At this point, it’s tough to find a frugal shopper who hasn’t purchased at least one group buying deal on Groupon, America’s original – and still preeminent – social coupon site. Those who manage to use their Groupon deals before they expire enjoy substantial discounts on local products and services they might not otherwise try – or even, in many cases, know about.
When used properly, Groupon is a fantastic marketing tool for small business owners, as well as a relatively cheap solution with few, if any, upfront costs and vast market reach. But Groupon campaigns invariably eat into – and sometimes overwhelm – profit margins. And sponsors may fall victim to their own success when they don’t (or can’t) add enough capacity or inventory ahead of their launch.
In response to perennial complaints that its deals were too customer-friendly, Groupon embarked on an ambitious retooling process to shore up support from small business owners. According to MarketWatch, the effort has borne fruit, though some business owners remain wary of the deal giant.
Here’s a closer look at Groupon’s four primary merchant solutions, what you need to do to launch a Groupon campaign for your business, and how to make your campaign a success.
Groupon’s Primary Merchant Solutions
Groupon has four core merchant solutions. For the first three, the distinguishing factor is the audience – the process of launching and running a campaign is similar for Local Deals, Getaways, and Live. The fourth solution, Goods, is significantly different and has more in common with online marketplaces such as eBay or Amazon than the social coupon model that made Groupon famous.
1. Local Deals
This is Groupon’s signature offering. It’s designed for businesses selling products, services, and experiences in circumscribed trade areas. Participating businesses needn’t have physical locations or local bases of operation. Some of the most prolific Local Deals participants are grocery and meal delivery services and regional or national chains with dozens or hundreds of branches.
To build a Local Deal, you can use Groupon’s Deal Builder feature (more on that below) or work with a human Groupon representative to customize your offering. You can customize your listing by:
- Setting a cap on the number of individual coupons available (either per month or per lifetime, if your deal runs longer than a month)
- Creating tiered coupons with higher discounts for bigger spenders
- Limiting coupons to certain classes of customers, such as first-time customers
- Adding original photos
- Adding an online appointment booking feature (at no charge)
- Adding an in-store pickup option (at no upfront cost, though Groupon may levy a surcharge on each purchase marked for in-store pickup)
There’s no upfront cost to run a Local Deal. Groupon charges a variable marketing fee to cover listing and promotion costs. This fee varies by merchant type and category, but it’s significant – usually 25% of the coupon’s face value. Groupon occasionally runs category-based promotions that further reduce customers’ net costs, and it reserves the right to add these discounts to its marketing fees. The surest way to protect your margins is to limit your deal quantity.
Local Deals appear on Groupon’s local market and category pages, which default to users’ physical locations. A proprietary algorithm determines your deal’s placement and visibility. Generally, more popular deals appear higher in Groupon’s listing pages, but demographics and previous purchasing habits may also affect who sees your deal and where.
Getaways is Groupon’s portal for hotels, resorts, and short-term property rentals. The model is comparable to Local Deals – vendors offer accommodations at significant discounts to list price, with Groupon taking a variable marketing fee out of customers’ payments.
You can customize your Getaways deals by:
- Setting a minimum stay length
- Setting occupancy limits
- Limiting the total number of rooms or units available
- Creating package deals (such as discount admission to local attractions with a three-night stay)
- Defining effective dates (a great way to fill rooms in the offseason)
- Including or excluding taxes and fees in your deal price
Like Local Deals, Getaways appear on customers’ local market pages, as well as under the “Getaways” tab. Your Getaways listing is likely to reach a wide audience, including multiple proximate metropolitan markets, plus farther-flung markets that send lots of tourists your way. For instance, if you’re advertising a property in Florida, your listing may be visible to customers in Chicago, New York, and other northern cities.
Live is Groupon’s portal for live entertainment. Ideal Live sponsors are performance venues (such as comedy clubs, music bars, and theaters) and performers with dedicated fan followings (such as solo musicians, bands, comedians, and stage troupes).
The process for creating and promoting a Live deal is similar to those for Getaways and Local Deals. You can customize your deal by:
- Limiting the deal to specific dates and times
- Restricting deal holders’ access to particular sections or seating areas
- Creating package deals (for instance, three shows for the price of two or backstage access with full-price admission)
- Limiting the total number of deals
You can choose from two admission options:
- Vouchers (Will Call). Customers show up at the box office, present valid coupons, and get their tickets.
- G-Pass. Customers use their Groupon deal – usually in the Groupon mobile app – as their ticket for a particular show and seat.
Groupon Goods is Groupon’s online shopping portal. If you’re familiar with eBay, you’ll feel at home navigating Groupon Goods’ customer-facing navigation, though the backend experience is significantly different.
Goods is built around physical product listings. The local element is an afterthought here – the most visible deals are generally available to customers everywhere. Top-selling categories include:
- Health and beauty
- Home and garden
- Apparel and accessories
You can use Groupon’s in-house fulfillment system to ship orders across the United States, offer in-store pickup to local customers for up to 30 days after purchase, or both. As with the other solutions, Groupon takes a marketing fee off the top of each Goods sale. There’s no upfront fee, but you don’t get all the proceeds, either.
How to Sell on Groupon
Here’s how to create and launch a deal-based Groupon campaign or list your product in the Groupon Goods marketplace. For more details on specific steps of the process, talk to business owners who’ve run successful Groupon deals in the past and ask your Groupon representative if you’re stumped.
1. Create Your Account
First, you’ll need to provide some basic information about your business:
- Business name
- Business address
- Contact information
- Vendor category
- Number of locations
2. Create Your Campaign
Next, you’ll build your deal. In some cases, Groupon permits merchants to use the automated Groupon Deal Builder tool to create deals from ready-made templates, saving you valuable time. You may need to work directly with a Groupon representative to create and customize your campaign, however – it’s part of Groupon’s sales process.
If it’s your first time using Groupon as a business, you’ll need to await verification, which usually adds a day or two to the process.
3. Claim Your Groupon Page
Any Groupon merchant can claim and customize a Groupon page, a search-friendly listing that includes your business name, contact information, description, image, customer feedback, and other important details. Even when you have no campaigns in progress, your Groupon page is a valuable – and free – SEO tool.
4. Optimize Your Campaign
Take some time to explore Groupon’s various merchant tools, such as Groupon+ (a customer loyalty program for restaurants), online booking for Getaways merchants, and targeted local marketing for Local Deals participants. If you’re stuck, ask your rep for advice, but be wary of upsells you don’t really need.
5. Complete Additional Steps for Marketplace Deployment (If Necessary)
If you’re listing a product or products for sale in the Groupon Goods marketplace, you’ll need to provide additional information, such as how you’ll fulfill orders (shipping or in-store pickup), whether your goods are taxable (check the rules around interstate sales tax collection), and whether and when you’ll accept returns.
6. Prepare for the Rush
Before your campaign’s launch, Groupon will send you a detailed guide on how to prepare for and manage your deal. Read it thoroughly. Groupon’s advice can help you avoid many common pitfalls, such as insufficient staffing or inventory. Review the procedure for redeeming customers’ Groupons and tracking sales metrics in your merchant dashboard.
When to Use Groupon
When should you think seriously about running a Groupon campaign? Consider these scenarios.
1. You’re Promoting a New or Rebranded Business
This is the archetypal Groupon use case. There’s no better way to make a splash in a crowded marketplace than to run a blockbuster promotion on your signature product or service. Consider running a promotion when:
- Your business opens for the very first time
- You launch a retooled version of your business with a new product or service mix
- You open a new business location
- You launch a new product or service
- You launch a new format, such as brunch at a restaurant that previously served dinner only
2. You Need a Boost During the Slow Season
Groupon deals are great for boosting your business during the slow season. If you run a seasonal enterprise – say, a crafts reseller that does disproportionate business around the holidays or a family resort that sees most of its traffic during the summer – then a judicious Groupon Local Deal, Getaway, or Goods listing could be just what the accountant ordered.
3. You Have Excess Inventory
If you need to get rid of unsold inventory to make way for new stock, make up for an ordering error on your part, or zero out an SKU that you plan to discontinue, run a Goods listing or in-store Local Deal for the affected items until you’re sold out.
4. You Need a Short-Term Cash Infusion
For newer enterprises, particularly those whose principals have less-than-perfect credit, finding small business financing is a challenge. As you work to improve your credit score and eventually secure a personal loan to fund your business, consider running a Groupon campaign to temporarily increase your cash flow.
Just know that this strategy is unlikely to sustain your business in the long run unless you’re able to use the boost to begin building loyal, repeat customers.
5. You Want to Increase Customer Loyalty
Even if you don’t need the short-term cash flow boost, you can use Groupon campaigns to establish a loyal customer base. Your Groupon campaign alone won’t be enough, of course. You’ll need to delight each Groupon-wielding customer and make it worth their while to return (more on that below).
6. You Can’t Afford More Expensive Forms of Advertising
Most independently owned businesses can’t afford to sustain a traditional advertising campaign that incorporates local television, radio, and digital ad buys. For countless small businesses, running a Groupon campaign is their first – and sometimes sole – marketing effort.
7. You’ve Had Limited Success With Other Digital Marketing Tactics
If you’ve already tried your hand at paid search ads and social media marketing with limited success, what do you have to lose by shifting gears and running a Groupon campaign? The campaign may well prove to be the linchpin of a revitalized digital marketing strategy that uses paid search, social media marketing, and other funnels to promote an attractive discount that gets paying customers in the door and creates a golden opportunity to win their trust.
When to Avoid Groupon
You might want to think twice about using Groupon if:
1. Your Margins Are Already Tight
If you can’t afford the bulk discounts necessary to run a successful Groupon campaign, you may want to hold off until you’ve cut costs elsewhere – or rethink your pricing strategy altogether.
2. You’re Concerned About Devaluing Your Product
Discounting for the sake of discounting isn’t always a sound strategy. If your marketing strategy is built on the perception – or the reality – that your product is valuable or exclusive, promoting it with a bulk discount is a surefire way to undercut that image.
3. You’re Concerned About Alienating Longtime Customers
Be cautious about Groupon campaigns that exclude longtime customers. It’s one thing to run a “new customer only” promotion when your business is just getting off the ground and every customer is a first-timer. It’s quite another to run such a promotion when you’ve been in business for years and have a loyal following.
If your business is already established, think carefully before running segmented promotions that benefit only some current or prospective customers.
4. You’re Already Close to Capacity
If you run a service business that’s already close to capacity, selling what little capacity remains at deep discounts – or, worse, opening the door to Groupon holders taking the place of customers willing to pay full price – may not be a sound strategy. Reserve capacity-absorbing promotions for obvious deficits, such as filling rooms during the offseason.
5. You’re Worried About Your Ability to Scale
Groupon tries to set its merchants up for success, but it can’t hold your hand through the entire promotion process. If you lack the resources to staff up or add inventory ahead of your promotion’s launch, you’ll either need to dial back the promotion’s scale or defer it entirely until you’re in a better position.
Should you fail to accommodate the wave of new business your promotion may draw, you risk taking a serious, and perhaps fatal, hit to your reputation.
6. Your Sales Model Isn’t Built on Repeat or Recurring Business
If your sales model relies mainly on one-off transactions, running an across-the-board bulk discount promotion for first-time customers doesn’t make sense. You might make an exception if your business is also highly seasonal – a Groupon deal that entices one-time customers who’d otherwise never patronize your business is productive.
Tips for a Successful Groupon Campaign
There are no guarantees in business, and every Groupon campaign, product, and audience is different. But following these tips should increase the chances that your Groupon campaign meets your definition of success.
1. Don’t Forget to Claim Your Groupon Page
Before you run your first Groupon campaign, claim your Groupon merchant page. For no money and just a few minutes of your time, this simple step gives you a high-authority foothold in online search results for your business’s name.
The more of your search profile you’re able to control, the tighter your grip on your enterprise’s public image and reputation – an important consideration even if you decide never to run a paid Groupon campaign.
2. Take Full Advantage of Groupon’s Customer Data & Analytics
Check the Groupon Merchant Center regularly for updates on Groupon sales and information on the customers who come your way through Groupon. This information is free with a paid campaign and not readily available elsewhere.
No matter which solution you use, you’ll see granular details about Groupons your business has sold and redeemed, feedback from verified customers, and sales trends over time. For the Local Deals and Live solutions, you’ll have access to an Impact Report that shows more details about your customers, including how many were new to your business and how many would recommend your business to others, and your deal’s digital impressions, also known as views.
3. Set Reasonable Discounts
Earlier in Groupon’s history, merchants frequently complained that turning a profit on a deal was all but impossible. Today, Groupon claims that 80% of campaigns are “immediately profitable,” and anecdotal evidence suggests that the average discount is lower than in the past.
But that doesn’t tell the whole story. All else being equal, any discount will cut into your margins. The question is whether the added business is an acceptable tradeoff. Before running your deal, assess the profitability of the products or services you plan to promote and determine a reasonable discount that preserves some margin.
4. Institute Strict Quantity Caps
The best way to keep your deal from overwhelming your enterprise’s capacity is to place a strict limit on the number of available Groupons. This has the added benefit of creating an impression of scarcit – prospective customers shut out of the first run may clamor for a repeat.
5. Set Strict Time Limits
This is another effective cost- and capacity-mitigation strategy. Your Groupon rep may try to push you to run a longer campaign, but be firm.
6. Run Tiered Offers to Increase Revenue
Many businesses run tiered Groupon campaigns that promise bigger discounts for customers who purchase more products or services. For instance, a restaurant might run a three-tiered offer:
- $15 off for $10
- $50 off for $30
- $100 off for $50
The third deal is the biggest discount in percentage terms, but it also requires the most buy-in. If your goal is to move product or produce a short-term cash infusion, consider offering tempting high-dollar tiers.
7. Offer Package Deals
Variety is the spice of life. Instead of per-item discounts, consider multi-part package deals that customers can use as they wish. For instance, your spa might offer a 60-minute massage for the price of a 30-minute massage, plus the holder’s choice of one of several treatments at 50% off. A prospective customer not sold on a longer massage might jump at the opportunity to try something more novel.
8. Require Multiple Visits or Purchases
Structure your Groupon deals – package or otherwise – to require multiple visits to redeem. For instance, your winery’s tasting room might offer 50% off three tastings on the condition that each tasting occurs on a different day.
9. Promote Your Deals Through Multiple Channels
Groupon has a sophisticated algorithm that supposedly serves your deals to the most relevant users, but nowhere is it written that you must rely on Groupon alone to promote your campaigns. Use your own social media channels and company website to announce that you’re open for business on Groupon and consider paid search and social ads to boost impressions further.
10. Don’t Cannibalize “Sticker Price” Business
Don’t run Groupon campaigns that you have reason to believe will cannibalize your full-price business. For instance, if you’re having more trouble filling restaurant seats at lunch than dinner, limit your promotion to lunchtime only.
11. Don’t Discount Your Most Valuable Products & Services
Groupon is great for offloading inventory, absorbing excess capacity during the offseason or downtime, or capturing new customers. It makes less sense for businesses that don’t need to do any of these things.
If you’re having no trouble with product turnover and your present marketing channels are attracting new customers just fine, you might still have a use for Groupon, but it won’t be on discounts to your top-selling products or services.
12. Use Groupon’s Value-Added Features
Take advantage of applicable value-added features, such as the Groupon+ loyalty program for restaurants, in-store pickup, and online appointment booking.
13. Funnel Groupon Users Into Your CRM Process
Groupon can be a powerful lead generation tool. Every Groupon redemption is an opportunity to win a customer’s trust and add that customer to your customer relationship management (CRM) process. This way, the next time they walk through your door, the spur might be a well-crafted marketing email, targeted social ad, or handwritten thank-you note.
If you take one thing away from this guide, let it be that Groupon is by no means a panacea for small businesses. Despite the wealth of cheery testimonials you’ll find with a cursory Web search, Groupon campaigns can and often do go poorly. Sure, careful campaign planning and thorough pre-launch preparation increase the chances that things will go right, but there’s no guarantee of success.
Before you launch your first Groupon campaign or list your first product in the Groupon Goods marketplace, chat with fellow small business owners who’ve done the same. Read firsthand accounts of positive and negative Groupon experiences. And don’t let your Groupon representative talk you into moving forward with a campaign or listing before you’re ready. You’re the boss, after all.
Do you use Groupon deals to promote your small business? Do you have any advice for first-timers?