To Groupon or Not to Groupon

Promoting your business online is a must in today’s economy. Businesses are shifting marketing dollars from traditional channels, ones that have been around for close to 100 years in some cases, to the digital landscape. Internet marketing offers many avenues for online promotion and one such service has almost (not quite) branded itself into verb status. The daily deal and coupon promotion site, Groupon, has become immensely popular. Businesses of all sorts have been able to promote themselves and their products and services through the online discount giant. The question many are asking though is does this really make sense for my business and my marketing dollars?

Inc.com has a great pros and cons list for using Groupon to reference and here are some quoted highlights:

Pros 
1.    It attracts a lot of consumers. You can reach new customers by appealing to those who are looking for inexpensive deals and a chance to save money. You get to charge lower prices to new customers who aren’t willing to pay more. Existing customers are willing to pay full price for products or services. Dholakia says that Groupon promotions offer the most benefit for businesses in which the promotion does not cannibalize sales to existing customers…

4.    It builds relationships. Use price promotion deals for building customer relationships rather than just creating one-time buys, recommends Dholakia. Meaning, instead of a restaurant owner offering $60 worth of food for $30, parcel it out to offer $20 worth of food for $10 over the customer’s next three visits. Don’t offer discounts on a total bill, rather offer a specialized discount for various products or services…

Cons
1.    Deals attract low-end bargain seekers. Because the Groupon customer base is made up of deal-seekers and bargain shoppers they might not be willing to purchase beyond the value of the coupon. So, there are low rates of spending and low rates of return. One problem with price deals is diminishing returns; thus, merchants need to put a cap on the number of deal coupons that are to be sold, says Dholakia…

5.    There are better deals out there. Daily deals sites are not the only game in town. You can run a similar promotion for less money. There are plenty of marketing programs you can use; does it make sense to use this one, asks Dholakia. For example, you can offer a discount or promotion on a Facebook fan page. It’s an effective way to engage new and existing customers at a very low cost, he adds.