How to Avoid Getting Burned by Daily Discount Sites

There's a good chance you’ve at least heard of Groupon, even if you haven’t enjoyed the deep discounts of a Groupon deal yourself. But have you used the deal-of the-day, online coupon company to increase sales for your own business?

 

For some businesses, it makes sense to partner up with Groupon, the startup that reportedly turned down a $6 billion-acquisition offer from Google. Not just any business gets to partner with them though. Groupon is a selective company that does its research before joining forces with a company to strategize a discount plan. For many of its partners, Groupon increases traffic, revenue, and new business.

 

But before setting out to partner with Groupon, make sure you’ve determined a few things about what your business can handle.

 

1. Make sure the deal won’t end up financially hurting your business. 

If the limited time discount is too steep for your business to sustain, don’t do it. Remember: Groupon does get a large percentage of each sale from the deal. It’s best to be prepared to break even, or even lose money from the offer. Think of it strictly as a marketing investment to gain new customers.

 

“I’d say 99 percent were new customers which was a big deal for us because we’re a destination fine dining restaurant and not on the beaten path,” says Bonnie Rodriguez of Zohra’s Restaurant. The food spot was asked to participate in the launch of Groupon in the Lakeland, Florida region (a small town with a large coupon loyalty). “It’s a true partnership. They promote your business in the best light and are selective with whom they choose to work with."

 

For Rodriguez it was worth it. Her grassroots marketing wasn’t reaching as many people as Groupon did in just one day. Also of great benefit was the free press from the Groupon write-up about the business and the service.

 

“When they came in to eat, we were able to personally say thank you to all the tables who came through via Groupon,” says Rodriguez.

 

Small businesses typically don’t have the investment capital for major advertising or marketing campaigns, but what they do have is the ability to share revenue on excess inventory to drive quick sales.

 

“A company can post a deal on Groupon and see sales within minutes of the deal going up,” says Tatiana Byron, founder of The Wedding Salon. Byron uses Groupon to promote The Wedding Salon’s luxury bridal events.

 

 

2. Determine whether or not your business is able to handle a large number of new customers. 

Consider hiring some temporary staff in anticipation of the typically huge response Groupon deals bring. The quality and service a business offers shouldn’t suffer in the name of bringing in new business.

 

"Group buying is a very good proposition for vendors and definitely for the users,” says Adam Brown of GrubLife, a company that tweaked Groupon’s concept and applied it to the college market. “Sometimes the sheer volume that Groupon brings in can hurt a business. If they don't prepare by stocking up on merchandise, game planning on how to handle an influx of calls or foot traffic, or if they let their customer service slide, then they could come off badly and the user will have a poor experience.”

 

For Alan Khoriaty of Soluna MD in Coral Gables, Florida, the influx of customers was indeed overwhelming. The phone rang non-stop that first weekend, but it was worth it to bring in all the new business, Khoriaty says. “They were looking for a place in Miami that does spider veins,” says Khoriaty. “We sold about 600. The phones were ringing off the hook the first day, which at first overwhelmed us, but then we realized as far as patient flow it was manageable. People don’t want to redeem the coupon right away so they aren’t rushing in to have appointments all at the same time. And when they’re in there with us we have a new opportunity to up sell them.”

 

3. Have a long-term game plan for how you will get those new customers to return and buy from you the next time at full price. 

Given the the current economy, people spend their discretionary income cautiously; there is great incentive in buying, say, a massage or facial with a 30 percent discount.

 

“We noticed that even in the days after our Groupon deal has expired, people continue to talk,” says Byron.

 

“We witnessed how much coupon marketing in this economy makes people feel good about spending,” says Rodriguez. “Most of the time as a business owner, you don’t want to get involved with the coupon game. But with Groupon it works. We sold 186 Groupons (for a 53 percent discounted meal) and have since seen 50 of our new customers return. We looked at doing this for longevity in new relationships. We’d do this again for sure.”