have never used Groupon but, many of my friends have. They basically only use it for the one time deal and never come back. I think Groupon is positive for businesses as far as increasing the traffic coming in and out of their stores. However, I believe that businesses need to capitalize better on these opportunities to keep the customer coming back. The example you used with customers only waiting on new deals at your salon is exactly what the majority of Groupon users do. In my opinion, it is definitely a better tool for the customer than the business. Customers can find great deals any time they want to but, these businesses are not getting recurring customers which is the problem.