Recently, I was speaking with a woman in the checkout line at the market and somehow we started talking about yoga. While she liked her studio and the teacher, what really thrilled was the cost. “One dollar a class with Groupon!” she exclaimed. Now, in terms of fees, that’s what I call a downward dog.
But it also begs the question, is it actually worth it for the yoga studio? Maybe, but maybe not. For the small business, when it comes to Groupon (or Living Social, or any of the other discount sites that are cropping up all over), there are definitely pros and cons to consider before jumping onto the Groupon bandwagon.
Exposure: Probably the best part of Groupon from a small business perspective is simply the vast number of people that will be exposed to your business. Groupon is your classic loss leader strategy, and the essence of a loss leader is that you will take less to gain greater market share. Heaps of people will be exposed to your business.
Income: Yes, you will make less per sale, that’s for sure, but you will also have a lot more sales.
Sales: Groupon is a great way to move inventory and generate business. If you have unsold items, or empty tables at your restaurant, or time that you can’t bill, get ready to move it on out because that is exactly what Groupon will do.
Branding: This one is a double-edged sword. If it behooves your brand to be known as a discounter on some level, then Groupon is definitely for you. However, if being the low-cost leader doesn’t jibe with your business, beware the Groupon discount monster.
Loss Leader: Selling a lot of a product at little or no margin can tax even the most successful business.
Overwhelming: There are definitely businesses that have tried Groupon once and never went back because it was not worth all of the effort. Sure, they got a lot of exposure and a lot of new people tried their businesses, but the sheer numbers can overwhelm.
Customers: Everyone likes a bargain, that’s for sure, but one thing that is especially true with Groupon shoppers is that they really like a bargain. You need to be sure that this is the sort of customer you want to attract.
Repetition: The corresponding question is whether you will be able to turn these discount shoppers into repeat customers. Hopefully, but that’s part of the challenge.
The bottom line is that while Groupon and its kin are not for everyone, they definitely do increase the number of people who will learn of, and try out, your business. If that is what you seek, good luck.