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Aug

17

2012

Inbound Marketing: Is Groupon for Business Worth the Risk?

Inbound Marketing

I do agency work here at Mojo, but on the side I’ve started applying what I’ve learned as an internet marketer to help my mom’s competitive swimming store, Xtreme Swim, through a rough patch. She has a limited budget, as many small businesses do, and almost no budget for marketing. Inbound marketing principles, like what we do at mojo, can be applied to amazing success in the long run, but how do you bring in business in the short term? How do you bring in a few extra sales to help weather tough times?

Building social was the beginning. Promoting it was the second step (Hey, go help my mom out! Like Xtreme Swim on Facebook!). But my advertising was limited by free credits I could find, and now it’s all resting on organic. Where do I go next, is the question—and lately I’ve been considering Groupon.

The Bad and The Ugly

Now, anyone who knows me knows I hate groupon, and I’ll go on a small little rant why. Before I was a marketer, I was a waiter and sometimes bartender at a sushi joint that ran Groupon specials. Lots of them, and often. For the business we can only assume that it was profitable for the owners, because it certainly brought in business—but for the waitstaff, we were miserable. Groupon customers typically don’t tip well; it was common for someone to buy a $70 meal, use their $60 groupon, and tip on the $10, which made times tough.

And the customers who did come in on groupon were almost never happy. They would always neglect (or conveniently forget) the limitations they agreed to when purchasing, and become enraged when we explained that, no, the groupon cannot be applied to alcoholic beverages because of state code. This lead to extremely poor online reviews (Groupon reviewers are very vocal, and are on average much more negative on average) which lead to fewer regulars and soon Groupon was the majority of business. Vicious, vicious cycle.

The Inbound Marketing Good

So why would I consider Groupon for a swimming retail store? Well, because it’s retail—nobody is working off tips, and you don’t have all the expectations that come with a dining experience. If the store is well organized, product is stocked, and the staff is helpful, then theoretically you can win big. A well planned groupon campaign in that case will always be profitable because you’re working with hard numbers. Sometimes that will be extremely marginal profit to the tune of just a few dollars, but you’re gambling on the fact that they *might* decide to return in the future. I consider it a bit like a convoluted advertising campaign—it’s not about making money, it’s about raising awareness.

Here’s the potential I see though, and this is where my Inbound Marketing side kicks in. Everyone who walks in that store is a potential social media contact. Groupon users are on the whole very well connected online. If you’re a business, have those “Check In on Foursquare” and “Like Us On Facebook” signs out. Capture their email addresses at the cash register for nurturing campaigns and future offers, because those sales, even if they aren’t profitable, can be brought in on your own special offers in the future—deals through facebook, email, foursquare, deals that are on your terms, and on which you won’t have to pay half of profits to Groupon. That’s where the real potential is. If you’re letting people walk into your store with a Groupon and you aren’t capturing their information in some way as a lead, then don’t expect them to ever return. It’s that simple.

So in the case of Xtreme Swim, I’ll probably go at least as far as talking to a Groupon rep and see what kind of deal can be worked out. But, as I said, it’s a gamble. If you’re a business and you don’t think you can confidently pull off 3-4 times your expected demand, and with a smile, then don’t do it. There’s plenty of Groupon horror stories out there about businesses who weren’t ready for the huge amount of customers walking in the door. That only leads to negative reviews, and potentially lost profits.

Bottom line: If you’re retail, or you sell a service, explore Groupon carefully. If you’re in the food industry, save yourself and your staff a terrible headache, and find other ways to market.

Inbound Marketing 2014 Guide from Mojo Media Labs

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