Beware of Groupon

Groupon and Living Social (and others) have become all the rage. And not just for consumers, but for businesses looking for quick cash and exposure. I think these coupon sites offer an interesting marketing approach, but small businesses should beware.

First, check into the payment structure. My understanding is that usually the coupon site will require that you offer at least a 50% discount on a product or service and then take half of the proceeds from all coupons sold. And the pay out to your business may be spread out over time.

I have also heard from a few local businesses that the coupon site people can get a little pushy and insist on changing the deal to be offered last minute, sometimes insisting on changes that may require more for less from the business. This type of advertising is really a "loss leader" in that a business understands it is likely to lose simply on the coupon, but hopes to win with a consumer using the coupon and making additional purchases. However, if the deal is for one-time product or service it may severely limit a small business's cash flow to be giving away hundreds (or thousands) or a product or service for what really is 25% of the normal price.

Below is a link to a series of blog posts that explore this online coupon phenomenon is much more detail. They touch on my points above and give some food for thought about whether the online coupon industry itself is really sustainable.

http://techcrunch.comjavascript:void(0)/2011/06/13/why-groupon-is-poised-for-collapse/

Also, please offer up any local marketing tips you are willing to share in the comments below.

-Kirk

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