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Is Groupon a Good Deal for Small Businesses?

Updated on November 24, 2012

Is Groupon Good for Small Business Owners

Groupon, Living Social and other daily deal sites have become very popular as of late with all different kinds of companies entering the space such as Google with there new Google Offers, but at the end of the day is the Groupon model good to small businesses which make up the majority of businesses offering special deals through the site. The obvious advantages that daily deal sites provide to small business owners is the ability to reach a wider audience in there particular region and find consumers that are actively searching for a service that they are offering. The most common deals that can be found on daily deal sites are restaurants, massage therapy / yoga type centers, and basic entertainment locations like movies, bowling alleys, and other entertainment options. There is also been a trend in the daily sites of providing weekend getaways at special bed and breakfast locations and small boutique hotels and resorts in special locations close to your home as well as destinations outside of the country.

From a Consumers point of view Daily Deals are overwhelmingly AWESOME!!!

Who doesn't like getting 50% off at a fancy restaurant for a nice night out with your significant other or great cheap massage or fun adventure on a budget. However for a the average small business owner there is several things to be concened about before setting up a daily deal. The following are a few items that are to know about and be prepared for before signing up for a daily deal site for your small business.

Daily Deals Sites Servicing Small Businesses

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Groupon Daily DealsLiving SocialDeals in New YorkCity Guide Deals
Groupon Daily Deals
Groupon Daily Deals | Source
Living Social
Living Social | Source
Deals in New York
Deals in New York
City Guide Deals
City Guide Deals

Daily Deals for Small Business Owners

Here is a couple of the most important parts of a daily deal to be prepared for as a small business owner. These should all be considered heavily prior to engaging with a daily deal site if you are considering that as an avenue to market your companies products and services.

1. Expect to share 50% - 60% of the final sale price of the deal with the daily deal site. This is how they make there money. If you are selling a $10 for $20 meaning that the daily deal site sells a deal for $10 to the customer and it is worth $20 of merchandise a small business owner can expect to only receive $5 for each deal that is sold through the site. Any more should be considered a bonus when using a deal site. This is the biggest place for an opportunity for a larger company like Google to support small businesses with daily deal options away from Groupon or Living Social if they can afford to provide the service without such a high commission then this type of activity becomes much more interesting for a small business. It is almost impossible to have a daily deal that after the costs of providing the goods / services to a customer and paying the commission portion to the daily deal site that you will make any money. Most small businesses are in the red if a customer purchases the deal and does not purchase additional items above the cost of the specific deal.

2. Most customers using deal sites are seeking deals only - It is common for the daily deal sites to tell potential small businesses during the pitch opportunity to do a deal that customers often will spend more than the amount of the deal or that they will become repeat customers and pay the full price on their return visit. While this is true for some small businesses, it is also not true for many, so while spending lots of resources to sell the original deal and to have the capability to service the influx of new customers, it can be very difficult to retain the customers or upsell them. If you are doing as an example a 10 for 20 and the customer only spends $21 that extra dollar is not going to make up your losses for conducting the deal. Services like massages can expect to hope to earn additional money through tips to help offset the costs of the deal however a coffee shop may not be able to generate the same amount of extras when a customer comes in and only spend a few cents over the deal it is a big looser for the small business. People that are very active users of deal sites and not just the casual user are more likely to not ever come back, as they search deal sites constantly for new restaurants to try based on the special deal that they are able to get. Rather than coming back to your restaurant they are enjoying their next $25 for $50 at a local competitor that is also trying their luck with a daily deal.

Favorite Daily Deal Site

What is the best daily deal site for small businesses

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How to maximize a deal for your small business

Despite the potential problems with daily deal sites, they do provide an excellent platform for you to showcase your business to local consumers that are actively seeking goods and services that your small business offers. If you as a small business owner decide that it is a marketing opportunity you want to go forward with, you must be not only prepared to handle the increase in customers and the lack of initial revenue as the deal sites often pay you in several chunks not all right after the deal occurs, but have a very strategic plan to maximize the exposure to new customers.

Knowing that the average daily deal site user is actively looking for specials providing an additional incentive for people that participate in your daily deal to return to your store front on another date is absolutely necessary. Whether that is just a small discount or a free dessert or offer an additional deal direct to those that participated and keep the whole $10 for $20 rather than doing the share, you need to have an offer that will get people to return again and spend money at your establishment. Small business owners that can get the traffic continuing to flow back to their store have a much higher rate of converting deal seekers into routine customers. Don't expect the daily deal sites to provide a whole of additional support post deal as they are onto the next one so make sure that you are thoroughly prepared prior to discussing a daily deal.

Overall it is still a crap shoot doing a daily deal. If you feel your business is comfortable enough to take the risk of a daily deal then it is something that you should highly consider. A daily deal however is very unlikely to be successful if you are doing it as a hail mary attempt at reviving a failing small business.

Comments

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    • Ms._Info profile image

      Ms._Info 

      9 years ago from New Jersey

      Groupon seems like a good way to get in front of a lot of consumers. a good way small businesses can take advantage of Groupon is to do a teaser offer as a way to get more leads, and and more names to their newsletter. Having a list of customers that you can pitch to over and over again is gold!

    • profile image

      FStevens 

      10 years ago from London

      I have to say that whilst Groupon may be appealing from the professional side of things, from a personal side I'm not so sure. The problem seems to be that businesses can't necessarily cope with the increased demand that comes with launching a deal on Groupon, leaving people struggling to make bookings and often simply giving up and claiming their money back.

    • justom profile image

      justom 

      10 years ago from 41042

      I just saw a story on the news a few days ago about groupons. They talked with a guy who owns a small restaurant who's had a thriving business for probably 20 years now. The economy being the way it is he accepts these groupon deals and it didn't sound like he was very happy about it. His costs, like everyone else's, are going up but folks expect the deal. It's a double edged sword for sure but personally I won't expect a 50% off deal from a small business like his. I think it's terrible to make it harder on a guy just trying to provide good food at a reasonable price to begin with. Good hub, Peace!! Tom

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