Groupon Does Not In Itself Create Automatic Long-term Customers.

January 31, 2012

Marketing plans and acquisition tactics for Groupon and Daily Deal Sites.

By Maureen McCabe

As a business owner you must carefully evaluate your participation in deep discount or ‘daily deal’ coupon websites such as Groupon or WagJag. Do not confuse an acquisition tactic – getting new customers – with generating long-term profitable customers.

You may be someone who has got a great deal on one of those sites or have considered buying a deal. Like me, you are willing to travel a little farther than normal to save between 50-90% off the regular price. Or perhaps you purchased the deal because you would like try the product or service – regardless of whether you have any intention of making a repeat purchase from that business.

There are many companies that offer daily deals. In addition to offering a deep discount, you must pay a 40-50% commission for each deal sold. Frequently, you will end up selling the product at a loss or very close to it. If you provide a service you might think it’s just your time – you may want to think again.

If you want to generate a profit from your deal, there are three critical steps you must evaluate before signing up.

1. You must be able to meet the demand, provide a quality product, and give amazing service to ensure you give the customer a reason to return and purchase your product again.
2. You need to develop a fantastic ‘repeat sales’ marketing strategy and plan before your deal is launched. (Refer to the examples below.)
3. You need to have a process in place to track the purchases for each customer – how many made a second purchase, third purchase? What is the lifetime value of each customer?

Tip: If you cannot measure your results, how do you know if you were successful? You need metrics to determine if you made a sound business judgment to invest your time and money into the deal – not just a ‘gut feeling.’

The following two business owners would have benefited from a cost-effective ‘repeat sales’ marketing strategy and plan.

1. Bakery
   I saw a sticker that a baker uses on her cake boxes. It was so small that I could read neither the company website nor phone number without a magnifying glass. I am not exaggerating – well, maybe a little. She used the label on a box sold to Groupon customers. NOTE: She neither handed out a business card nor had a follow-up marketing plan for repeat sales. She was surprised by the lack of follow-on sales – are you?
2. Dry Cleaner
   The owner of a dry cleaning company contacted me for a free no-obligation marketing consultation. He wanted my opinion on daily deal discount websites. At the end of the conversation he summed up his plan – “I don’t need to offer the customer a discount to come back – they should just want to use my service because we do great work.” He said that he would be interested in working with me if he didn’t get many repeat sales.I was curious and called him two months later. The majority of the coupons were redeemed within a month. He got few repeat sales and wanted to hire me for three hours to develop his strategy to get these people back – and wanted me to guarantee my results. With modesty, I’m good at what I do – but no one can perform miracles after the fact.

The key message – the baker and dry cleaner needed a repeat sales strategy and plan before they launched their deals. Perhaps they should have offered a smaller discount coupon (e.g. 20% off) at the time of purchase. It would have encouraged the customer to return on a different day to buy more. A personal phone call or an email might have enticed them to make a second purchase.

Here’s a great article by Rick Shea, President of Optiv8 Consulting – it reinforces my message that a strategy and marketing plan are needed: Do Daily Deal Coupons Work? Read the article, Do daily deal coupons work?

Did you know that the majority of business owners who participated in a deal never participated in another one? Bottom line if you don’t have a strategy and plan to obtain repeat customers, perhaps Groupon will be the only one that generates a profit on your deal!

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