As a consumer, I’ve been experimenting Groupon for a few months. It certainly has some advantages; however, my concerns mainly go to the businesses: do they really make money promoting their business with Groupon? Is Groupon good to increase their visibility? Is it good for the long term/positive branding? 

Groupon was launched in Nov 2008 and their first market was Chicago. Today, it’s now one of the most innovative billion dollar company. Since I started using them once in a while, I discovered new restaurants and places in my city.  Have these restaurants/places gained a new customer? The answer is probably not.

The Conqueror
I found some positive arguments why a small business should opt for Groupon as part of their marketing strategy:

• Increasing your visibility and the ability to reach your potential market more efficiently.
• Having new customers/future clients who don’t typically visit your store.
• You can actually measure the result (ROI).
• Groupon gives a great word of mouth (people actually talk about their Groupon or give them as a gift)
• For potential customers, it’s a perfect excuse to try something new.
• Statistics say that 20% of buyers don’t show up, which means they paid for not having your product. 

The Killer

• A common characteristic of Groupon users/clients is: they have a tendency to book/cancel/re-book/re-cancel! Does your business have the energy to handle the trouble?
• It can be difficult to manage the quantity sold. It can increase your short-term costs: hire more staff during this promotional period, more training, etc. Moreover, waitresses aren’t generally happy with it because they often get gratuities based on the discounted amount rather than the full price.
• Groupon attracts cheap customers, the ones who will never pay the full price for your services, which potentially means non-repeat business.
• Generally, a business must have a promotion that gives 50% off the regular price; Groupon usually asks for 50% of the actual deal for their fees. The costs can be high.
• It can be harmful for a business’ image.  Being seen as a discount business, clients might not be ready to pay the regular price anymore.  
• The collective coupon model doesn’t work for every business: it seems that the higher your margins are, the better your chances are of gaining something. The contrary is also true: the smaller your margins are, the more you will lose.
• People who are interested in saving money might not be the right target.
• Even though the business gets a lot of information about the people who purchased their Groupon (I would assume), the Groupon community is not necessarily a random sample of the general public.
• Some Groupon buyers are already repeat customers of your business; you will leave money on their table and on Groupon’s table but get nothing in return.  On top of that your product/service will inevitably lose value in their eyes.
• Think about the long term versus short term ROI.

Is there a Champion?