News: May 2011
Groupon – could it benefit your business?
For those of you who are unfamiliar with Groupon, the company partners with local businesses to send a daily coupon e-mail shot to its members. The members who buy the coupon get 50 to 70 percent off on a product or service, and Groupon splits the proceeds with the retailer usually leaving the retailer with about 20 to 25 percent of the retail price. At this stage many business owners will start asking themselves if this is a marketing initiative that is worth trying.
Selling your product or service at 70% – 75% discount may seem like madness, until you consider what Groupon is and what it can do for your business. Groupon’s service should be considered as advertising. A full page advertisement in a business magazine could cost you £5,000 and you may not get a single phone call as a result of the advert. Groupon’s massive database offers huge exposure for your business and you could win a significant number of new customers as a result.
First you must consider the suitability of a Groupon campaign for your business. How many potential customers in your area don’t know about you? Do you have excess capacity? Can you handle a surge in trade? The next thing to consider is branding. Do you believe that by giving out a large discount you risk damaging your brand? It depends on the business. For example, a professional business consultant offering discounted services may not create a great impression, however a hair dressing salon could attract new customers by flooding the market with e-vouchers on Groupon.
Whether you decide to use Groupon or not, bear one thing in mind; Groupon is advertising – it costs money. Instead of writing a check for an ad, you are choosing to lose money on sales. If your campaign costs you £5,000 in lost profits but you attract 50 new clients, then the “Cost of acquisition” per customer is £100. If you succeed in attracting those customers to come back and do business again and again then the investment of £100 to win each new customer is money well spent.
You can find out more about Groupon by visiting www.groupon.co.uk