Pros and cons of putting your business on Groupon

1:50:00 AM BB 0 Comments

A lot of people know Groupon as the site where you get cheap massage, laser hair removal, and carpet cleaning deals. But there's so much more than that.

What most customers don't know is that Groupon takes a pretty sizeable chunk of the sale price, sometimes it's split 50-50. What that means is that when you buy a 1 hour $49 massage, the service provider only $24.50. That's honestly not a lot of money when you factor in labour costs, advertising, rental space, insurance, office supplies, gas, and other overheads. This means that your massage therapist offered that massage at a loss.

Word on the street is that Groupon customers don't become long-term clients because they're discount seekers not wanting to pay full price for services.

Why?
You're probably wondering anyone would take such a terrible deal. Groupon offers a lot of publicity and exposure for new businesses. What I described above really is a worst case scenario. Often times, Groupon negotiates with service providers better than a 50-50 deal. But there's lot of stories and case studies out there about businesses offering deals on Groupon at a huge loss.

Luckily, in a tiny city like Victoria, I think business owners have a bit of an advantage with Groupon because depending on your service, there probably won't be a lot of competition. This means that you're probably able to negotiate a favorable deal.

This was my experience. I was able to run deals averaging around 70-30, which was pretty excellent. This is because Groupon really wanted my business on there because I was the only person offering this service.  Going into negotiations with Groupon, I read all the horror and success stories out there of businesses similar to mine. So I knew what I was walking into. Or so I thought.

The Experience
I offered 3 deals with a price range of $65 - $109. The deals were quite popular and my phone and email was quite busy. Surprisingly, I found Groupon customers in my niche business to be quite rude. People book my business services weeks to a month in advance, but Groupon customers wanted an appointment right away. When I'd tell them that they can expect to get an appointment in 2 weeks, they'd be very frustrated. Two women actually yelled at me on the phone. Another one left my staff outside in the rain for 15ish minutes because they were late and didn't communicate. This behavior was quite shocking and very different from my regular clientele.

The 2 Groupon reps I worked with over the 4 months were quite disorganized. There was not a lot of communication between them and I got different information from both of them all the time. Very frustrating. For example, I asked rep A to pause 1/3 deals because I was getting inundated with phone calls. Rep A said ok. The next day, I notice that I got a few more bookings which was confusing. So I inquire, and rep B responds saying she noticed it was paused and she unpaused it because rep A hadn't told her that I requested to have it paused. Wtf.

I paused the deal 3-4 months in  because the experience became too stressful and not worth it. 2/3 deals were profitable, and led to long term clients.

Lessons Learnt 
a) Follow up: Some of the reasons why I was able to convert these into long term clients is because I followed up, solicited feedback about the service, added them to my mailing list, and offered them the opportunity to book their next appointment with me directly at the same Groupon rate. Pretty great deal, who'd say no to that? The rude clients, I completely ignored cos I'm savage like that

b) Upsell: Another reason why I was able to have 2/3 profitable deals is because my service provided many upsell opportunities. This means that customers would buy a base service on Groupon, but could purchase extra services from my company directly. An example is buying a $30 facial on Groupon and the aesthetician offers you a 15min facial massage for $10. You might say yes. 

 c) Know your audience: One of the main reasons why deal 1 was unsuccessful is because it targeted an audience that typically wouldn't use my service, but only used it for the discount. It's important to know your audience and only offer you service to them. For example, if I were offering a carpet cleaning service on Groupon, I wouldn't have a 1 or 2 room option. I'd probably start a 3 or 4 rooms, because these are people who live in larger houses who can afford carpet cleaning, probably have kids who are messy, and will probably use your service long term. 

 After Groupon
Once my Groupon deal ended, it's important to implement a). Follow up with customers to remind them of your service. 

I ended the deal earlier than expected because it wasn't worth the hassle anymore. I've since been contacted by Groupon to chat about what went wrong with hopes of continuing the deal, but I doubt I will. Nonetheless, it was an interesting learning experience that I'm grateful for. 

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