Tuesday, November 16, 2010

Is Groupon creating a dangerous carpet bombing effect on some small businesses?

The growth of Chicago-based Groupon has been nothing short of phenomenal. With at least 20 million subscribers in 29 countries receiving the Web company's free daily e-mail, Twitter and Groupon app offers, this is the fastest growing online business in recent memory.

And no wonder. With their unique format, local businesses sign up to be featured in one of their daily specials that go out to subscribers -- all neatly divided into 350 local areas.

These offers are unique and feature very attractive, discounted price points. But there's a brilliant caveat, a certain number of subscribers must buy the Groupon or the deal is off. And that rarely happens, because Groupon brings social marketing to a bizarre new state of online collectivism that is often too tempting to pass up.

From Lasik surgery to yoga lessons, Groupon has become an expert in the art of the unusual deal. The kind of deals that send hundreds, if not thousands of new prospects  to a local business. Oh yes, Groupon gets 50% of the deal for themselves - no wonder they may be worth $1 billion by next year!

But I want to offer a bit of warning and advice to eager Grouponees.

A story about a local dentist caught my attention recently. By offering a $231 check-up exam, cleaning & x-rays for just $49, the small business was overwhelmed with 768 requests in one day! Could you handle 100 calls an hour?

Read the complete story here

Since Groupon splits revenue 50-50, this dentist was only getting about $25 per offer. In reality, most businesses plan to lose money with a Groupon deal. But the hope is that they will gain so many new customers who will return again and again.

That's a nice idea in theory, but businesses planning a Groupon should have some understanding of what they may be in for and how to best prepare for it. So here's some prep...

Three things to consider before Grouponing

1) Get a Teaser Mentality.
Remember the premise of this kind of online promotion is to get attention with a sensational teaser offer. So treat it that way. Try not to set your business up for a disaster by giving away your product or service with the best profit margin. Lure potential customers with something that give them a good taste but wanting more.

2) Prepare and Then Prepare Some More.
Be ready for what could be the fire hose effect  -- many people demanding your offer in a short time period. So be prepared for an influx of calls. Maybe hire a short-term phone service to take calls you can't get to because you don't want to disappoint and have those folks bad-mouth your business to everyone they know!

3) Take Names and Numbers.
It's critical to develop a list to make this effort pay-off. So track all calls, categorize your new customers and then immediately follow-up with another offer to bring those initial trial people back for additional business.

Parting shot: There are smarter, less explosive options to Groupon. Try a simple text blast to existing customers inviting them to bring a friend or neighbor in for a special deal or use Facebook to drive a special offer. There are many ways to share a great deal.

Paul Patzloff is a hybrid creative marketing professional offering strategy and high-value content. His new brand Gravity uses innovative techniques to create online pull that attracts new, qualified sales leads for businesses. Request his new presentation "Feel The Pull of Gravity" by contacting Paul 

Image from Groupon.com

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