5 Groupon Success Stories And Discount-to-Loyalty Strategies

Group-buying discount services are exploding onto the small business scene. TJ McCue looks at the positive aspects in this post.
Forbes Contributor: Makers, Inventors, Small Business, Forbes
June 15, 2011

Groupon may find itself in the dictionary soon as a replacement for the word coupon. It has become as well-known in some circles as Google, Microsoft and Amazon. Group-buying discount services are exploding onto the small business scene, but business owners have mixed, often volatile, feelings about them. I’m going to look at the positive aspects in this post.

If you don’t know much about Groupon, just use the OPEN Forum search box to the upper right of this post. You will find loads of great articles that offer instructions and some of the common mistakes.

There are two big Groupon benefits for business owners that I see: One, that you dramatically increase your visibility. Two, you have no out-of-pocket advertising expense. Okay, you may have to spend on materials or product, but if you do it right, you can at least break even and generate new business. If you follow some of these examples, you can make a Groupon offer profitable.

1. Hiatus Spa + Retreat sent me some details and these three tips stood out. The last one is my favorite.

  • Include a day-of discount, or a return-visit offer (like $20 off $100 purchase) to ensure that the next deal your guest purchases is with you—not another Groupon at a competitor.
  • For their offers, they waive the membership initiation fee to their special club. This keeps guests coming back for six months or more to enjoy the spa service of their choice.
  • If you are concerned with Groupon certificates coming in on busier days, create a better offer if redeemed during your non-busy time.

2. A fitness club leveraged a standard free pass into a revenue-generating offer. When potential new customers would inquire about signing up for a membership, this club would normally give away a free three-day pass. They realized that the free pass didn't always turn into a new member, though, so they decided to create a longer trial, but charge a reduced fee for that pass. It was a paid 15-day pass and made that one available on Groupon. It was very successful. In short, the company invented a new product from a semi-successful free product and tested it in a big way via Groupon.

3. Paige Lewis from Hairs to You shared a detailed post at FinancialBin on her company’s Groupon experience. It is worth reading. But she summarized some points in an e-mail to me:

She decided her deal would be $50 worth of services for only $25. Her company sold 92 Groupons, but only 77 redeemed (they still received the money on the others, though). Of the 77 clients they saw, seven became regular clients, bringing with them family members and friends.

Her advice? Don’t give away something for nothing. Many articles have been written about how important it is to figure out exactly how much the deal will cost you in products, time and payroll before deciding on a deal. Lewis' deal was worth $50 and most clients came in for a cut that ranged from $48-$53. So, she probably broke even on the Groupon itself, but made it up on repeat visits and word of mouth. Her other other bit of advice: Really think about the expiration date. She said a full year is too long.

4. CanvasPop is a service that helps you transform your photos onto a canvas. The company ran a Groupon, but made sure to follow one major rule: capture e-mails. As an online service, CanvasPop captured each e-mail when people signed up to redeem the Groupon on their site. They also offered a $30 gift certificate with each order. Then, to make it even more valuable, the company included a 15-percent off card that the Groupon customers could “share with a friend” to further expand the word-of mouth-effect.

5. The last success story comes from the Elkhorn Inn in Eckman, West Virginia. What I learned from their experience is that business should e flexible with Groupon offers. The inn sold a total of 82 packages, 99 percent of which went to new clients. The inn told me their philosophy is “if they love us enough to buy three Groupons so they can keep coming back to the Elkhorn Inn & bring their friends, they deserve the discount!”

Here’s the part about flexibility: The inn also chose to allow purchasers to use two Groupons simultaneously for two guest rooms, so they could come with their children or friends. When the Groupon purchasers call to book, the inn also has the chance to upsell the new customers on dinners at the Inn. They were prepared.

Groupon may not be in the dictionary yet, but it sure is helping to define local business in this crazy economy. I’m still looking for B2B Groupon examples, so please share your Groupon success story in the comments.