Launched in November 2008 and now serving over 25 million email subscribers (and growing at a rate of 2 million new subscribers a month) in over 170 cities in 22 countries, deal-a-day local shopping site Groupon.com is the rave these days. So much so that the word groupon anxiety – the anxiety of potential customers losing sleep over the new groupon deal that will be released after 1 AM – has been officially introduced into the urban dictionary.
So as far as the consumers are concerned, groupon is a smashing hit. But is that the case for the other side too? Are the small business owners who are offering their deals on groupon.com at very steep discounts (50% to 90% off as groupon.com proudly advertises) really getting what they desire? Are they making money or losing money on the deal? Are they able to capture new customers or are they losing the existing customer base because of the rush on the deal day?
Recently, Rice University associate professor Utpal Dholakia published a report titled “How Effective Are Groupon Promotions for Businesses?” in which he documented his findings of a study based on interviews with 150 businesses in 19 American cities and 13 product categories that ran Groupon promotions between June 2009 and August 2010. The results are somewhat alarming and quoted in a related NYTimes blog post (below).
As a small business owner or a service provider, can you really make groupon work to your advantage too? NYTimes reporter Jay Goltz thinks you can, and breaks it down with some real numbers in a practical example in his article titled “Doing the Math on a Groupon Deal“. He shows you how you can either lose money and get nothing, or make some money and gain a few new customers, depending on how you structure your groupon deal.
Check it out and do the math yourself for the small business or service you have, before embarking on a deal. The numbers you come up with may either surprise you, or shock you!