The Groupon Gamble

You see them all over the place today, deals that you can’t refuse.  I have the Deal of the Day in my local newspaper that allows me to get “something” for 50% off, usually a restaurant or lift tickets at Woodbury Ski and Racket.  The most popular deal maker today has to be a company called Groupon.  They offer deep discounts at local establishments.  You pay for the discounted item or service upfront and as long as 20 people or more sign up for the deal, you get the discount.  Sounds good?  It is good, for you.  The person offering the deal could end up losing big time if there is no cap on the deal.  I read a couple horror stories in the last year about small businesses losing big time because of way too many people accepting the deal.   

There was this company that sold gourmet muffins and she had so many people sign up for the 50% off deal that she almost went bankrupt.  There is also a story about a woman who runs a small café in Portland that was offering $13.00 worth of food for $6.00. (Boris)  Well, she had a constant stream of people coming to her place who never returned.  She said it was the biggest business mistake that she ever made. 

The idea of Groupon is great but the cut that they take off the top is what makes it very scary.  For deals under $10.00 they take 100% of the profits, ouch!  I guess they think the advertising you get out of the deal makes it worth the cost.  Maybe for a well established business but the small business owner should think twice before they set up something like this.

Online advertising could reach more potential customers than ever before.  It could cost you next to nothing if you do it right and your business could grow overnight.  Should you use a service like Groupon?  Well, they say they put caps on deals and you are sent a load of literature about the risks and benefits before and commitment is made but then why are there all these horror stories?  My opinion, Groupon could be good for you.  Don’t do it unless you are fully prepared to follow through with the maximum allowed deals.  Remember, a bad customer experience gets spread around much more than a good one.  If you are an agent trying to build an advertising campaign for a client, make sure you steer them in the right direction.  They trust your judgement, don’t suggest a Groupon deal unless you know their entire financial situation. 

Everybody wants to save money where they can these days.  I would try other ways of getting people into your store or on your website before going for a service like this.  It could be a big gamble but it could also have a big payoff.  If you are a business owner then you are used to taking chances.  Think before you sign anything, the choice is up to you, choose wisely.

 Boris, Cynthia. "Groupon Gone Wrong: One Customer’s Sad Tale." marketing pilgrim.com. N.p., 

      20/09/2010. Web. 24 Feb 2012. <http://www.marketingpilgrim.com/2010/09/groupon-gone-wrong-

      one-customers-sad-tale.html>.