At this point in time, it’s probably pretty safe to assume that almost everyone has at least heard of popular social couponing sites like Groupon or LivingSocial, if not cashed in on one. In fact, I plan on using one tonight for $10 worth of food at one of my favorite local burger joints here in Portsmouth, Lexie’s Joint. While coupons can certainly increase foot traffic, small businesses should be careful about how and when they make use of online coupons.
For many, the benefits are obvious. Featuring your small business on a hugely popular social couponing site puts you immediately in front of hundreds or thousands of eyeballs, a mass of potential customers that may have never even heard of you before. That’s huge. Not to mention, a surge in foot traffic is almost a given.
But, many fail to account for the dangers of offering such a coupon to your customers. Before even thinking about signing with Groupon, or creating any coupon for that matter, do a ton of research. The key here is knowing your location’s sales numbers and traffic patterns. There is no point in driving a large number of customers into your diner during the bustling weekend brunch hours. In fact, this could be disastrous – your staff will likely not be able to handle the influx and your customer service will take a nose dive. If anything, create a coupon that is only valid during your slow times, and even then insist on putting a cap on the number of coupons that can be sold.
The major draw to sites like Groupon is without a doubt the deep discounts it promises, usually around 50-75% off full price. Be sure that your profit margins are high enough to warrant such a huge discount (and remember, Groupon takes a cut too), or be certain you can rely on add-on items to make up the lost revenue. For most small businesses, this is near impossible and they wind up losing money.
If you must try coupons at your small business, it’s probably a better idea to forgo the Groupon route altogether and instead offer a coupon through your own social media networks or website, where you’ll have more control of the deal. Instead of practically giving away your key products, consider offering your customers something else that doesn’t cost you much, like free breakfast at your hotel instead of a free night’s stay or a free order of fries instead of a free large pizza.
Have you tried your hand at a Groupon deal?