Can Groupon create loyal, profitable customers?

sylvana

There is no doubt that Groupon is growing in popularity especially among SMEs these days. I’m wondering though is it a viable tool to create loyalty? Or are the majority of customers coming through Groupon just looking for a bargain, and do not repurchase after the deal has been redeemed? Has anyone measured ROI of campaign run on city/social/board deals and would like to share their experience?

The only stats I could find are from the Wall Street Journal, which claims that only 22% of Groupon customers return to a business after redeeming discounted coupons.

TheInquisitor

Its dissappointing that there wasn't a figure showing how many were already customers. Probably 21% lol

enviro

Groupon should be considered a marketing tool, the aim of offering the deal is so that the business can attract new customers or just increase existing business. The decision of the customer to return again is down to the experience they have. Price will be a factor but if the customer feels the service/product is worth it, they will return and pay the full price. That is the challenge for any business using Groupon.

Advantages of using Groupon

* New people in the door
* Opportunity to develop repeat business
* Save money on traditional advertising activities (eg: Printing and distribution)
* Target the consumers who are likely to purchase instead of mass distribution

Disadvantages of using Groupon

* Reduced profit margin
* Risk of being overwhelmed by increased business
* Devaluation of the brand (because of lower prices)

The key for any business is to be careful how often Groupon is used and how much the price is reduced by. Using in moderation would be a wise move.

sylvana

enviro wrote: »

Groupon should be considered a marketing tool, the aim of offering the deal is so that the business can attract new customers or just increase existing business. The decision of the customer to return again is down to the experience they have. Price will be a factor but if the customer feels the service/product is worth it, they will return and pay the full price. That is the challenge for any business using Groupon.

Advantages of using Groupon

* New people in the door
* Opportunity to develop repeat business
* Save money on traditional advertising activities (eg: Printing and distribution)
* Target the consumers who are likely to purchase instead of mass distribution

Disadvantages of using Groupon

* Reduced profit margin
* Risk of being overwhelmed by increased business
* Devaluation of the brand (because of lower prices)

The key for any business is to be careful how often Groupon is used and how much the price is reduced by. Using in moderation would be a wise move.

Totally agree. Businesses using Groupon should be prepared for the high volumes and have plan in place in order to provide high quality service to all customers. Poor quality definitely won’t attract customers to return.

Still… would love to hear some numbers.. just as a general guidance..

Another good point I suppose is to ‘use it in moderation’. I’ve seen a dance studio that run 2 Groupon campaigns within last 2 months. Second campaign was targeting new customers as it excluded existing customers, however, as classes from first promotion are only in the middle, surely they didn’t manage to measure campaign success, loyalty especially.

iMax

I'm in the process of setting up a groupon clone (see sig). I'm going after a different market - families, (if there's anyone in that sctor that wants to find out more, PM me). I'm about four weeks from launch right now with some really good deals already to go.

However, I've about five months of research behind me on it & there's certain sectors it does not suit. A lot of people/businesses (mainly in the US) are angry at the effect Groupon has had on their business. Most are unprepared for the level of business coming their way or don't realise how much it would cost them.

Also, Groupon now sits on the total take until after your coupons close - they used to pay you 50% of what was due the following day, & the rest on redemption. Now you have to wait & while you know there's a big cash injection coming, it might come just too late for some businesses.

I spoke with one supplier who ran a city deal promo a couple of months ago & he sold out at 1,100 coupons at €8.99 each (€9,889). Of this, Groupon were giving him half the money collected (after their commission), so he came away with €4,944. The normal retail price was €18.99, so the promotion cost him €15,945. Out of his redeemed coupons, approx (according to him) 72% were existing customers & he was quite angry at this, until he realised he'd gained 28% (308) new customers from it. However he was unprepared & didn't capture any info about the customers coming in.

Of this 28% he would expect about half to come back more than once. So it cost him around €100 for each new customer. He did see this as a good spend as if he were to take out a newspaper ad, it would be hard for him to measure the return & the cost per customer might have been higher.

I'm going to be coaching my suppliers on how to maximise the return on their promotion & assisting them as it goes on.

A deal with a site like Groupon (or mine), shouldn't be looked on as something that is going to make money (although it should & if done properly, will), but more like marketing & the cost of running it, should come out of your marketing budget.

RedXIV

Just as a short personal story, I purchased the boards deal pearl car wash valet and have used them again since, mainly due to the phenomenal job they did. But I've purchased maybe 20 of those deals and thats the only one I've used again..

Probably utterly useless info but just incase it helps

Goldfish2010

I have used groupon and other versions of this service to promote my business and find it to be a complete nightmare. It attracts a certain kind of customer who was never in the market for your service and is just buying it because the offer is cheap. They don't generally become loyal customers and try and get more than what the offer is for. I would never use it again and think busninesses using it are desperate - do people realise for an offer reduced from 150 to 70 euro, the business promoted only gets around 50 euro and a whole lot of moany customers. Not worth it. If people can't afford my service, I don't want them as customers.

sylvana

Thanks very much for sharing your experiences!

• iMax-that’s a very interesting insight! Thanks!
• RedXIV-proves enviro’s point-quality is a paramount
• Goldfish2010-that’s what I would be afraid attracting deal hunters

Would you say that even higher level of targeting would be more beneficial in creating long lasting relationships? If for example clients could opt in for receiving offers only from specific areas in their cities (zones as it’s possible with direct mailings) ie. from restaurants, beauticians etc., then given that their experience was good wouldn’t they be more willing to come back after promotion is over? What are your thoughts on that?