Groupon – could it benefit your business?

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

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