I’ve been reading a lot of negative articles on Groupon, and I want to offer a different perspective. I’m not trying to play devil’s advocate, and I am not affiliated with Groupon in any way.
Many merchants have a negative experience with Groupon. It usually goes something like this: Groupon sends a lot of people their way and they are unprepared for it. Groupon customers are cheap rarely pay more than the deal value. Groupon customers aren’t repeat customers.
From what I understand Groupon does give you an idea of when to expect the flood gates. I mean, the merchant has to say yes to the deal and then the Groupon must be sent out and people must buy. To me, getting on Groupon is something like getting on Oprah, or to some people TechCrunch, Mashable, Digg, or Slashdot. If your website isn’t prepared for it, massive traffic sent from Slashdot can take down a website – called slashdotted. The difference is unlike a website that can get featured any second without any notice to the website owner, the Groupon merchant does have a heads up. Just like it’s not TechCrunch’s responsibility to make sure your website can handle the load, it’s not Groupon’s job either. Theirs is to feature the merchant and drive eyeballs and foot traffic.
The second common complaint I hear is that Groupon customers are cheap. As an occasional Groupon user myself, I always make it a point to tip on the full value. I’ve worked in the food service business and realize how little these people make. To friends who don’t know how Groupons work, I always try to explain to them the Groupon business model and how basically the merchant’s taking a huge hit to give them this great deal. However I am sure that there are Groupon clippers out there who are bargain hunters. I think it’s the merchants’ job here to upsell as much as possible to offset that. One example business that does a good job of doing just that was featured on Hacker News.
Lastly, the other common problem I hear is that Groupon users aren’t really repeat visitors. Related to that I also hear that sometimes people with Groupons are offered a different menu or a different level of service (usually lower). I am not sure how this would encourage anyone, Groupon or not, to want to come back. If I am offered a lower quality menu or lower quality service than the customer next to me, coupon or not, I am not coming back. The merchant must understand that it’s their responsibility to offer an amazing experience to create a customer out of that visitor. The Groupon user – I would not consider a customer – just a lead. In web terms, that’s basically a high bounce rate. They come and they leave. To me, as a web guy, it’s not too dissimilar from buying web traffic. I can buy a lot of Google adwords or Facebook ads and generate a lot of traffic to my site, but if my product sucks, nobody’s going buy or come back. It’s solely up to me to create a compelling product that users want to buy or create a website that users want to come back to. Getting all the foot traffic from daily deals can work for these merchants, if they are prepared to engage these customers and make an effort to get them added to their mailing lists to get them back in the door.
When we hear stories of merchants who have lost their shirt doing a Groupon, I always think that part of the onus is on Groupon’s salespeople (who are driven by their commissions to sell the biggest deal they can get manage), and the other part is on the merchant, to understand the math and economics of their own business. Groupon also doesn’t provide adequate tools to provide real transparency to their merchants, which is why companies like mobmanager.com are picking up where Groupon has left off, providing fraud prevention and ROI analytics for merchants.
The way I view Groupon is very much like buying web traffic in many ways. You have to be able to handle the load, you have to do a good job of selling and upselling so you can justify your ad spend, and you have to have a good product so people come back. Just as it’s easy to buy ads on the internet and write them off if they didn’t result in any sales, it’s easy to get burned by Groupon. In both cases, people didn’t know what they were getting into.
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