Have you been wondering how to advertise on Groupon? If so, then you’re in the right place. Advertising a deal on Groupon allows small businesses the opportunity to connect with Groupon’s 53 million+ unique users. This type of exposure can be game changing for a small business, especially one that is having a difficult time expanding their customer base and reaching new clients.
And while it’s quite possible to have a bad experience advertising on Groupon, there is also a way to use the site to increase brand recognition, drive repeat customers, and make money. It all depends on you, the type of business you own, and the strategy you put into place.
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What is Groupon?
Groupon is a daily deal website where businesses can advertise their discounted products and services to potential customers. The deals usually range from 50-70% off and a multitude of products and services are offered.
How does Groupon work?
Groupon works as a middleman. It liaisons between businesses and subscribers. Every day, Groupon sends out an email to each of its millions of subscribers. The email showcases a special, location-specific deal, or Groupon, that’s only available for a limited time. Because the deals are usually local, Groupon targets their emails to subscribers from that particular location. Consumers can also go on Groupon’s website to find deals that they are interested in purchasing for themselves or as a gift for someone else.
Unlike with traditional coupons, with Groupon, the customer must pay upfront. Groupon acts as a gift certificate. To redeem, the customer will need to provide their printed gift certificate or show the barcode on a smartphone. Most Groupons are 50% off the retail price. Discounts can vary, even up to 90% off. Once a customer purchases a Groupon, there is an additional expiration date. Whereas the deal expires typically within a week of the deal introduction, the Groupon itself has a much longer expiration date–anywhere from 6 to 12 months. Most Groupons also feature fine print that defines what’s included and excluded in the deal.
If you’re considering using Groupon, you may also want to look into Yelp. Their “Yelp Deals” program works in a similar fashion, allowing you to offer discounts to potential customers. Create an account with Yelp and you’ll get $300 in free advertising credit.
How Much Does Groupon Cost?
Groupon requires no upfront payment. This means if no one purchases your Groupon, then you don’t pay anything. Instead, Groupon takes a fee from your revenue. At the time of this writing, that fee is 50% of your total. Here’s how it works:
Your service is worth $100. You slash the price by 50% to satisfy Groupon’s discerningly frugal audience. You stand to earn $50, but Groupon takes 50% of that, leaving you with $25.
So, what is your actual cost?
Since Groupon works like a gift certificate, you still make money even if the Groupon goes unredeemed. Which, according to Yipit, is close to 20% of all Groupon sales. On unredeemed Groupons you make your cut of the sale without having to render the product or service. This can help make up for discounting and the portion that Groupon takes.
You can also incorporate strategies such as upselling your customers in order to make some of the profit back. For a restaurant, people may buy drinks (typically not included in Groupon deals) or bring additional friends which will drive the price up.
Considering the lifetime value of the customers is another factor. Typically Groupon works better for businesses like salons over restaurants because a one-time customer to a hair salon can quickly become a repeat customer. People need their haircut multiple times a year, and most are loyal to one place once they find it.
Groupon should be looked at as a marketing strategy. Groupon helps to get the customers in the door. Your challenge is upselling the customer in the short term and developing a relationship in the long term.
How to Succeed on Groupon
So how do you turn a sale that potentially puts you in the red into a profitable marketing strategy? In this next section we will walk through the steps you should take to make sure you are getting the most out of your Groupon advertisement.
Attract and Retain New Customers
Groupon’s greatest benefit is that it puts your business in front of a large local audience that you probably would not be able to reach without the website.
Attract these customers to your store by offering an enticing deal. Groupon users are trained to see big discounts, and they will probably turn their nose up at anything less than 50% off. Look at what similar companies are offering on Groupon as a barometer for what deals people expect to see from your type of business. You’ll also want to make sure that your business is well represented online.
“Don’t just assume that people will see your offer on Groupon and immediately make a purchase – most of them will visit your website, social media profiles and even read reviews before making the purchase, so it’s vital that all of these aspects of your business are up to scratch. Otherwise, it doesn’t matter how good your Groupon offer is, you won’t generate leads.”
— Finn Hayden, Mahlatini Luxury Safari
Once you’ve gotten the customers in the door with your attractive deal, it’s time to focus on retaining these customers so that you can profit from their repeat business. Here are a few actions you should take to keep people coming back:
- Provide an awesome experience: This may seem obvious, but it’s the best way to get someone to come back to your store. This not only includes the quality of the product or service itself, but also how the customer is treated while at your business. Unfortunately, some businesses treat Grouponers as second class customers because of their discount. This translates to negative customer experience, negative reviews, and a plethora of one-time customers.
- Capture email addresses: Keeping in touch with customers is a great way to keep your business top of mind. One way to do this is by regularly sending out a newsletter that provides value to your customers. Consider including deals to entice them to come back to your store. Make sure you are following email marketing best practices to ensure that people don’t want to unsubscribe.
- Ask them to follow your social media pages: You can post signs around your store that ask people to follow your pages, or ask in person. This will keep customers up to date on what’s going on with your business and encourage repeat business. Make sure you are posting regularly on social media. People won’t like your page if there is nothing interesting on it.
Once you have gotten a customer to say yes to your product, it’s easier to persuade them to buy more. Train your employees on ancillary products that work well with the product included in the deal. The goal is to get customers to spend more than the deal amount. By preparing your entire team, you will be more effective at upselling your customers.
For example, consider that you own a hair salon and our offering a discounted haircut. Try up selling customers by asking if they would like to add-on a blow out. Also, think about which hair products you can offer once the appointment is over.
Sell Extra Inventory
Another strategy is to get stagnant inventory moving by slashing prices and offering the product on Groupon. It’s better to get some revenue than no revenue. Keep in mind that this might be the first time someone is hearing about your company, so make sure that it is still a product that you are proud of and work to maintain the relationship after the deal is done.
Get More Reviews
A great side benefit of Groupon is increased social proof. People purchasing a Groupon are asked to review your service, and more (positive) reviews can lead to more business. Selling a Groupon gives you additional possibilities to get noticed. Plus, the Groupon review could potentially appear in the Google search results when someone searches for your business, which gives you an additional spot on the page.
Capitalize on Unredeemed Groupons
One way to profit is through unredeemed Groupons. According to Yipit, 20% of Groupons are never redeemed. This mean you still get paid, even though you didn’t render the service. You certainly can’t base your Groupon marketing around crossing your fingers and hoping no one shows up, but it is a consideration when using Groupon. It’s been shown that higher cost Groupons are less likely to go unredeemed, so if you are offering a $500 package, don’t expect too many your buyers not to cash in.
Which Businesses Fare Best on Groupon?
Not all types of businesses will have success on Groupon. When considering whether you should advertise on the site, consider the following questions:
Are you a new business?
Groupon is a great way to create buzz about your new business. Your deal has the potential to reach thousands of people in your local area, which is great for a company that needs to increase brand awareness. The goal is that everyone who purchases your Groupon will then tell their friends about the great new business in town.
Word of caution: If you’re a new business, you may already be struggling to pay for the upfront expenses involved with opening a store. Make sure you can handle the deep discounts required of advertising on the site.
Do you typically see repeat business?
The businesses that do best are ones that have an easy time driving repeat business from a customer. For example, think of the nature of a restaurant versus a hair salon. Someone who buys a Groupon to a fancy local restaurant is most likely purchasing it for a special occasion or a gift for someone else. People don’t tend to go to the same expensive restaurant multiple times. You do stand to gain from referrals, however getting repeat business is tricky. Therefore, restaurants actually tend to see the lowest profit from Groupon deals.
Compare this with a hair salon. People are typically loyal to a salon once they find one that suits their particular needs. Customers will visit multiple times in a year plus are likely to refer the salon to a friend. Even if you lose on the initial effort of getting the customer through the door, the lifetime value of a salon customer has the potential to be huge.
Will this cannibalize your existing business?
Another thing to consider is how offering this Groupon will affect the relationship with your current customers. If you are currently relatively busy, then the influx of customers could possibly overwhelm your staff, or even worse, push out your loyal long time customers. This is especially true for reservation based services such as a restaurant or salon. One workaround for this is to only make the Groupon valid on certain times and/or days. For example, a restaurant could offer a lunch special (a notoriously slow time) or a salon could have the deal only valid Monday through Thursday.
Evaluating your business is an important step to take before offering a Groupon deal. By asking yourself the questions above, you will have a better idea if it’s a good option for you.
Consider the type of deal that you are offering.
Groupon is not all about discounting your products or services. One offering that works well is an experience.
“I tried both offering a product and also offering classes. The product offering was great for Groupon but not good for us. People descended on our shop during the holidays and wiped out the stock that would have sold at full retail to customers. That was a “live and learn” on my part. The next time, I offered classes and that was a great success right from the start. Thousands of people came to the classes over a 5-year period and it completely changed my business. They would participate in 1-hour chocolate and wine pairing class where we talked about our business, why it was different and why our chocolate paired particularly well with wine. Then we serve 4 wines with 2 chocolates each so they can have a great experience. Once people have a unique and experience here, they become customers for life.”
— Julie Pech, Owner, The Chocolate Therapist
How To Advertise On Groupon in 3 Steps
Now that you’re ready to sign up for Groupon, here are the three easy steps you need to take:
1. Sign up on the Groupon Merchant page
Go to the Groupon Merchant signup page and choose the type of deal you would like to promote.
Fill in your information and then hit submit. They will then show you different types of deals you can promote.
2. Choose your discount
You will then be asked to enter how much the service typically costs, and how much of a discount you would like to provide. Groupon gives you a “green zone” for the discount percentage that will have optimal performance. It also tells you how much money you stand to earn for each sale.
For my example hair salon service, I inputed that the typical cost is $35 and Groupon suggested a 46-54% discount. With a 52% discount, the customer pays $17 and I would receive $8.50.
3. Work with a Groupon specialist or use their deal builder to create your ad
You’ll be able to choose your image, describe your business, choose your limitations (such as limiting one per customer) and set a launch date using the deal builder.
However, if you want to specify your fine print or change other details then you will need to speak with a specialist.
Ananda Neureither, owner of Crafts & Drafts, offers this advice when working with the Groupon specialist.
“Stay on top of the folks at Groupon! Check and re-check and then check your listing again! Each time I ran a promotion or made any changes to one, there were a LOT of mistakes! Make sure everything on your listing is correct before signing off on it.
You’ll also want to discuss with Groupon where your promotion will run and who will see the emails. For instance, my business is located in Chicago and they can target different areas of the city and suburbs, which is a very large territory, so make sure you’re targeting your ideal location.”
Depending on your location, Groupon has a waiting list and acceptance is not immediate or guaranteed. Groupon determines whether or not to accept your deal based on local client needs.
Actions to Take After Your Groupon is Posted
Once your deal is launched, make sure you are prepared for the possible influx of customers. Offering a Groupon deal will change up the day to day of your store. Consider the following points to make sure your business is not unhinged when the deal is posted.
Make sure everyone on staff is notified and properly trained.
Imagine this scenario. A new customer walks into your store and goes to pay for your product with their newly acquired Groupon. The cashier has no idea how to redeem the coupon, or insists that there are no discounts. Even if the situation is eventually sorted out, the customer will leave with a bad taste in their mouth. Therefore it’s important that everyone not only knows that the Groupon is being offered, but also how to redeem it, and what the terms are.
Don’t be caught off guard if there’s an influx of customers.
Some companies will see a huge surge of traffic from a Groupon. This is great, if you can handle it. If you’re a mom and pop shop, it may incapacitate your business or overwhelm you to the point of not being able to redeem all the Groupons at once.
The week leading up to the expiration date is typically the busiest, so make sure you have plenty of people on staff to handle the rush.
Note: Make sure you are super clear about the expiration date of your Groupon. Purchasers have already paid for your service, and you will get paid whether or not they use your service. This is great for you but unfortunate for a customer who comes in a day late. Make sure to train your employees on how to deal with this type of situation.
Cap the amount of deals sold so that you don’t run out of inventory.
You definitely don’t want to sell more of your product or service than you can produce. A good way to prevent this mismatch is to cap the number of Groupons available. If you are worried about running out of appointment/reservation times, then another smart action to take is to set up restrictions for appointment times. This will prevent a deluge of customers arriving all on one Saturday.
Advertising on Groupon is a great way to expand your audience and the reach of your business. However, because of the required discounting and the percentage that Groupon takes, it’s hard to make a profit directly from Groupon sales. Make sure you have your strategy in place for how you’ll keep customers coming back once you’ve gotten them through the door.