Here’s a question I’ve often heard: “How do I get into that ‘Groupon pie’?” Or, as it is sometimes said:
“What is a Groupon?”
Groupon is the industry leader in a litany of websites claiming to offer “deals” at local stores. These are generally grouped under the term “Offer Sites”.
As I run a local marketing company, I have had a great interest in these “Bargain Sites” since they first appeared. Here’s the skinny one of them.
“What is a bargain site?”
Settlement sites like Groupon and LivingSocial (which are the two largest settlement sites, but by no means the only two, with over 150 million and 60 million subscribers, respectively) work by structuring deals with local businesses to offer something unique. : a greatly reduced price on a valuable good or service.
We will use a dentist for this explanation, but of course many other companies use these bargain sites. Dentists can offer a service like teeth whitening, which costs them just pennies (in addition to the cost of employing their staff), for around $ 250- $ 300 normally, but they offer it for half the price on a site like Groupon. or Living. Social.
The idea is that companies can profit by selling large volumes of their goods and services at a discounted price, as much or more than they profit from selling to one customer or customer at a time. It’s the same principle that makes it cheaper to buy the largest volume of detergent or a multi-pack of socks, simply applied to other goods and services. In fact, the Groupon name is a combination of the words “group” and “coupon.”
This provides an incredible incentive for many people who did not want (or could not) afford such luxuries the opportunity to indulge themselves. Businesses benefit greatly from a massive influx of customers and money, mostly new, even at half price, because such deals often get hundreds to thousands of people who accept them. Even $ 100 x 100 people is nothing to scoff at (that’s around $ 10,000). And all of those are potential regulars.
How do bargain sites make money?
Now, that $ 10,000 (which is already a discounted cost for services or goods being sold), is split between the bargaining site and the bargaining business. Most bargain sites will charge 50-60%, so the actual amount the company raises from that $ 10,000 would generally be $ 4,000 to $ 5,000.
So generally they will only collect about a quarter of what they would normally collect when offering a similar good or service at the normal market price. Generally, if it is structured well, all parties will win. Again, it’s hundreds or thousands of new customers to add to a company’s database, which is well worth the initial reduction.
Are there any risks when using bargain sites?
You have heard the success stories on these sites. But, if you’ve looked at everything, you’ve also heard horror stories of companies that tried to offer a deal on these sites and lost thousands of dollars, almost went bankrupt, and even had to close their businesses because they didn’t. ‘I don’t know what they were doing. What gives?
Well, remember that most businesses will only earn a quarter to a third of what they generally earn from the goods and services they offer. They make up for the small margin in quantity sold and reap the benefits of exposure to potentially repeat customers. However, some companies simply cannot scale well.
There was a bakery in the UK that often sold around 100 cakes a month, which decided to run a Groupon offer on a dozen cupcakes for roughly £ 6.50. They sold 8,500 offers. That’s over 100,000 cupcakes from a business that typically sold about 1/100 of that volume in a month! They ended up unable to fulfill many of the orders and had to momentarily expand their business to accommodate the volume, and in the end the offer cost them over £ 12,000. Not only that, but a lot of people were upset with the massive delay in getting their £ 6 cupcakes, and being internet savvy people in general, they rang out on the various review sites, KILLING the reputation of this business.
Oh! How can I safely offer an offer on one of these sites?
Experience is crucial. If you do not know what you are doing, you will not be successful in these offers. You need someone who has experience in these businesses to help you. Finding a reputable local marketing company with expertise in this area can go a long way towards success, although estimates show that less than 4% of local marketing companies offer these types of services, so it is possible that have to investigate.