Archive for July, 2011

Is Groupon Bad for Business?

Written by localdirect on . Posted in General

is groupon bad for business?Groupon may seem like an easy way to make money and get customers through the door, especially when you read some of their quotes like ‘Learn how a one-day feature on Groupon can bring your business thousands of new customers.’  It seems simple and it sounds great at first, but this quote is misleading.

Yes it may do what it says on the tin, but how many of these new customers come back to your business after redeeming their Groupon?  Not many according to their research statistics.  In fact, 78% of customers NEVER go back to a business after redeeming a Groupon.  While, Groupon obviously provides good value to the customer (who doesn’t like to get up to 70% off something?!) the benefits to businesses are far less certain and many business owners are now starting to realise this.

Of course, Groupon is not the only culprit as there are many other “deal of the day” copycat companies that have sprung up over the last year offering an almost identical service.  The key point is that these daily deal types of offers are not always a win-win situation.  Where businesses would love to see new customers coming in, they also want them to keep coming back for more.  However, this is not in Groupon’s best interests.  If your business builds up a bigger, stronger customer base, you may be less inclined to buy into Groupon deals.

Furthermore, a convincing argument can be made that Groupon does not want your business to succeed.  It wants you to keep buying their coupons so they get 50% of the earnings your business makes through the deal.  And most importantly, Groupon does not share any customers details, e.g. addresses, e-mail addresses, mobile numbers, nor does it provide any help for businesses to do this on their own.  It does not track or provide data to businesses on for example, how often new customers come back to your establishment.

So where does that leave you?  It leaves you, in effect, giving away your earnings, without a guarantee that you will be building up repeat business from the customers.

Doing a deal through Groupon can also be bad for your existing customers.  If a loyal customer sees someone else getting a half price deal it could isolate them.  They may be put off by this and may never come back.  And going back to the statistics earlier, your new customer with the coupon is also not likely to return, adding insult to injury.  In addition, offering large discounts isn’t great for your business’ reputation.

Alternatives to Groupon and other Daily Deal Sites

Fortunately there is another way.  According to a recent survey by HipCricket, 57% of people would be interested in opting in to a brand’s SMS loyalty program.  SMS marketing of this kind can do everything that Groupon cannot.  In other words it can build up a customer database with a widely improved chance of gaining repeat business and you won’t have to share any of your earnings with anyone else.

Furthermore, there is a real opportunity now to enhance your business with SMS marketing as 80% of the HipCricket survey respondents said they have not been marketed to via SMS by their favourite brands. Furthermore, 90% of the HipCricket survey mobile users who had participated in an SMS loyalty club felt they had gained value from being a part of the program – proof that consumers are already crying out to hear from you, so why aren’t you listening to them?

By signing up to LocalDirect today you can start building up your own list of mobile subscribers and begin contacting them whenever you want.  Mobile marketing and the integration of online and offline marketing is the way forward.  LocalDirect make it easy to get the best from SMS marketing and other new technological advances that are becoming widely used such as mobile websites and QR codes, so why not take the opportunity and take full advantage?

We are on the cusp of a new marketing revolution, be among the first to tap into it and reap the benefits.  Click here to view our marketing services and packages.

 

Further reading:

Reuters article

Posies Cafe blog post