Being Cheryl: Columbus Social Media and Random Humor

It might be A Good Idea to use a group buying discount site like Groupon for your business.

Let’s look at the couponing model you may be more familiar with, for comparison:

Say you run a coupon in your local newspaper for 30% off at your restaurant. The newspaper has a circulation of 1,000.

• 100 people clip the coupon and come into your restaurant as a result.
• 300 people notice the advertisement for the restaurant, but don’t clip the coupon – some get a brand impression of your restaurant, and 50 of those people come into your restaurant at a later date, even without the coupon.
• 600 people never even see the ad.

Those numbers were pulled out of my ass, by the way. I have no idea what the direct response rate is for your local newspaper. The point is that you have to pay, up-front, for NOT reaching those 600 people and likely not impacting another 250. You have no assurance that ANYONE will see, or clip, your coupon.

The couponing model is completely different with Groupon and “clone” sites like MyEZDeal and Eversave. You offer your product or service at an extremely discounted rate (50-70% off usually) taking advantage of the distribution power of the site’s mailing lists and the ability of the deal to spread virally through social media. You don’t pay ANYTHING for people who never view the offer, or for people who view but never purchase the offer, but who may still develop brand recognition. Your only cost is a percentage of your sales, and some revenue loss from the discount. You only pay for people who have paid something to come to your restaurant (or salon, or bowling alley, etc.) Some sites like Eversave and Faveroo (Columbus-only, coming soon) even donate a portion of their cut to charity.

Say you use Faveroo, which we will assume has an e-mail database of 100 people

• 100 people see your offer, and brand, in their inbox
• 40 buy the offer
• 20 of them re-post the offer on Twitter and Facebook. Assume each of them has at least 100 friends, giving a potential brand impression for 2,000+ people.
• 30 people who see the offer via Twitter or Facebook in-turn buy the offer. Some of those people re-post the offer to their 100+ friends.
• While 2,100+ people may have received an impression from your brand, you only pay for the 70 who have spent money to come into your business.

Do you see the potential here? Good.

Keep in mind…

• Don’t create a deal that will bankrupt you. I’ve heard stories from multiple people about a certain local restaurant that launched a Groupon deal and then refused to accept the vouchers, angrily proclaiming that the deal was putting her out of business. (By the way, if that ever happens, Groupon and most of the clones will refund you.) A lot of people are going to buy your offer at the discounted rate. Take your costs into consideration.
• Be aware of the long-term. A customer who purchases a voucher to your business can wait up to a year to redeem it – they’re loaning you payment in exchange for product in the future. Don’t forget about the 500 people you owe salsa lessons to in 9 months.

Keeping the above two tips in mind should keep you away from a situation like this: (NSFW language)

God bless the Boondocks.

I haven’t yet had a chance to set up a deal for a client on a group buying site, but I’ve got a client currently through Social Business Strategies we’re planning to implement this for, and I’ll be sure to share the results.

Have you used a Groupon-esque site for your business? What results have you seen? Or why have you avoided group discount sites?