The Payroll Blog

News, tips, and advice for small business owners

How to Make Groupon Work for Your Small Business

Posted On
6/20/2019
By
Anne Perisho

If you’re looking for a little extra cash for your small business, you may be considering offering an attractive discount or listing a deal on Groupon. Groupon is where consumers go to find great deals on fitness classes, spa services, restaurants, and more. While offering a Groupon could be a great way to draw in some new clients for your business, there are misconceptions about its effectiveness in bringing in long-term business. There are also ways to offer deals that more directly benefit your small business, and bring new customers into your doors.

How Groupon Works

The Groupon process for small business owners is pretty straightforward; businesses will create a deal that is featured on Groupon’s website and potentially shared out in an email to prospects. When somebody purchases your deal, Groupon will keep half of the revenue, leaving business owners with the remaining revenue. This article from The Balance does a good job explaining how small business owners make money from Groupon. The article mentions an example of offering horse-riding lessons. As a small business owner, if you charge $100 for a lesson, Groupon will ask that the deal is at least 50% off so that customers can purchase the lesson for $50. From there, you will receive $25 from the sale. While this is a drastic reduction in price from the set rate of $100, it could still be extra cash flow for your business, and more importantly, increases your business’ visibility.

Biggest Hurdles With Groupon

While Groupon is great at creating foot-traffic, an article from Forbes cited a survey featuring responses from small business owners who offered Groupons displayed some surprising and alarming results. The survey found that the majority of customers who entered a business with a Groupon never returned to pay full price for the service. This can be especially frustrating for business owners because even though the Groupon worked with getting new people in the door, it didn’t turn most of them into life-long customers.

So what goes wrong? The problem generally stems from a misunderstanding of what Groupon’s role is to your business. While small business owners might turn to Groupon to meet their sales goals, they should think of the service more as a piece of an overall marketing plan to increase interest in their product or service. It’s better to think of Groupon participants not as clients but as leads. The responsibility lies with the small business owner to ‘close the sale’ by convincing these interested parties that their product is worth paying the full price.  

What You Can Do To Retain Groupon Customers

While Groupon does a great job of getting clients in your door, retaining Groupon customers comes down to offering exceptional customer service. Often, Groupon customers can have a bad reputation and therefore, are often treated differently by business owners and their employees. As a small business owner, it’s your choice to offer a deal, so you shouldn’t be upset when people want to take advantage of the deal and choose to visit your business for that reason. When Groupon customers enter your business, you want to be offering the best experience to make it as memorable as possible. For example, if you operate a restaurant, don’t limit their menu choices or water down their drinks to make up the cost difference created by the deal. Mistakes like that are a surefire way to keep customers from returning.

The most common mistake small business owners make with Groupon customers is not finding a way to keep their interest. While you don’t necessarily need to follow up with another monetary offer, it would be smart to offer them a little something to show your thanks, especially since when they return a second time they will be paying full price. If you operate a spa, perhaps you offer an add-on service the next time they come in, or a punch card granting a free service after five or ten visits. Also consider offering Groupon-esque deals if the client refers a friend to your service, like discounting both of their bills by a certain amount, even if it’s not as drastic as the original Groupon itself. Small actions like these may not only increase the amount of foot traffic in your establishment but will also likely increase loyalty to the brand itself.  

It’s also important to consider the client’s point of view and use it to adjust where you can. While you are focused on making your business profitable, if a client can only afford your service by using a Groupon, that might be telling. Keep in mind that lowering your prices might draw more people in to use your service, offsetting the dip that might come with the lower cost. It may be uncomfortable at first, but if you’re offering a great service at a knockout price, clients may be more likely to recommend you to others.

Bottom Line

Think of Groupon as a way to market your business and brand, but not the product itself. Groupon can get people interested in your product, but without you doing your part, it won’t lead to future successful sales. When used the right way, and expectations are managed on your end, Groupon can be a great tool to help you towards your business goals. Whether it’s creating new customers, increasing your business’ visibility, or acting as a cash flow buffer in a pinch, using Groupon in your small business could be a smart idea, but only if you do your part as well.