Groupon: Good for guests, Bad for Business

Image courtesy of Google images

We all love a to save some money these days and companies like Groupon and Living Social benefit us as consumers greatly.

If you're unfamiliar with how Groupon works, I'll explain. Businesses offer a discount to their product or service to customers. They set an amount of purchases that have to be made and if there are enough people to buy the offer then the "deal is on." The concept is that a large amount of purchases will make up for the discount they are giving.

The 'Benefits' to the Business

These businesses benefit from inflated sales for a period of time (or so you think). The true benefit they get is the amount of NEW customers to buy their product. When a Groupon representative talks with you this is one of their biggest selling points. They tell you about all of the new faces you'll see and after testing your AMAZING product they will keep coming back. It's true! You WILL see a lot of new people.

BUT, the truth about all those new customers is that the majority of them will not come back without another discount. This is a proven fact and I invite you to even ask these businesses. There are a few reasons why they won't come back:

• They've come to expect a discount and they will wait for your next Groupon offer.
• They like to try new things, but your product just wasn't to their liking. (Surprise, not EVERYONE likes your product)
• They have always wanted to try your product, but the price without a discount is just way too high, so they won't be coming back.

Bad for Business

So what's so bad about offering a discount on Groupon? It's a rip off! Most business owners are blinded by the large amount of new customers that they think they're getting a great deal. In reality, they are still not making full profit on all of those sales. Most offers are 40-60% off their regular price. If a business could live on selling their product all the time at that rate then they shouldn't be charging the original price to begin with.

The other thing most people don't think about with regards to Groupon is they have to be able to make money, too. The way Groupon makes their money is by taking a percentage (40-60%) of the money customers pay for YOUR offer. Let me repeat. They take a cut from your already discounted price!

Let's use one of my favorite offers for an example, 18 holes of Golf with cart rental at 50% off.

Each Offer:

Regular price of such offer is $50

Golf Course through Groupon offers $25

Groupon takes 50% of offer price = $12.50

$50 x 50% = $25

$25 x 50% = $12.50

$25 - $12.50 = $12.50

Total amount business receives = $12.50 or 25%

In the end, Golf Course gave their product away for 75% off!

As a consumer I'm going to keep buying Groupon offers every week because they save me a bunch of money and I get my fix of eating out and trying new things. It's awesome and you know it! But as a professional and someone who helps small businesses with their branding and growth I will absolutely never advise a business owner participate in Groupon. There are countless ways to get exposure and new customers through your doors without needing to discount your product and without giving money away to another company.

If you want some advice to get new customers and keep them loyal or grow your brand please contact me and I'll gladly help. Until next time... #BeAmbitious

Does social media advertising actually work?

Does advertising on social media actually work?

I've been asked this question multiple times by clients. It's a very difficult question to answer, but I will give it my best shot and try to be as clear as possible.

What is social media advertising?

First of all, let me be clear about what I mean when I say social media advertising. There are a couple forms of social media advertising that can easily be confused.

The first form is the most common where your business has a Facebook or Twitter page and you post sales and special deals on your pages for your followers to see.

The other form, which I will focus on more, is the actual purchasing of post views. Your business page can create ads where you pay for each view or 'impression' the ad gets. The best part about these ads is you can target the exact audience you want to reach. Even if it's a 26 year old mother who likes sports and recently purchased a new phone in the small town of Denison, Iowa. (Shout out to my hometown!)

So does it work?

The short answer is, yes, but maybe not how you want it to work. Here's why:

A lot of businesses have the misconception that getting more followers to your social media pages means more customers in your store. This is probably one of the biggest mistakes in marketing. Social media for businesses is not meant for a channel of advertising. Advertising is is a bi-product of social media.

All forms of social media advertising are beneficial to your business for one main reason... exposure. The more your business name and identity are seen by your target audience the better your chance to make an impact. Unfortunately that does not mean those new followers will immediately turn into paying customers. So really, even though you can have precise audience targeting with social media ads, there is still the same guarantee, or lack thereof, as other forms of advertising. In these terms, no, social media advertising does not work if your goal is to get immediate reaction on in-store sales.

Make a plan for success.

It is possible to have effective social media advertising. You just need to adjust your purpose with Facebook and Twitter to be in line with your overall marketing goals. Make a plan and stick to your plan.

The number one goal for every business on social media should be to build interaction and loyalty in your brand. In today's society we are trained to expect advertising in every setting. And, with our capabilities with the internet and search engines customers are smarter than they have ever been. This is a good thing because now we can focus less on teaching the viewer and more time relating to them. Use your social media to let your guard down with your business (but don't be too loose like this disaster). By interacting with your customers you're building trust and a bond between them and your brand. Relationships are the most powerful branding tool.

Overall, I do suggest using social media for your business in almost any case. It's a very powerful tool and there's so much you can do with it just by experimenting. It's an easy way to gain exposure and even more, get to know who your most loyal customers are and what your customers truly think of your brand.

If you're not quite sure how to make the most of your social media, send me a message and I will give you some pointers to get started. You can email me or visit my website here.

Good luck! As always #BeAmbitious.