I read an article tonight on HBR’s website that went into some fantastic detail about Groupon’s financial stability. (Read: Groupon Doomed…) Or the lack of. I have had some feelings about Groupon for some months now, and as much as I hate to admit it, as much as I would like for Groupon to be a good idea. It isn’t.
I reached a point (very quickly) where I could no longer pose Groupon as a viable part of any strategy to ‘get the word out’ for my clients. The metrics of how Groupon works does not make sense for any business hoping to make a profit. MAYBE as a ‘Hail Mary’ pass, last ditch effort, or any other relative cliché. Maybe. It could be the ‘final nail in the coffin’ – OK, I promise, I’ll try to make that the last one… I will try not to digress any further.
The problem: it’s difficult to convince ANY business owner to relinquish any chance of profit to bring in ONE customer, let alone his/her entire family. The chance that this customer will be a whale, new evangelist – slim. It would be better assumed that this person already frequents your establishment, and takes advantage of every coupon they can find.
Scenario: A business owner decides to go with Groupon (or LivingSocial) to boost foot traffic in their retail space, increase the covers at their restaurant … Sure, the word gets out, but can the proprietor fulfill? If it does work, and 4,000 (even 400) people buy that Groupon – what now? A Groupon that becomes too popular could destroy a business. Can you maintain the promise of your brand with this boost? Does offering a ‘coupon’ affect your brand image? Is this how you want to introduce your business to those who’ve never met you?
How it works: You buy a Groupon for $10, worth $20 – the business owner receives $2.50 from that sale… I’m surprised that they have convinced so many to take the risk! In my opinion, the Groupon business model isn’t good for those they are trying to help. Obviously, it’s not even working for them. A business model where nobody wins, needs some serious retooling.
Unfortunately, with the every other day tanning bed, massage parlor, teeth whitening Groupon – has proved the concern that this IS the next ‘Dollar Stretcher’ magazine, ValPak coupon. I am not trying to insult any, I had hoped Groupon would be something a little more, well- glamorous, chic.
The current model leaves the proprietor enduring a walk of shame the next morning, feeling cheated and used. Trust me, those I have talked with told me they’d rather have empty tables, or a quiet store and MOST, if not all hate the concept of even offering a coupon, or a discount.
So what is the solution to getting more traffic? Having more covers? Increasing your conversion rate? Fast answer: Do whatever it is that you do, better than anyone else, and differentiate. More on that later..