If you’ve ever looked for a deal on travel or discounts for local hot spots, you’re probably familiar with Groupon. It’s one of the most popular daily discount sites and receives hundreds of millions of visitors every month.
Plenty of businesses, both big and small, look to Groupon as their potential saving grace when sales start to drop. But for every successful Groupon adventure you’ve heard, there are dozens more that tell a different story. Keep reading to learn how sites like Groupon work, what they mean for small business, and how you can skip the daily discount sites and still grow your business.
From a consumer’s point of view, Groupon is great. All you have to do is log on, search for a product or service, and see what crazy deals come up. Most seem too good to be true ($500 for an all-inclusive 10-day trip?) and common sense often whispers concern. This whisper should definitely be listened to if you’re a business looking to promote your product on the discount site.
Their business model is simple. Businesses come to Groupon and set up an ad, which can either be local or available to consumers all over the globe. These ads can promote almost anything, including travel packages, beauty products, activities, restaurants, and household necessities. Products and services are then marked down (usually by at least half) so that consumers are driven to buy.
Why would companies do such a thing? There are several reasons. Deeply discounting a product can clear old inventory or test the market for a new product. For time sensitive events, discounting tickets can fill the seats and restaurant discounts can help new dining establishments get the word out about their menu and services.
But here’s where it gets a little sticky for merchants. Groupon also needs to make money and they don’t rely on consumers to pay extra (even though they’re the ones getting the extreme discounts). Instead, the merchants split their earnings with Groupon.
For example, a company selling a product that normally retails for a dollar would discount it to 50 cents on Groupon. For each sold, they would pocket around 25 cents with Groupon taking the rest.
Even if you hold no professional training in business, common sense says this isn’t the best way to boost sales.
Why You Need to Consider Groupon Alternatives
If you still think Groupon is your best option for making sales, consider these fast facts.
You Could Lose It All
Selling hundreds or even thousands of products or service packages through Groupon ads sounds like it would be great for business. But for some, like this bakery in London, such a frenzy of new customers can send you into a downward spiral. With the need to suddenly purchase new products or hire extra employees to handle the rush, combined with low profits, you can find yourself on the path to financial disaster.
Hurts Your Brand
One of the best lessons you can learn in business is to know and understand the value you bring to clients. So if you know that you’re underpricing yourself, you could be helping the public view your brand as less than what it’s truly worth. This can damage your reputation and you might not recover.
Heavy Discounts
Here’s the obvious issue with sites like Groupon. The discounts are absolutely insane. When you’re only pocketing 20 cents on the dollar, it can be nearly impossible to even break even. There’s a good chance you’ll be losing money. Even if you’re bringing customers in the door, you might not be doing your company any favors.
Less Than Ideal Clientele
People who visit discount sites are looking for deals, and crazy Groupon type deals at that. Chances are that once your discount is over, they won’t be interested in coming back and paying full price. Because they’ve experienced your product or service at a steep discount, paying full price can be nearly impossible for them to swallow and they’ll move on to the next provider
Damaged Relationships
If you currently have a stream of steady customers, they could be upset with discounts they see or hear about through Groupon. Imagine paying a certain price for your daily cup of coffee for years and then find out that people who have never stepped foot into your favorite coffee shop are suddenly able to get their beverage for half price. When customers feel like their loyalty doesn’t matter to you, they’ll move on.
Finally, don’t only consider the issues your business could experience with Groupon but also those that consumers could have. Research shows that customers have had issues with false advertising from Groupon and that their customer service is less than adequate. Unfortunately, a poor experience with Groupon could lead a potential customer to associate poor customer service with your company, even if they never reach out to you directly for help.
Best Alternatives to Groupon
When it comes to Groupon type sites, there are not many stories of success for small businesses. So instead of splitting already shameful profits with such a company, consider your Groupon alternatives. There are several sites that offer a similar business model, like LivingSocial, Yipit, or Woot. But when it comes to finding a site that offers equal benefits for both merchants and consumers, check out one of the best Groupon alternatives – Tradepay!
When you join Tradepay (it’s FREE), you’ll be able to advertise your business or services (again, for free) to an entirely new clientele base. Because Tradepay is a business to business platform, you’ll be reaching the best group of people to help your business grow.
When someone decides to make a purchase from your company, they’ll pay with 60% cash and 40% Trade Dollars. Trade Dollars can be earned in three ways:
How does this help small business? By still receiving 60% cash for their goods or services, they’re pocketing much more than what they would have with Groupon like websites. With the accumulation of Trade Dollars, you can either purchase services that can help your business or stock the shelves with new inventory. A sale on Groupon doesn’t leave you with any sort of opportunity like this.
Want to learn more? Head on over to Tradepay where you can learn more about the innovative B2B platform. Remember, you can sign up for free and do a little exploring to see how you can protect the value of your business and avoid selling out to companies like Groupon who don’t have your best interest at heart.
