With a 115 million subscribers and over 135,000 participating merchants, Groupon has become "as synonymous with the daily deal craze as Google is with search engines." But is it right for every retailer?
One of the many things I love about Social Media is the fact that it allows me to meet people I would otherwise never meet. One of those folks is Michael Koploy. An ERP Analyst for a company called Software Advice, Michael recently wrote a very in-depth blog post on Groupon, explaining in detail why Groupon may not be the best fit for some retailers and pointing out some pitfalls to avoid as well. In fact the line above in quotes is culled directly from his post, which I highly recommend reading.
Some key takeaways from the post...
- Groupon isn't for everyone. Retailers need to think strategically when deciding to take the daily deals plunge. If you're struggling, participating in a Groupon deal most likely isn't going to save your business. Groupon, like any other marketing venture, needs to be part of a planned initiative.
- While you theoretically use Groupon to offer your products at a significant discount to attract new customers and hopefully repeat customers, many customers will not be repeat loyal customers, but in turn become loyal to Groupon itself.
- There are many pitfalls including being fully aware of Groupon's reimbursement policy; they pay out in three increments - at the close of the deal, 30 days later and then finally 60 days later.
Like I said earlier, I definitely suggest reading Michael's article. In fact after I read it, I decided to reach out to him to learn more as I am fascinated by the whole "daily deal" phenomenon and in particular Groupon.
SO: Are there any current, viable competitors to Groupon?
MK: There are. Living Social is one of the main competitors to Groupon, and works on a very similar model. Facebook is beginning to offer its own social discounting service, Deals. Even Google is getting into the fray, with Google Offers piloting in Portland, New York and San Francisco. Everyone is trying to jump on the bandwagon, and yet Groupon is still the biggest name in a segment that almost encourages copycats. They should be commended for that.
SO: Can you provide some specific examples of retailers who should not use Groupon? Or does it really go on a case-by-case basis?
MK: It really is a case-by-case basis. Every retailer should take a look at their inventory, financials, and previous marketing efforts before jumping into any of these social promotions. That being said, there are certain types of promotions for retailers that they should stray away from. For example, a business that provides a service with very low profit margins most likely wouldn't benefit from running a Groupon promotion, because these deals lead to the retailer selling these products at around a 75% discount rate.
One of the biggest mistakes retailers make is they often don't provide any incentive beyond the Groupon deal to encourage customers to come back. Studies have shown that just running a promotion through social deal sites does not result in repeat customers. And many of the people who are buying the promotion aren't spending money with the retailer beyond the purchased deal. To offset this, retailers should provide additional incentives for customers to return to the store, in the form of later promotions and discounts, for example.
SO: Does a retailer run the risk of NOT offering Groupon deals to its patrons?
MK: I don't feel that consumers will feel slighted if their favorite hotspot doesn't participate in an social deal promotion. Likewise, if consumers are wanting to check out a new venue, they will. They probably aren't waiting for a Groupon to try it. Others may parse through Groupon, LivingSocial, and other deal sites to look for a discount opportunity - not to check and see if a particular local retailer has decided to offer a deal.
SO: And if so, what can a retailer do to offset any negative feedback?
MK: Retailers can use these sites to reach out to new customers. But, they can also take the initiative themselves to build a new customer base. Creating a Facebook Fan page or Twitter account are two free, organic ways to reach out to the local community and attract new patrons, as well as develop a network that pays dividends both now and in the future.
SO: What does the future hold for Groupon in your opinion?
MK: Groupon is not the first to offer deep discount couponing, and it won't be the last. But it really has taken the world by storm, and made couponing "cool" again. The question for Groupon remains - how responsible are they to the retailers that participate in the deals, and the consumers the purchase them? As Groupon continues to grow and more and more retailers opt-in, look for Groupon to reduce the percentage it takes from every promotion, as viable copycats spring up and try to undersell the original.
What your thoughts on the whole "daily deal" platform?
Are you a retailer who has used Groupon or one of the other daily deal providers? If so, what was your experience like?
Or perhaps you're a retailer who's considered using Groupon or one of the other providers but were unsure of how to proceed...
Are you a retail marketer who has recommended Groupon or one of the other daily deal providers to your clients?