Jay LeonardWhen the Daily Deals Companies like Groupon and Living Social exploded in popularity during the economic downturn, they promised to bring you hundreds of new potential customers by placing your promotion in front of their millions of e-mail subscribers. Since then, the Daily Deals space has been lambasted in the media for its negative implications to small businesses.
Daily Deals ultimately are too expensive for low-margin businesses. Companies like Groupon take a 40-60% cut of your revenue on an already discounted offering (e.g. $50 worth of goods for $25). In addition, coupons are redeemed by customers who in many cases have no intention of returning to your business. In my opinion, Daily Deals can only be a valuable revenue driver to those businesses who provide service offerings, rather than goods (e.g. Dental or spa services or cooking classes rather than discounted food or beverage goods).
It’s no secret that the Daily Deals space has recently taking a downturn, as evidenced by mass layoffs at many of the top companies and declining stock prices for those that are publicly traded. To combat this, I’ve noticed a recent trend by Groupon that is even more absurd and outrageous. Simply put, Groupon is no longer just bringing you new customers but they are stealing your existing customers from you.
How you may ask? Groupon has now resorted to buying Google AdWords on your business’s name. Initially, if you were offering a 50% off Daily Deal through Groupon, they would promote this offer to their customer base that didn’t know about your business. Now, Groupon steals the customers from you that already know about your business and are actively searching for you.
Let me explain further, I’ve recently noticed that when you offer an ongoing Daily Deal, Groupon may purchase your business’s name on Google Adwords so that their Daily Deal offering will appear above your business in search results. Essentially, they are downright stealing your customers from you and making you lose out on the full-cost of the goods or services you provide.
You can find a few examples at the bottom of this article for Underseas Scuba Center, Tiki Party Boat and Orchard Rejuvenating Med Spa.
In reality, Groupon should not be earning revenue from customers who are already searching out your business, but from new customers who only purchased your Deal because they found it on Groupon. If your business is looking to offer a Groupon in the future, I would highly recommend that you explicitly require in your agreement that they CAN NOT advertise your Groupon on your business’s name.
Has your business offered a Groupon? Have you seen this take happen with your business? Feel free to leave comments below.
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This article was written for Business 2 Community by Jay Leonard.
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Given the nature of the author’s business he clearly has a conflict of interest. Unfortunately his small business will never be able to offer the scale and cost efficiency of driving new customers like Groupon and LivingSocial. He is one of the 1000’s of unscalable solutions for smaller merchants. He probably advocates that merchants spend aimlessly on Google AdWords themselves.
Franklin, my business does not offer daily deals. In fact we advocate against deep discounted daily deals. Our focus is on helping local businesses manage and promote their pre-existing daily and weekly specials, happy hours and events consistently across their own website, their social media channels and to our network of third-party websites and mobile apps that reach tens of millions of consumers. We do indeed have scale and we are also providing businesses with technology to simplify their marketing efforts. In addition, I have never advocated that local businesses spend money on Google AdWords. Lastly, we are not a competitor to Groupon. So there is no conflict here.
That being said, the point of the article is merely stating that Groupon should NOT be bidding on it’s own customers’ business names when they are offering daily deals through Groupon. The point of daily deals is to bring in new customers that otherwise wouldn’t have known about the business. If I am a consumer that is already searching on Google for the business’s name, then clearly I am a pre-existing customer and shouldn’t be seeing a Daily Deal advertisement. Not sure how much more clear I can make it other than that.
Franklin, my business does not offer daily deals. In fact we advocate against deep discounted daily deals. Our focus is on helping local businesses manage and promote their pre-existing daily and weekly specials, happy hours and events consistently across their own website, their social media channels and to our network of third-party websites and mobile apps that reach tens of millions of consumers. We do indeed have scale and the technology to simplify there marketing efforts.
That being said, the point of the article is merely stating that Groupon should NOT be bidding on it’s own customers’ business names when they are offering daily deals through Groupon. The point of daily deals is to bring in new customers that otherwise wouldn’t have known about the business. If I am a consumer that is already searching on Google for the business’s name, then clearly I am a pre-existing customer and shouldn’t be seeing a Daily Deal advertisement. Not sure how much more clear I can make it other than that.
Groupon completely did this to my business, as well as always paid me late, and sometimes for an amount much less than what I had actually earned through them that we had agreed about in our merchant agreement. This company is really bad news. Stay away from them!