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Is Groupon Worth it for Your Small Business?

Posted on in For Geeks Only

Have you thought of using Groupon as a way to draw in new customers? You are probably thinking how economical can it be if you are slashing your prices up to 50%. Small businesses have a small profit margin to begin with, and owners across the country just like you are wondering how you can take advantage of Groupon without losing money.

How Groupon Works

As a small business owner, you probably have considered creating coupons that your customers can take advantage of. Business owners think of an attractive deal that customers will like, and you buy a small space in a newspaper or coupon book and wait for customers to come in to your store. Groupon is similar in concept only, but they craft deals for you using their own marketing strategies that will lead to millions of customers that become aware of your product or service. Groupon’s sales representatives make sure the deal your business receives is 50% of the normal price. Then, they take 50% off what the final price would be.

Example

For example, if you sell $200 in merchandise at 50% off, this amount turns into $100. Groupon takes their share of the pie, which would be $50, leaving you with $50. However, you’ll ultimately receive more sales in the future. Their calculator looks at forecasted sales, as well as an increase in customer loyalty is taken into account when you see a 30 to 40% net loss in revenues.

Benefits

  • A Groupon sales representative helps you create your own deal.
  • They use a large member database to market your deal in your local area.
  • You can put a cap on how many deals you want to be sold.
  • You’ll receive new customers.
  • Groupon is the largest deal buying site.

Disadvantages

  • Deals start off at 50% off the original price, and an additional 25% goes to Groupon.
  • It isn’t likely you’ll turn a profit.
  • With the influx of new customers, you might not be adequately staffed or have enough supplies to meet the demand.
  • You are stuck paying credit card fees.
  • Groupon takes the total amount of the deal if the offer is below $10.

To be successful in your Groupon deal campaign, you need to do your research. You should use the tools Groupon provides and any other tools to see if it is worth it for your business in the long run. You can think of using Groupon as a marketing tool or expense only to help draw in new customers to buy your products or services.  If you create a successful campaign, you’ll see an influx in customers wanting to buy your products or services your business offers.

It might be worth it to try a small Groupon campaign to test the waters, and to see if customers are interested in your products. You don’t want to put all your eggs in one basket with Groupon because you will lose money when you use it, but it’ll help get your brand out there to millions of new customers.

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