GroupOn

In recent months, I’ve noticed the term "Groupon" creeping into conversations with increasing regularity. The term comes from groupon.com, a website devoted to offering a new deal each day and built around the tagline of "collective buying power."

The site is targeted to various cities across the country, and each day features a steep discount at a local establishment.

Here's how the site works: Groupon features a daily offer for a deal in your city.

If enough people buy, the deal is on. Through social networking, customers can tell their friends and advertise for you. In a single day, Groupon will attract hundreds - if not thousands - of new customers for you.

When you sign up to promote your business, a Groupon representative helps you design an offer so that you control the deal. GroupOn clients say that the site is 86 percent more effective than print, 94 percent more effective than broadcast, and 90 percent more effective than online advertising.

Groupon's subscriber base: 68 percent are 18-34 years old, and 80% have either a Bachelor's or Graduate degree.

As a small business how can you get the best out of Groupon:

Excess stock – do the maths first, does the discounting solve a problem at an acceptable loss of margin, or maybe discounting frees up costly warehousing space
Excess capacity – similar to above, and given I worked in the travel market, maybe Groupon could sell seats you’d never have sold and some income is better than none and allows an off-season tour to run, for example
Generate awareness – Groupon could be effective way to get awareness with the right market, and get those new consumers to share the buzz, particularly relevant for younger demographics (Most Groupon users are young (68% are aged 18 to 34) and females (77% are female)
Generate footfall – The Gap allegedly did this, generating a staggering $11m, using an offer as a loss leader to get people into stores
Keep the lights switched on – it may that keeping a production line moving in tough economic times is what you need and that a reduced margin is acceptable for a short period

Groupon for Free publicity
This may be the most interesting perk of Groupon.

First, there is the viral aspect of having people tweet your deals or post them on Facebook. Numerous deal aggregator sites also help prolong PR buzz for days.

Second, search volume and direct traffic increase exponentially when a promotion is in play, which ultimately boosts sales.

Groupon’s referring traffic represents both the word-of-mouth nature of the site, as well as its basis in the online community. Facebook and Twitter were the top referring sites in January, with Facebook comprising 44% of all referrals and Twitter 8%.

Based on the order of the top referring sites, Groupon’s traffic relies less heavily on search than on the power of social media, as Google and Yahoo take the third and fourth spots on the list. Over the past several months, the amount of overall visits coming from search has hovered steadily around 3%.

As you can see the Groupon phenomenon is not just helping increase the potential e-commerce revenue stream. It’s also changing the way businesses promote their brands online.

Why not try it out, be careful, because the profits are in the backend by delivering great products, services and experiences, people will come back for more.

The right way to use Groupon: hire more staff on the day, pick a date when you are not normally busy, and give your staff an extra Groupon bonus.

This causes 3 things to happen:

• Customers will get a fantastic service when they come to your business.

• Your staff can’t wait to serve Groupon customers.

• You take a loss.

But here’s the most important part. Get their email address and tell them you will let them know the next time you have a big discount like this. Email them, and offer them something for free. There is SO MUCH to this strategy, so email me at Sandy@sandybarris.com if you want to know more.

Budget: $250 - $5,000 monthly

P.S. here are few recommendations to working with Groupon:

Does this fit with my long-term strategy?
Make the interaction super simple – one deal, one day, one city. What could be clearer?
Create a sense of urgency in your customers. If there are not enough people by midnight, the offer disappears.
Do I have an upsell strategy? In the Posies case, I have to think they would have been much better off offering the Groupon on more of an "ancillary" product, instead of their core product. They could have offered it for a 1 lb bag of coffee beans for instance, in which case they would expect a large majority of the customers that came in for the special to also buy (at full price) coffee and/or food.
Energize your customers to get other customers. Good word of mouth is useless unless it turns into sales.
Make it fun! Groupon’s tone is upbeat, enjoyable, and does not have that yet-another-boring-coupon feel.
Make it fresh. Every day has a new deal for each city!
Can I afford the discount I'm providing? What will be the possible net impact to my business if the coupon is widely accepted/used?
What is the potential negative impact? While striving to attract new customers, you always have to consider the possibility of negatively impacting current, loyal customers.