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Social Coupons - Good for the Small Business?

Understand the Facts, Don't be Misled.

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It all started with Groupon, deep discounts offered to consumers and a promise in a quick uptick in business. You offer the discount and Groupon distributes it to thousands of subscribers in your area. The concept caught on and now a Groupon competitor pops up daily. Just look at the latest:

  • Groupon - Over 15 million users, the most popular when it comes to social coupons.
  • Living Social - Living Social is the second largest daily deal site after Groupon. It's the one that is most similar to Groupon.
  • Facebook Deals - Introduced in January of 2011, but has yet to take off and grow its own legs. Deals are based more on "checking in" in specific locations.
  • Google Offers - The Google alternative to Groupon. Google offers businesses the ability to match offers to relevant and target customers.

How does it work?

  • You offer a sale item.
  • The cost of advertising is the discount of the item you offer.

The idea is that you will use a loss leader and that offer will make customers aware of the company and the products or services you offer.

Don't let anyone fool you - social coupon services are expensive, in particular I'm going to use Groupon, just because their data and effect on small businesses seems to be more accessible to he public.

On the average they take 50% of your revenue as a cost of advertising and doing business.

Let me give you an example. A restaurant offers $50 in meal service, but only offers a Groupon special of $25.00. They must also pay Groupon 50% of that - so you they just gave away a $50 meal for $12.50.

Now, what's attractive about Groupon? They take care of the promotion, mailing of the coupons and they mail you a check. Pretty easy, right? Well, until people start to enter your restaurant with those vouchers and you start to see the amount of money you have lost. Social coupon sites do have the ability to introduce and expose your business to potential customers and entice them to come back, if you handle the redemption properly.

The Promise

The promise and every small businesses hope is that Groupon will bring in new customers, but this is where I ask you - Are these the customers that you want? Customers that use social coupons, come to your business primarily because they can purchase what you are offering at a deep discount. Is this the type of customer that you want? Now, it is true a Groupon user could redeem their coupon and get totally sold on what you offer and return, but this is not the norm. Most social coupon users just purchase a multitude of social coupons and will patronize the place they have coupon for. Many businesses that have used social coupons will tell you that they never truly gained new repeat customers because of the offer, so they never recoup the loss.

I've also seen businesses that run a social media coupon and then they cannot appropriately handle the traffic, this can leave a bad experience in the memory of consumers and they will not return.

I also think that for regular customers using services like social coupons can dilute your brand. There is a reason that you set the prices that you do. Your company offers value and if not, well that's a deeper issue. Your business has a brand and for some of you it has taken years to build that brand. When you offer steep discounts you are saying we are willing to be flexible and perhaps we are charging consumers too much.

Just a thought.

Getting the Most from Social Media Coupons

  • Limit your Offer. You must be able to handle your offer efficiently and effectively.

  • Staff Up. Once your offer runs be ready for the rush and to be able to give customers exceptional service, so that they will want to come back.

    Educate Customers on the Offer. Don't just leave it to social media coupon providers, but post information on your site, put more information out at your location educating them on the "fine print," because chances are they didn't read it.

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