Groupon Advertising – 10 Pro’s and Con’s.
Group buying may be all the rage among consumers but does it really make good business sense? What is the alternative to this advertising approach? As reported in Inc5000 they gave 10 Pro’s and Con’s on Groupon advertising as a selling strategy. Their article below details what you should consider as your best strategy.
What is Groupon:
Groupon, the group buying site offering daily deals, has proven to be wildly popular with consumers. Great discounts are given for restaurants, retail stores, spas, theatres and much more. What’s more appealing than scoring a £100 massage for £25 or grabbing a meal valued at £50 for £15? People love discounts, especially during hard times when money is tight.
What you Must Consider when using Groupon Advertising:
You don’t want to devote a lot of your budget to these daily deal sites. Such a promotion has to be part of your overall marketing plan along with how you are using Facebook, Twitter, Google Adwords, and so on. The problem is that businesses often go into a promotion without a good understanding of what they want to accomplish.
How Does It Work?
Groupon offers different deals each day for a local good, service or event in a city where it operates. Discounts range from 50% to 90% off. The promotion is only valid if a certain number of consumers purchase the deal within 24 hours. Groupon keeps 50% of the revenues from each coupon deal.
More than 40 %of the companies wouldn’t run a Groupon offer again.
10 Pro’s on Groupon Advertising :
1. It attracts a lot of consumers.
You can reach new customers by appealing to those who are looking for inexpensive deals and a chance to save money. You get to charge lower prices to new customers who aren’t willing to pay more. Existing customers are willing to pay full price for products or services. Groupon promotions offer the most benefit for businesses in which the promotion does not cannibalise sales to existing customers.
2. It advertises your business.
A Groupon promotion can be a way to announce the existence of your business to consumers who are unfamiliar with your products or services. You get to entice potential customers to try your goods. The idea is that they are going to like it so much that they will come back and buy from you again. Your promotion must grab consumers and increase your potential conversion rate for repeat customers.
3. It helps move inventory.
Use Groupon deals to sell slow moving items in your inventory or un utilised services. Discounts seem to be most compelling for merchants with low cost of goods sold. Use price deals to promote a product that is not that expensive. A Groupon type promotion should be something that you do once in a while for a specific, narrow, limited reason.
4. It builds relationships.
Use price promotion deals for building customer relationships rather than just creating one-time buys. Meaning, instead of a restaurant owner offering £60 worth of food for £30, parcel it out to offer £20 worth of food for £10 over the customer’s next three visits. Don’t offer discounts on a total bill, rather offer a specialised discount for various products or services.
5. It generates incremental revenue.
If you have a low-cost or fixed-cost structure, you can make money on promotions. Take an owner of a rock-climbing business that has existing equipment and a storefront. The operating costs don’t change based on the number of people who show up. A coupon deal can actually generate some extra cash by getting more bodies into the facility. Customers paying £10 for a £20 service still nets the owner £5 per voucher.
10 Con’s on Groupon Advertising:
1. Deals attract low-end bargain seekers.
Because the Groupon customer base is made up of deal-seekers and bargain shoppers they might not be willing to purchase beyond the value of the coupon. So, there are low rates of spending and low rates of return. One problem with price deals is diminishing returns; thus, merchants need to put a cap on the number of deal coupons that are to be sold.
2. Deals hurt the brand.
The obsession with the price doesn’t necessarily make for a lot of brand loyalty or even brand awareness. One negative aspect of daily deal sites is that price promotions usually hurt the brand of the company offering it. It makes customers price sensitive. When they get something at a much lower price, they then become less inclined to pay full price for that same product or service in the future.
3. Deals don’t generate repeat customers.
Groupon has a low conversion rate for repeat customers, according to marketing experts. You may never see the person again once they use your coupon. Or that person may not be willing to buy from you again without a coupon in hand. The percent of new customers that redeem the voucher that becomes repeat visitors of the business is estimated at around 19%. It varies by product categories.
4. Deals are not profitable.
Another problem is the split. Groupon keeps 50% of the revenues from each coupon deal. If you do the math, merchants need to gross margins well in excess of 50% for Groupon to work for them. The promotion is very steep, usually 50% or more. Most businesses are built on margins of 75%, by offering huge discounts and giving 50% to Groupon, they just aren’t earning enough to cover the cost of serving that customer.”
5. There are better deals out there.
Daily deals sites are not the only game in town. You can run a similar promotion for less money. There are plenty of marketing programs you can use; direct Facebook marketing can and will retain the price of the service and gain loyalty through brand awareness and great service. It’s an effective way to engage new and existing customers at a very low cost without giving away your services for free.
Facebook advertising v’s Groupon advertising wins every time…
For hints and tips check out 10 Video Marketing Strategy’s for 2019.