Groupon is a commission-based middleman worldwide e-commerce marketplace that links subscribers with local businesses. The name is a combination of “group” and “coupon”. They offer discounts for restaurants, retail stores, theaters, parks, and much more. Consumers love discounts and saving money and Groupon offers this style of discount daily.
How does Groupon work for the consumer?
Groupon is a free service to join for consumers. Every day, Groupon sends an email to their subscribers announcing deals-of-the-day in their area. If a consumer decides they want one of the deals, they purchase the coupon electronically (directly from the Groupon website). The consumer then redeems the coupon at the restaurant or store who placed the Groupon ad in the first place.
How does Groupon work for the seller?
For the seller, Groupon agrees to acquire a certain number of sales on a per day basis. If Groupon does not meet that requirement, the seller does not have to pay any commission to Groupon. If Groupon exceeds that number, they will receive a commission from the sales (typically 50% commission). In addition, Groupon makes most of their money from charging a marketing fee that advertises and promotes offers. Usually, that fee is a percentage of the income generated by selling on Groupon.
Pros:
- It attracts a lot of customers. You can entice customers to come to your establishment by offering a coupon, which many people enjoy.
- It advertises your business. Groupon’s emails will spread awareness of your business, increasing the likelihood of bringing in new patrons. Additionally, it might encourage current patrons to try new food or drink items. Do people visit your establishment to drink, but they aren’t aware of your killer burgers? This is a great opportunity for them to check it out for a discount.
- It helps build customer relationships. If you have a deal that spaces out the savings over multiple visits, you’ll encourage customers to keep coming back to your business to receive the next discount.
Cons:
- Deals may not produce repeat customers. You could possibly never see your new Groupon customer again after they use their coupon. They may not want to purchase from your business again without a coupon or discount.
- Might attract bargain shoppers. These are people searching for nothing more than a way to save some money. They may not have the motive to purchase anything in addition to the worth of the coupon.
- Might not be able to keep up with the increase in traffic. With the sharp rise in traffic due to the Groupon discount, many businesses do not have the staff to uphold the high foot traffic to ensure quality service.
If used correctly, running a promotion using Groupon is an impressive win-win for the consumer, business, and Groupon. We want to hear from you! Have you ever used Groupon to promote your establishment?