Posted on | October 20, 2010 | 3 Comments
How to set-up / execute a Groupon offering?
The so called group buying phenomenon which was fueled by Groupon.com created a new way of promotion. However, it is unfortunate to see some companies failing terribly on group buying promotions. As the recent study from Rice University (Utpal Dholakia) reports 32% of all campaigns on Groupon are unprofitable for businesses*.
Below, you can find the top 12 tactics that you should remember when setting up and executing your group buying campaign:
1) Have a correct reason (see Top five reasons you should offer a Groupon promotion)
2) Think about your brand value and positioning; if your business has a luxury perception (i.e. your regular restaurants clients value the ambiance and they are here for people watching and are insulted by the bargain shopper clientele) and make sure you are not destroying value with this campaign
3) Don’t expect to produce repeat customers with your group buying promotion (You are getting “deal chasers”, 59% of the clients will not spending beyond your promotions face value and 75% of the Groupon clients will not buy full price at your company in the future*)
4) It’s very important to know the medium before utilizing it, therefore, first purchase & use a promotion as a buyer and if possible talk to somebody who offered a Groupon promotion before
5) Cannibalization has to be low; if you think most of your customers are on Groupon, don’t even bother giving a group promotion (cannibalization of your current sales will not only hurt you financially, on top of it, the lower price will destroy your perceived value)
6) Cover your variable costs, make your financial analysis correct, don’t get bankrupt
7) Make sure your quality doesn’t drop; If the increased utilization with Groupon clients will lower the quality of your service or product, then you might suffer even more in the long run, due to this promotion
8) Focus on employee morale (higher utilization will increase the work load; lower tipping in case of service might be another problem)
9) Train your workforce for the new “deal chaser” crowd; frictions between stuff & Groupon clients might lead to negative customer feedbacks on the web
10) Be careful on multiple uses of promotions (re-printing); it is a good idea to create a code database and checking code before usage (i.e. at reservation stage)
11) Target your campaign correctly; if you are providing value to a geographic region understand the geographical focus of the group buying site you are using. Are national buyers a disaster for you? Answer this question before you set-up your campaign
12) Be careful if you have given other promotions; even though you made it crystal clear that other promotions or offers are not valid, the “deal chaser” crowd will upset you by requesting multiple promotions. This will both have its impacts on employee morale and customer satisfaction as mentioned above (A large printed clause on this, close to cash register, will be very useful)