Why Groupon and discount coupon websites like this will hurt your business and possibly ruin your customer base.
We have all herd about these discount and coupon websites delivering the “deal of the day” and it is basically 50-80% off the original price. I get excited when I see these “deals” who wouldn't? the idea has been out in the public and in the market place now for months now and businesses are now talking about their experiences with using these sites to market and sell their coupons.
The verdicts are out and these people are not very happy, oh yeah and broke. So lets get this straight, Groupon will sell the coupons for your business online for you....ok good. And they will do all the advertising and marketing.....even better. But wait this sounds to good to be true where is the catch and how will Groupon make money? they will take 50% of your profits, so wait a minute.....I have to discount my product or service 50% off and then Groupon is going to take 50% from my “profits”........Where is the money for my business?
“ $46,320 of merchandise at retail or roughly $23,160 at cost…of that I get around $10,000 because of course I only get 50% of the deal minus credit card fees (ugh!) Groupon gets their 50%.” Kim, Owner of a parent teacher store
“There came a time when we literally couldn’t not make payroll because at that point in time we had lost nearly $8,000 with our Groupon campaign. We literally had to take $8,000 out of our personal savings to cover payroll and rent that month”. Jessie Burke, Owner of Coffee shop in Portland
“with sales of around 300,000 Groupons, Gap lost $7.5 million in revenue on the pay $25-get-$50 coupon deal.” Gap
So when do I get paid for all the items that where sold on Groupon?. Well glad you asked, Groupon pays you in 3 installments during the Groupon life cycle, could be months until you see any money.
So this Groupon website is making 50% of your profits after its been heavily discounted? They kinda sound like the mob back in the 50's, except they are providing marketing/advertising not protection for your business. From my understanding of online businesses and how they work, the over head is relatively low, you might have sales people that work off commission, or possibly an administrative person answering the phone for customer service, but typically the over head is very minor. So why dose Groupon think they need 50% of your money? Sounds like greed to me and a bad business plan, mixed in with bad intentions. They are not helping the economy in any way, just because people are buying and spending their money dose not mean the economy is picking up or “rebounding”.
These websites, I’m sure they will move a lot of product but are they cannibalizing their target market, acquiring unprofitable customers and training them to look for the deal? This is business 101 do not do.
I say if your a smart business owner, please do not fall for this hype. Do not encourage these websites and they will disappear, no businesses to offer coupons= No Groupon or website like them. Their are plenty of other ways that will cost you less and provide less of a headaches from customers that take advantage by getting mad because you will not honor a day old coupon.....
