This week I had a client of The Joy of Marketing ask me if I recommend using Groupon to get new clients. For those of you who don’t know what Groupon is, it’s a way to get deep discounts from your favorite retailers by purchasing a coupon with a group of other people. For example, I was able to score a massage at 50% off from the Four Seasons by taking advantage of a Groupon discount. Good for me, right?
A few weeks ago I read an article about the Groupon phenomenon. Lots of small business
owners who publicize an offer through actually LOSE money!
Here’s why. Not only are you discounting your products or services, but Groupon takes a 50% cut of any sales. So if you offer your products at a 50% discount like The Four Seasons, you are really only earning 25% of what you typically charge for this service. At best, you may break even when you offer a Groupon deal if your costs are in line with the prices you charge.
being said, if your business is slow right now, should you try using Groupon to stir up traffic? If you’re following a boutique business model – here are 3 reasons why you should NOT use Groupon.
1) When you offer a huge discount on your products just to get traffic in the door, you devalue your brand. Now you’re seen as a ‘cheap’ place who offers big sales and will struggle to be perceived as high end again.
2) The client who only wants to pay for what you have to offer at a discount will almost never pay full price. So while you may think you’re attracting new clients, you’re attracting the WRONG kind of new clients.
3) If you’re not careful, you’ll drive too much unprofitable business to you, and your costs will outweigh what you’re charging. When this happens, you’re actually paying to do business with these clients instead of them paying you!
While Groupon can work for certain kinds of small businesses, if you’re following the boutique business model, steer clear.
To learn more about the boutique business model, check out our free e-book, The Boutique Experience. We share the 5 essential ingredients to growing a boutique business and more.
24 Comments on Using Groupon to Drive Traffic to Your Small Business