Talk about making it tough on yourself …
Groupon, the three-year-old coupon company, is all the rage these
days with its upcoming and much-anticipated billion-dollar IPO. But
for the small business owner trying to blaze a trail and build a
successful business, it isn’t beneficial for your company. Here’s
why:
First, with Groupon there’s a good chance that you will lose money,
especially if you have high fixed costs and low marginal costs.
That’s because the cost to work with them — the split with Groupon —
is actually more than 50%, as Groupon does not share your credit
card burdens.
Then there’s the concern you should have about offering your
products/services at steep discounts as it dilutes your brand. Your
company offers a real value and also has a reputation to uphold,
which for many has taken years to build.
Groupon deals — offering the newbie your products/services for half
the price your loyal customers have been paying you — upsets your
loyal customers. Plus these new customers are questionable for the
long term, since they’re deal seekers. Will they return and pay full
price?
There’s no magic formula here with Groupon’s model. Working at a 50%
off certainly isn’t the smartest way to go. Instead, providing value
with outstanding service, while establishing rapport and building
empathy with your customers is the way to go — both in the cash
marketplace as well as the barter marketplace.
