The first time I heard about Groupon was from a small business owner — Surfy Rahman, co-owner of Indique Heights in Washington DC. in 2009. He mentioned it as a user and not as a business owner.
Since then the coupon offers or Group-buying space has evolved a lot. The companies in this space that I have subscribed to along with Groupon are:
- Living Social
- Google Offers
- Amazon Local Deals ( powered by Living Social)
- CertifiKid ( Family and kid friendly deals)
- The Capitol Deal from the Washington Post
- Recoup ( a deal site that offers coupons and helps support causes)
If you take a look at the range of my subscriptions they are a good representation of the spectrum of deals available now.
The concept of coupons is not new. It has existed as long as business has existed as a marketing tool for business owners to attract new customers and sometimes to retain existing customers. Companies like Groupon pioneered a trend where the offer was based on a combination of factors:
- The deal
- Number of deals offered
- Location
- Market specifics
- Time when they could be used
Under ideal conditions, coupon offers should have given businesses access to new markets and customers and a way to fill capacity during lean periods. The speed of the industry growth lead to several bumps both for the coupon companies and the business that used the coupons. Here are some pitfalls that occurred in some of the coupon offers:
- Customers turning up in large numbers on the first day the offers opened and/or last day of the offer
- Staff dissatisfied when patrons using restaurant coupons were not calculating the tips at the full price
- More existing customers using the offers and businesses not getting exposure to new customers
- Businesses not setting a logical limit to the number of coupons sold and opening themselves to operational nightmares
- Sometimes no clear understanding of timeline and merchant payment terms
Despite the pitfalls mentioned above, many small business have had successes using coupons. One of the most important factors is the ability of the coupon offers to change customer behavior. I wrote about this in a previous post “How Online Tools Helped a Family Farm Get New Business.” Consumers love these deals.
My friend, Dr. Sanjay Jain has taken classes in photography and art that he had always dreamed of and could achieve it when the barrier of cost came down with a Groupon offer. When I put this question on Twitter, many in my network said they had tried new restaurants and became regulars at other business.
Coupon or group-buying companies have two kinds of customers. The end consumer who pays for the coupon and uses it. The business who partners to make the offer. Negative stories from merchants have received far more prominence than success stories. In his article, “5 Groupon Success Stories And Discount-to-Loyalty Strategies” TJ McCue writes:
“There are two big Groupon benefits for business owners that I see: One, that you dramatically increase your visibility. Two, you have no out-of-pocket advertising expense. Okay, you may have to spend on materials or product, but if you do it right, you can at least break even and generate new business.”
As we look forward towards 2013 at the buzz around the coupon industry here are some of my thoughts on trends in 2013:
Expanded Localized Deals
- The challenge in 2013 will be to increase the number of end users and merchants.
- Expanding to more local merchants and targeting customers in the local area.
- More niche verticals from both nationwide and local coupon companies.
Focus on Increased Online Commerce
- Trends like Groupon goods will increase procuring goods directly from producers to the customers.
- B2B services that offer self-serve couponing tools will also increase.
Increased Resources and Tools for Merchants
- The bigger players like Groupon introduced new tools to help its merchant customers – GrouponWorks a portal for merchant resources , Groupon Rewards for merchants to manage incentive programs for returning customers and a scheduler tool. Living Social on its part introduced an online ordering system for restaurants to take orders from customers using a Living Social coupon.
- In order to enable credit card payments Groupon introduced a payments tool for its merchants similar to Square or Intuit’s GoPayment.
- Just like UPS mastered and offered logistics for merchants and Amazon offers logistics to sellers on Amazon, more coupon companies will offer a turnkey process to connect businesses with customers.
Consumer Flexibility in Customizing Deals
- Today the coupon is valid for a specific time after which the monetary value of the coupon is redeemable .
- Offering different redeeming models may make this a better experience for both merchants and customers.
- Think of an offering where the customer can buy a coupon redeemable when the merchant sends a text or tweet when the business is less busy.
- Innovation in the way referrak.
More Options in the Revenue Models with Merchants
- There are some differences how merchants are paid their share of the offer. There is an opportunity here to think of innovative methods.
- Imagine a small business gets funding from a coupon company with a agrement to run coupon marketing campaigns exclusively with the provider.
Looking at negative posts, it may seem that group-buying does not satisfy merchants but that is not true. In a Forsee study commissioned by Groupon:
“Groupon’s overall merchant satisfaction was a very strong 79. The average satisfaction score for a B2B company in ForeSee’s benchmark is 64.”
The Living Social website quotes stats that 91% of deal redeemers give repeat business and 29% of deal redeemers are new customers.
As a business owner when you make a decision about your marketing in 2013 definitely consider adding the group-buying to your marketing mix with careful consideration on avoiding the pitfalls I have mentioned above.
Next I will be taking a look at case studies. So if you are a merchant who has used group-buying, please contact me with your experience in the comments below.
What are your thoughts on this industry trends for 2013?
British Landscape Photo via Shutterstock
Ryan
Any business needs to ensure that they are using some type of mobile marketing whether it is sms, or a flat out coupon. People are moving more to their phones, and you want to be sure that you are able to market yourselves to where your customers are.
Hi Ryan,
People are spending a lot if time with their mobile device and makes sense that small business should market themselves on mobile devices with mobile friendly websites, SMS marketing as you suggest.
Shashi
Nice job, Shashi.
I always enjoy reading your posts, here.
So, is Groupon going to go away in 2013?
I can tell you this-the merchants I’ve talked to: 50-50. Some love it, and some think that this type of promotion is one big pain.
The Franchise King®
Thanks Joel,
Coupon companies will continuously evolve and play a role for new business and for business that have excess capacity. Existing business can take a look and strategically use this type of marketing to get new customers. As you said there are some hiccups and some businesses have not had an easy time. THis has to be thoroughly thought through for the reasons I have mentioned in my article.
Shashi
I feel merchants use Groupon to not only attract new customers, but to also understand their current customers more. We are trying to tackle the second value proposition.
Hi Kixie,
Great, let me know if you have any success case studies to share.
Shashi
Ti Roberts
These are a list of some interesting trend. I wonder if Groupon is going to stay around in 2013.
Hi Ti,
Thanks for your comment. My personal opinion that Companies should not be judged by their stock performance alone. I think coupon marketing companies are evolving and maybe my trend forecast will come true. 😉
Shashi
John Joyce
Hi Shashi,
I have heard from merchants who say these types of deals don’t generate large amounts of [full price] repeat business. The living social numbers actually show that 71% of deal redeemers are existing customers. So, you’re losing revenue from 7 existing customers so you can acquire 3 new discount customers, and, they all might just wait until the next deal comes along before they buy again.
Sell on value and not on price.
– John
While some of these coupon aggregate companies offer a useful and valuable service to small businesses, I often advise businesses to take control of their own loyalty and/or coupon program and not be forced into the terms of Groupon and other discount aggregators. I also advise not simply going back to the old days of printing coupons and advertising in the news paper, or even just doing email (and print out) campaigns.
Where I see couponing, and loyalty moving is to the mobile phone and specifically getting into the native wallet on that mobile phone. I particularly recommend looking at the benefits of Passbook (of course I am biased as I founded PassKit – but have done extensive research and the results thus far suggest this is the way to go and will be for the next few years at least). Businesses of any size can access Passbook, and other mobile wallets, and easily get their brand into the one device that people carry with them always.
What many of our clients, and they are businesses all over the world and from small retailers to large enterprises, have done is start with a discount coupon to attract customers into their store and then once redeemed, ‘convert’ this a digital loyalty card (and so keep their brand/company in the wallet). All very easy to implement and incredibly effective at attracting and keeping more customers. The problem with the Groupon, or other coupon models is you give a discount to hopefully attract more customers, Groupon then own the customers and the people who came to your shop don’t necessarily become any more loyal to you. You have no easy way of engaging with them to help them make a repeat visit/purchase.
Hope this helps you and happy to expand more with case studies if useful.
Scot Runyan
First of all in marketing and advertising there seems to be no absolutes. In other words each business is different so we really shouldn’t get carried away with the thought of absolutely never use this or always use that.
With that being said there are some timeless themes that run through both business and marketing. When you break it down the only real form of advertising that will work on a consistent basis is “Word of Mouth”. In today’s world of internet and mobile phones, word of mouth is on steroids. What happens in Vegas stays on YouTube forever.
I have found that the average business owner who uses these coupon deals is looking for a quick solution that they think can be solved with a “One Trick Pony.” When in reality they have lost sight of what really made them successful in the early days. They have lost sight of their “Unique Selling Proposition”, that is, what makes them different from their competition? The best ROI a business owner will ever receive is when they figure out a way to reward their existing loyal customers they already have for bringing in new customers.
I know I would much rather pay a referral fee to an existing customer for bringing me a new customer than paying a slick salesman to send me hundreds of customers who are only there because I have lowered the price on my product to below a “Loss Leader Price.”
Think back to when you developed your business plan and factored in the parts and labor to produce your product or service and determined exactly what you would have to sell it for to make the profit you wanted. Discounting destroys the integrity of your business model. It creates a psychological barrier in all of your customers minds that says to the new ones– I’ll be back the next time they lower the prices—and to your loyal existing customers they think wow, if they can sell this for so little why am I always paying so much. So get back to the basics. Go over your business plan again and make sure that your prices reflect value and leave profit in your pocket. Work on your unique selling proposition and make sure you are developing new customers because they understand your uniqueness and they appreciate the value you deliver —rather than an unsustainable cheap thrill.
Always put systems in place that reward your raving loyal customers, not the latest one trick pony sales gimmick. Marketing solutions are never found alone, they are usually a mix of many small unique solutions integrated into a cohesive plan to match the personality of the business and the owner.
Nick Dean
Great article. Although coupon marketing took a little bit of dive when there was all that negative PR about Groupon and how is not effective for small businesses, 2014 started with a lot more companies focusing on coupon marketing.