2 cents on Groupon

There are 2 reasons I have followed and been interested in Groupon since its early introduction.  First, I am a business owner and interested in how it benefits/hurts its participants.  Second, I love getting a good deal and half off of something I want definitely interests me.  But as I see it, Groupon just can't last forever.  I think it is extremely important for the business owner to understand exactly what they are getting into and how it will effect them.  The horror stories I have heard about businesses being overwhelmed and not being able to honor their Groupon probably stems from inexperienced or uneducated business owners.

I have debated with many people about the benefits or downsides of Groupon.  On one side, Groupon can offer your business a tremendous amount of exposure and by paying for it with your owns goods or services, you can leverage the margin you have in those goods or services.  On the other side, Groupon de-values your goods or services to the consumer.  It can make it even more difficult to receive your real pricing from the consumer if all they ever want is 50% off.

Today I saw a Groupon that I believe is a great fit for the business.  It is a local wine bar and restaurant.  The deal is $10 for $20 worth of wine.  First of all, thats a good deal for the customer.  It is something that will draw people in but if you have ever been to a wine bar, you know that won't really go too far.  That is why this is such a great fit for the business.  The key to Groupon is getting people in your door with the offer SO THAT you can sell them other goods or services.  If you are really successful, they will come back later without having a groupon.  This business was also able to promote their restaurant at the same time, and I would bet with a good plan for serving these Groupon users the business can really capitalize on the increased traffic they receive.  Plus, wine is a high margin item, so the significant discount they are giving when participating doesn't completely kill them.  Bravo to this business for making the right deal and using Groupon appropriately.

Now, there is also a restaurant that I have seen participate with Groupon multiple times, as well as a number of other similar sites.  They may be doing really well but personally, they didn't win me over.  I have been to their place twice, but both times with a Groupon.  In fact, I think there food is worth what I pay for the groupon.  So they have completely lost with me, I hardly ever spend more than the certificate amount and I haven't been back since using them.  I'm sure they won others over but I'd be curious to know the real details/success/failure of their experience.

So I love Groupon.  I love getting half price.  And as a business owner I try to keep in mind they are trying to make money as well.  But I have to be impressed.  I have to enjoy my experience.  I have to value the goods or services.

We shall see how long businesses can afford to advertise this way and if the business model works long term.  For now I'll continue snatching the deals that catch my interest!