The first time I heard about Groupon was from a small business owner — Surfy Rahman, co-owner of Indique Heights in Washington DC. in 2009. He mentioned it as a user and not as a business owner.
Since then the coupon offers or Group-buying space has evolved a lot. The companies in this space that I have subscribed to along withGroupon are:
- Living Social
- Google Offers
- Amazon Local Deals ( powered by Living Social)
- CertifiKid ( Family and kid friendly deals)
- The Capitol Deal from the Washington Post
- Recoup ( a deal site that offers coupons and helps support causes)
If you take a look at the range of my subscriptions they are a good representation of the spectrum of deals available now.
The concept of coupons is not new. It has existed as long as business has existed as a marketing tool for business owners to attract new customers and sometimes to retain existing customers. Companies like Groupon pioneered a trend where the offer was based on a combination of factors:
- The deal
- Number of deals offered
- Market specifics
- Time when they could be used
Under ideal conditions, coupon offers should have given businesses access to new markets and customers and a way to fill capacity during lean periods. The speed of the industry growth lead to several bumps both for the coupon companies and the business that used the coupons. Here are some pitfalls that occurred in some of the coupon offers:
- Customers turning up in large numbers on the first day the offers opened and/or last day of the offer
- Staff dissatisfied when patrons using restaurant coupons were not calculating the tips at the full price
- More existing customers using the offers and businesses not getting exposure to new customers
- Businesses not setting a logical limit to the number of coupons sold and opening themselves to operational nightmares
- Sometimes no clear understanding of timeline and merchant payment terms
Despite the pitfalls mentioned above, many small business have had successes using coupons. One of the most important factors is the ability of the coupon offers to change customer behavior. I wrote about this in a previous post “How Online Tools Helped a Family Farm Get New Business.” Consumers love these deals.
My friend, Dr. Sanjay Jain has taken classes in photography and art that he had always dreamed of and could achieve it when the barrier of cost came down with a Groupon offer. When I put this question on Twitter, many in my network said they had tried new restaurants and became regulars at other business.
Coupon or group-buying companies have two kinds of customers. The end consumer who pays for the coupon and uses it. The business who partners to make the offer. Negative stories from merchants have received far more prominence than success stories. In his article, “5 Groupon Success Stories And Discount-to-Loyalty Strategies” TJ McCue writes:
“There are two big Groupon benefits for business owners that I see: One, that you dramatically increase your visibility. Two, you have no out-of-pocket advertising expense. Okay, you may have to spend on materials or product, but if you do it right, you can at least break even and generate new business.”
As we look forward towards 2013 at the buzz around the coupon industry here are some of my thoughts on trends in 2013:
Expanded Localized Deals
- The challenge in 2013 will be to increase the number of end users and merchants.
- Expanding to more local merchants and targeting customers in the local area.
- More niche verticals from both nationwide and local coupon companies.
Focus on Increased Online Commerce
- Trends like Groupon goods will increase procuring goods directly from producers to the customers.
- B2B services that offer self-serve couponing tools will also increase.
Increased Resources and Tools for Merchants
- The bigger players like Groupon introduced new tools to help its merchant customers – GrouponWorks a portal for merchant resources , Groupon Rewards for merchants to manage incentive programs for returning customers and a scheduler tool. Living Social on its part introduced an online ordering system for restaurants to take orders from customers using a Living Social coupon.
- In order to enable credit card payments Groupon introduced a payments tool for its merchants similar to Square or Intuit’s GoPayment.
- Just like UPS mastered and offered logistics for merchants and Amazon offers logistics to sellers on Amazon, more coupon companies will offer a turnkey process to connect businesses with customers.
Consumer Flexibility in Customizing Deals
- Today the coupon is valid for a specific time after which the monetary value of the coupon is redeemable .
- Offering different redeeming models may make this a better experience for both merchants and customers.
- Think of an offering where the customer can buy a coupon redeemable when the merchant sends a text or tweet when the business is less busy.
- Innovation in the way referrak.
More Options in the Revenue Models with Merchants
- There are some differences how merchants are paid their share of the offer. There is an opportunity here to think of innovative methods.
- Imagine a small business gets funding from a coupon company with a agrement to run coupon marketing campaigns exclusively with the provider.
Looking at negative posts, it may seem that group-buying does not satisfy merchants but that is not true. In a Forsee study commissioned by Groupon:
“Groupon’s overall merchant satisfaction was a very strong 79. The average satisfaction score for a B2B company in ForeSee’s benchmark is 64.”
The Living Social website quotes stats that 91% of deal redeemers give repeat business and 29% of deal redeemers are new customers.
As a business owner when you make a decision about your marketing in 2013 definitely consider adding the group-buying to your marketing mix with careful consideration on avoiding the pitfalls I have mentioned above.
Next I will be taking a look at case studies. So if you are a merchant who has used group-buying, please contact me with your experience in the comments below.
What are your thoughts on this industry trends for 2013?
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