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4 Easy Ways To Lose Money Partnering With Groupon

IStock_000011826621XSmallGroupon has quickly become a lighting rod of debate among many small business owners. On the two sides of the issue about whether the service is good or bad for small business – the disagreement usually comes over the philosophy of deep discounting. Are you killing your profit margin in exchange for a short burst of fickle customers who will never come back to your business unless they get a similar discount? Or are you using a smart discounting method to bring new customers in the door, who you might convert into loyal customers paying at close to full price?

The answer, it turns out, relates as much on how you choose to use Groupon as anything else. A few weeks ago at the Corporate Social Media summit, some presenters from popular website analytics firm WebTrends shared some survey results that raised the possibility that the biggest success factor might be what products or services you choose to discount. This led me to the topic for this post – which spotlights some common strategies that lead to failure on Groupon – and how you might avoid them:

  1. Groupon Money Losing Strategy #1: Discount your core product/service. There are likely products and services from your business which many of your current consumers depend on coming into get. Discounting them simply offers your existing customer the same thng at a lower price … a sure recipe to fail. Instead, find products and services that have a higher margin where you can afford to lose some money initially, but will make it back if a customer gets hooked on that product. 
  2. Groupon Money Losing Strategy #2: Sell a longer term product or service. If yours is the kind of business or service that the average consumer might do only a couple of times a year (such as hair coloring) – that may not be the ideal thing to offer a deep discount on because you will have effectively lost your one chance to interact with that consumer for months.
  3. Groupon Money Losing Strategy #3: Offer a forgettable discount. While the simplest thing to do may be to offer a coupon where a consumer spends $10 to get $20 of spending power with your business … the reality of a promotion like this is that it is completely forgettable.  Instead, if you can tie a promotion to a part of your business – such as offering 3 rounds of Golf for $81 as a course recently did in my area – it can be much more memorable for consumers who choose to take advantage of it.
  4. Groupon Money Losing Strategy #4: Focus offer on the item and not your brand.  When writing up the offer that you will present for consumers, a common mistake is to only focus on describing your offer without doing a good job of selling your brand along with it. This misses a golden opportunity for building brand recognition among local consumers (presumably a major goal of why you would do the Groupon in the first place).  Instead, make sure you try to use a real photo instead of a stock image, include links to positive online reviews, include links in the body of the description of your business and generally do a better job of talking about why your business would be a great one for the consumer to choose not only for this promotion, but in the future as well.

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Rohit is the author of 8 books on trends, the future of business, building a more human brand with storytelling and how to create a more diverse and inclusive world.

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