As a typical consumer, chances are you’ve purchased a Groupon
in the last 12 months.
Last year, over 44 million unique customers purchased at least one Groupon.
That’s 1 in 7 people in the US. If I have my math right, that equates to a
whopping 14% of the population.
There are definite pros and cons, but ultimately, you’ll
need to decide what’s right for your business.
Let’s take a look at every aspect you should consider when choosing to
advertise on Groupon.
What is Groupon?
Groupon is short for group coupon. It’s a daily deal
website where customers purchase discounted gift
certificates, mostly for local businesses.
Groupon was created in 2008. Since then, it’s
grown exponentially, to the point where it even
turned down a $6 billion dollar buyout offer
from Google in 2010.
It liaisons between local businesses and subscribers. Everyday, Groupon sends
out an email to each of its 250 million subscribers. The email showcases a
special, location-specific deal, or Groupon, that’s only available for a limited
time. Because the deals are usually local, Groupon targets their emails to
subscribers from that particular location.
Groupon works as a middleman.
In most cases, quantities are limited and, often, the amount of Groupons each
customer can purchase for a particular deal is restricted.
A customer can purchase a Groupon for themselves,
as a gift for someone else, or both.
Groupon acts as a gift certificate that you either print off or save on your
smartphone (you’ll need the Groupon App). To redeem, you provide your
printed gift certificate or show the barcode on your smartphone.
Unlike with traditional coupons, with Groupon, you
must pay upfront.
Most Groupons are
50% off the retail
price. Discounts can
vary, even up to
Most Groupons also feature fine print
that defines what’s included and
excluded in the deal.
Groupon relies heavily on social promotion.
It offers a robust system of referrals, where Groupon customers get
monetary credit for each of their invited friends. The credit can then be
used to make future purchases on Groupon.
Customers are very likely to share Groupons
Each deal features social media icons where users can email, share,
tweet, or pin directly from the page. It’s also convenient to forward the
email to friends who may be interested in the Groupon.
Each deal shows how many people
have purchased a particular Groupon.
This is a powerful motivator to get
customers to buy.
Another important feature of
Groupon is the social proof
aspect of the deal page.
What type of businesses do
best with Groupon?
According to statistics, the most popular type of business on Groupon is
food-related. Restaurants fare best on Groupon. A distant runner up is
groceries, followed by entertainment and clothing and accessories. Least
popular, possibly due to cost, is vacation or travel.
Does Groupon bring
There’s been a lot of debate around this subject-- can Groupon really
lead to repeat business? Groupon reports that over 90% of customers
plan to return to business for which they purchased a Groupon.
Unfortunately, some businesses treat Grouponers as second class
customers because of their discount. This translates to negative customer
experience, negative reviews, and a plethora of one-time customers.
Treat Groupon customers with the same level of
respect as you would any customer.
At least 48% would do it again,
and 32% were unsure. These
numbers indicate a rate of
success. In fact, 66% of
responding businesses showed
a profit from the promotion.
It’s important to note that only
19% of businesses would not
use Groupon in the future.
What are the costs involved?
Groupon requires no upfront payment. Instead, Groupon takes a fee
from your revenue. At the time of this writing, that fee is 50% of your
Here’s how it works out:
Your service is worth $100. You slash the price by 50% to satisfy
Groupon’s discerningly frugal audience. You stand to earn $50, but
Groupon takes 50% of that, leaving you with $25.
Yes, it’s a harsh pill that you only make 25%
of your normal retail price, but Groupon should be looked at as a
marketing strategy, particularly a loss leader. Loss leaders get the
customers in the door. Your challenge is upselling the customer in
the short term and developing a relationship in the long term.
When do you actually get paid?
Groupon typically pays businesses in
thirds. The first 33% is paid within
7-10 business days, the second 33%
is after the first month, and the
remaining 34% is after the second
You receive payments by check or
Think Groupon as an
avenue to attract
When you consider the huge email
subscriber base of Groupon in combination
with the estimated 15 million monthly site
visitors, Groupon can be a worthwhile marketing
strategy. Groupon allows your business to take
the spotlight and leverage its huge
subscribership for mass marketing.
Another opportunity to leverage Groupon is by
increasing your profit margin.
For Example, if you normally sell a dozen cupcakes for
$7.50, but they are worth $15, list your Groupon retail
for $15, and sell for $7.50. You make $3.75, but that’s
much better than making $1.88.
Alternatively, you can offer a gift certificate at a
50% discounted rate to increase revenue.
This works best for fixed cost businesses. For example, if you operate a
gym, the costs of operation do not fluctuate based on the amount of
customers. So, offering a $50 gift certificate with the value of $100 will
bring more customers into your gym, and increase revenue.
It’s important to note that Groupon isn’t a one-size-fits-all model. Your business
may benefit more from using Groupon as an advertising medium. Another
business can use Groupon to unload extra inventory. Here’s some ways to best
What are the best strategies
for using Groupon?
This is the most popular way to use Groupon. Businesses hope to gain
new customers from advertising with Groupon. It’s commonly known that
once you can get a customer to say yes to your product, you can persuade
them to buy more.
1. To gain exposure
If you have more product than you can sell, there’s
no need to panic. That’s what Groupon’s for.
It’s better to get some revenue than
no revenue. Slash those prices and
get inventory moving.
2. To sell extra inventory.
Whether your business is on Yelp, Google+ Local, Urban Spoon,
TripAdvisor, or somewhere else, it’s dead in the water without social
proof. You need someone to write about you, hopefully in a positive
way. Selling a Groupon gives you possibilities to get noticed and
3. To get reviewed
Sometimes it’s a numbers game. If you’re new, it’s
not necessarily about getting the most value, it’s
about getting customers in the door.
Once inside, you’ll be able
to win them over.
4. To get customers
There are no good metrics available to decipher which deals are morely
to go unredeemed, but if it happens to your business. You stand to gain
considerably. According to a study performed by Rice University,
businesses stand to add approximately 30% to the profits earned during
the Groupon promotion.
5. To capitalize on unredeemed Groupons
The best way to figure out what’s popular on Groupon is to take your time
and look through what’s selling now. Current deals are a good barometers
to tell you what average Grouponers in your area are looking for.
How do you come up
with a good deal?
A good strategy for coming up with your own
Groupon is to consider your second most popular
product. If you already sell your primary
product, there’s no need to slash
those prices--it will only drive down its
perceived value with your current
customers or, worse yet, they’ll just
buy your Groupon for it, instead.
What makes a great deal? A greal deal
offers value to the customer at a price they
Once your deal is live and customers purchase the Groupon, it is usually
available for immediate redemption. Some companies get a huge surge of
traffic from a Groupon. This is great, if you can handle it.
What type of traffic
can you expect?
Alternately, you can set up restrictions, such as
appointment times, that prevent a deluge of customers
arriving all on one Saturday.
Another thing to consider is timing. If your product is
seasonal, timing is everything.
If you’re offering a Groupon to go ziplining in the middle of Winter, you’re not
going to get as much traffic as you would if you’re advertising in Summer.
You may have a decent amount of purchase, but they won’t redeem until
later in the year, if at all.
Do you get the information of the people who buy
Groupon provides you with the email addresses of the customers who
purchase your deal. You should definitely use this information legally and
ethically, as outlined in the Groupon privacy statement. Although you cannot
automatically add these email addresses to a subscriber list for your own
newsletter, you can most definitely ask.
Additionally, Groupon will
details about your
customers via the
Merchant Center or their
new Gnome tablet.
What are the logistics
of signing up?
Now that you’re ready to sign up for Groupon, here are the easy
steps you need to take:
1. Go to the Groupon Works sign up page.
2. Fill in all of the necessary information and submit.
3. Wait for Groupon to review your information and contact you.
4. Work with a Groupon specialist or use their Deal Builder
template to create your own Groupon.
5. Sit back and wait for the redemptions to start rolling in.
Is Groupon the best daily deals site?
If you’ve heard of Groupon, chances are you’re aware of Livingsocial.
Livingsocial is Groupon’s biggest competitor, but most customers usually
shop both. It may be beneficial to alternate between both and find out
which one brings you the most loyal and compatible customers.
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