What’s your Groupon Strategy?

Businesses are falling over themselves to get featured on Groupon and its clones.

Prague alone, a city of just over a million people, has a double-digits number of group buying deals sites. I’ve taken the opportunity to buy a number of deals myself from several different sites. The curse of the marketer is to evaluate every experience they have as a customer from the other side. So this is the “here’s how I’d do it” post.

A while back I wrote about the pros and cons of using group buying deals sites as a marketing tactic. Since then there was a very interesting first hand report by the owner of a cafe in Portland, Oregon about her experience running a Groupon promotion and how it nearly put them out of business.

Even if the site you’re looking at working with doesn’t take 50% (or 100% if the deal has a sticker price of less than $10 – yes seriously!!) as Groupon does, you’re looking at drastically reduced revenue, so you’d better do your sums and be trying damn hard to make the deal worth your while long term, because short term it’s very likely to be in the red. If you’re not sure, don’t jump into it because everyone else is, there are plenty of cautionary tales out there. Still set on it? Here’s my take on what a business should do when they run a Groupon…

Be smart about the deal

The last thing you want to do with a deal is lose money or damage your business’s long term viability by attracting bargain hunters that won’t come back or training customers to buy only when there’s a special. Think about what you could offer very carefully. Consider offering something that by its nature is likely to lead to return business. It might not even be part of your regular offering, it could be an introductory class if you teach something or provide a service, restaurants can make their deals exclusive of drinks (usually the highest profit area anyway), or for a special event (tasting evenings perhaps) rather than offer a discount that can be used anytime within three months. Retailers should consider long and hard what they’re offering – half off $50 worth of any goods means you’re left with $10 or so to pay for the product. The best option for retail would be to offer a single product or range of products which normally have enormous margins (maybe talk to the supplier about running the promotion), to make sure they cover their costs, and that they put into action the rest of these suggestions.

Before

  1. Do your sums. I know I’ve said that already but this is the fundamental ‘no money, no business’ part. If you’re losing money on every sale you’re not going to be in business for long. Work out how much you need to make extra from each customer. What extra products or services can you sell? Deals that can only be used one at a time, for a partial amount of a bill give you the best chance of making full ticket price revenue on the rest of the order. Most of all, don’t try and sell more than you can handle. If you’re a service provider (say a fitness instructor) don’t try and sell 3000 hours of your time for a tiny sum, you’ll end up resenting the customers.
  2. Keep it quiet (publicly) – you’re about to run an offer at a dramatically cheaper price, don’t damage your revenues in the days leading up to it by tipping anyone off.
  3. Tell your team. Make sure everyone who works for you is aware (but sworn to secrecy) of the impending deal. Explain the conditions so everyone is clear.
  4. Get a commitment from the site for how long the expired deal will be published for, at a well keyworded URL – but not including your business name. Make sure the links to your site on the page are not nofollowed and if possible, use valuable keywords, not ‘click here’ or ‘website’.
  5. If you can, find out if the site will let you follow up with buyers of the deal by email, and if you can identify redeemed and unredeemed deals.

On the day

  1. Tell your network – tweet it, post it on your Facebook wall, your blog and website. Consider emailing it to your list. You might think this contradicts point 2 above, and goes against the whole ‘group buying deals are about getting new customers’ line but as Joseph Jaffe teaches us in Flip The Funnel, your existing customers deserve to be treated at least as well as new customers. If you don’t tell your existing customers it’s like you’re hiding it from them. And hiding the truth is like lying, and lying is bad (see, I learnt everything I needed to know about marketing in kindergarten). Plus if you’re running this offer, you want it to ‘tip’ (become valid) and you want it to spread. Your existing customers are the most likely to share the deal with friends because they already know you.
  2. Be staffed well enough to handle the enquiries. Even if the deal doesn’t start till the next day, expect phone calls, emails and personal visits.

When the deal is being redeemed

  1. Schedule demand, if you can – if you’re a service provider, try and spread out the bookings so that you can be available for full-price paying clients.
  2. Stand by the conditions, but don’t be a stickler – in the story of the cafe owner, she was prompted to write the blog post to tell her story because she refused a longtime customer’s Groupon because it had expired. It would take a really understanding customer not to feel mistreated. Most customers aren’t. Saying ‘we have to stick by the rules because other people took advantage’ doesn’t cut it. The cafe had received the money (what little there was) from that customer’s Groupon, expired or not.
  3. Get something out of the interaction – assuming most of the buyers of the deal are new to your business, take the opportunity to grow your email list (tag it if you can, that information is going to be useful), Twitter followers or likes on Facebook. Print up some fliers to hand people when they present their deal coupon – taking a ‘what next’ approach. Suggest places they can write reviews, or connect with you further. Consider that these are value-conscious consumers and for many any loyalty they have is to the deal site, but if there’s something you can do to capture future business, now’s your chance. Have a loyalty programme? Tell them about it. High-tech with plastic cards? Give them a form to fill. Low-tech with paper cards and stamps for each visit? Hand them their card with the first stamp on.

After the deal has expired

  1. Go for the final squeeze – if you segmented your mailing list with new signups from the deal now is a perfect time to go for a final squeeze – what action would you like these people to take? Remember this group aren’t quite like your organically grown list of existing customers, so tailor the ask to that. If the deal site allow it, write to deal buyers through them.
  2. Measure – if you planned well, you had metrics that you would judge against. Now’s the time to do that – take the scores for whatever you were pushing for – revenue? Facebook likes? Email signups? Repeat visits?
  3. Evaluate – take the numbers from the last step – did it make sense for you to do it? What could have been done better? What did you learn? Would you do it again?

I’m pretty sure I’ve missed several nuances. If you agree, let me know in the comments.

Update: If you want to run the numbers, I recommend downloading the Groupon profitability spreadsheet helpfully prepared by Rags Srinivasan.

Image credit: NCReedPlayer

Group-buying local deals site fever

Team HuddleEver since Groupon started making a big noise in the US, and Livingsocial moved into the one-day sale market, similar sites have cropped up around the globe.

There are the blatant rip offs in Russia and China to the more subtle US based me-toos and German-backed startup MyCityDeal, now acquired by Groupon. Other UK and European competitors like KeyNoir and Groupola and more show that the market is big enough for a number of players. Even Prague has a Groupon clone: Slevomat.

How it works

Merchant approaches/is approached by deal site to be featured for a day. Merchant sets a price for their deal they want to charge, compared to the original price, and a minimum (and optionally a maximum) quantity of the deal to be sold. The customer is motivated to get the deal to ‘tip’ so that they get it, so they are very likely to share the deal with friends on social networks. Once enough people have pledged the cash, the deal site takes the payments, sends the purchasers their coupon/voucher and tells the merchant how many were sold.
How much the featured merchant gets from the total varies from site to site and even based on product or service category. Numbers reported from Groupon are as much as 50%, so if a deal is offering $150 worth of service for $75, the merchant can be making as little as $37.50.
If you’re considering using a deal site to promote your business or product, here’s a short list of the pros and cons:

Advantages

  • Reach a lot of potential new customers
  • Business when you might otherwise be quiet, especially if bookings are required and you’ve set the expectation that your busy times are excluded from the offer
  • Search engine link juice – a link from a fairly high pagerank site – the previous deals pages hang around for a while
  • Able to set minimum and maximum quantity, overall and per person
  • No initial cost outlay

Disadvantages

  • Unless you can turn those customers into repeat business you may be losing money on each one
  • Need to give a large discount to capture attention
  • Deal site may keep a large percentage of the sticker price
  • Might have to wait a while to receive payment from deal site
  • Can’t be overdone or you risk undermining your revenue permanently

Questions to ask

  1. What’s the revenue split?
  2. How soon is the money transferred to me?
  3. Do I get the customer’s email addresses (or have to acquire them myself)?
  4. Do you have any data on whether deal customers become regular customers?
  5. What percentage of businesses have expressed an interest in running another deal?

For consumers, this is a good list of caveats.

Have  you tried one of these sites for your business? How’d it go? Care to share in the comments section below?

Just looking for a global list of daily deal sites?

image credit: Megan Soh via Creative Commons on Flickr