Just when I thought the buzz around Google’s failed purchase of Groupon couldn’t get any more absurd, I saw an interview with Groupon's CEO Andrew Mason on Charlie Rose who said, “We are going to be the savior for small business.”
In that interview, he went on to say that Groupon was “able to give one business half the number of customers in one day that the business had previously had in the previous 25 years combined.” Mason said they delivered 5,000 customers. Could any small business handle such an influx effectively?
He continued, “We want to reverse this trend of spending more and more time on the computer, and help people rediscover their cities."
While you might be one of those 40 million Groupon subscribers who enjoy getting the deal of the day for a spa or store, my opinion is that you might just be killing that spa or your small business community.
Why? Because Groupon grows at the expense of those who can least afford it: small business owners.
A recent study by Rice University’s Jones School of Business showed that coupon-clippers are not going to return and make up the difference. As quoted on the promomagazine site, in the study Dholakia wrote, “There is widespread recognition among many business owners that social promotion users are not the relational customers that they had hoped for or the ones that are necessary for their businesses’ long-term success. Instead, there is disillusionment with the extreme price-sensitive nature and transactional orientation of these consumers.”
In short, Groupons do not give business owners the profitable return customers they had hoped for.
Look at it this way: If you gave a $120 massage for $40, who would you attract but the bargain-hunters? And they won’t return because they know another Groupon will arrive in a week or two with another massage studio offering them a similar deal.
When a Facebook fan alerted me to her experience with a Groupon promotion, I was compelled to look deeper which resulted in an 11-part blog beginning with her case study and continuing to examine various aspects of the online coupon-company claims.
What happens when this concept is brought to everything we buy? Cars, real estate, education, medical services... What will happen to the value of your brand then?
Bob Phibbs is the Retail Doctor, helping businesses of all sizes grow and deliver an exceptional experience for their customers since 1994. Download a free chapter of his latest book, The Retail Doctor’s Guide to Growing Your Business (Wiley) here.