Why Groupon is Not My Favorite

Most people find it hard to resist a deal, which is a huge reason why Groupon continues to gain in popularity. Its daily deals offerings can be extremely irresistible to consumers, with discounts ranging from 50 to 90 percent.
But for small business owners, is using Groupon really the best way to increase their marketing efforts? Though daily deal sites may be effective in getting new customers for your business, can the costs you incur in using Groupon offset the potential revenue you can incur from new customers?

Well, it really depends on a lot of factors. But let me tell you a couple of reasons why Groupon is not my favorite, and why I believe it's far better and more helpful to put up your own marketing programs and specials rather than use these daily deal sites.

1. No contact information for people who use Groupon

For business owners, growing their customer database may be one of the most important goals they want to achieve. The problem with using Groupon is the fact that you don't own the contact information of the people who obtain your deals there. So, even if you do get new customers from the deal you're offering, you don't really get to add to your email distribution list or your customer database.

1. The customers you get are not the customers you want

So you may think that the loss you incur for offering a 50% discount can be offset by the new customers who get inside your store. The problem is, are the customers you get from the deals you're offering really the type of customers you want?

Small business owners have noticed that these customers who use Groupon are basically just out for the deal, and they're not really the type of customers who will spend a lot in your establishment. These customers also tend to tip lower or not tip at all, and they're not the type of people who return unless offered another deal.

Also, if your regular customers choose to use Groupon in your store, then you actually end up losing a huge percentage of your revenue, since this customer is a regular one and is willing to spend the whole 100%. But since there was a deal being offered, he took it up, after all, who doesn't enjoy a discount?

1. Huge expenses for marketing efforts

Though you may consider using Groupon as part of your marketing strategy, do you really know how much revenue you lose for each deal? In addition to the 50% discount you're offering, Groupon actually keeps 50% of the sales generated for its clients. So in actuality, you will only get 25% of what you'd normally make in a regular sale. As a small business owner, that sounds extremely painful.

1. Your brand image may end up suffering

Offering 50 to 90 percent discounts can also end up backfiring on you, as people who used to perceive your brand as "high quality" may find their perception of your brand altered with continued discounts. Also, they may end up waiting until the next daily deal being offered before going back to your store.

1. You may not be prepared for a high influx of customers

Because there is no cap on the number of people who can buy a daily deal in Groupon, you may be shocked to suddenly find hundreds of customers in your storefront all carrying Groupon discounts, and as a small business owner, you may not have enough manpower on hand to deal with this huge influx.

Also, can your business handle a 75% cut in revenue for more than a hundred customers in one fell swoop? This is something you have to think about. Since you only get 25% of the sales generated, you may end up losing more money than you bargained for.

So Instead of Groupon…

So if you're not going to utilize Groupon in your marketing efforts, what other options do you have? Well, you actually have a lot of other alternatives.

You see, as a business owner, you not only want new customers, but you want repeat ones. You want them to keep coming back because they love your products, because they have a good experience in your store. And offering daily deals may not be the best way to do this.

It may be a lot more helpful for you to use your own marketing programs without having to go through Groupon or other daily deal sites. Nowadays, social media has become an accepted platform for marketing, and it's a great way to build up your list of loyal customers or fans who offer you a steady stream of repeat sales.

You can also push up your mobile campaign so you can build up your email and mobile lists. With mobile users on the rise, you really have to join the bandwagon and start focusing your marketing efforts on mobile users.

There are so many other ways you can market your small business where you don't have to end up losing so much more - the hidden costs are great. Groupon is not my favorite because I know, if you utilize your own marketing programs, use social media and mobile marketing for your business' marketing efforts, then you can retain a better control of your cashflow. And, for small business owners - cashflow is king.