groupon

Can GROUPON UK Deliver this ?

That’s the sort of claim that this business new to the UK is making.

Yes Groupon has arrived in the UK and judging by its enormous success in the USA we will all be hearing a lot more about it.

Small Businesses and Business Start-ups How will it help you?

For many it simply won’t. It can only be used effectively by certain types of business- see below for list of business types currently using this service. However I suspect that with a little imagination there are quite a few business types that have not yet discovered the Groupon way.

The benefits are:

An agreed number of customers to your Business at a set price.

money paid to you immediately – Service to be provided over an agreed period.

Customers can be added to your contact list

What does it do?

By giving their email address, the area where they live and their name members sign up to the scheme. Having done this they receive frequent emails ( Daily) each one making a different offer. The member is offered a package that would normally retail at say £100 and it is offered at £ 50. A big saving!

Having bid for a voucher for this product a minimum number of vouchers must be sold say 100. Only if the required number of vouchers are bid for does the deal go ahead and the members who were interested receive their vouchers.

Clear ? Well let’s take an imaginary example.

[hidepost=2]A meal for two people in a nice restaurant in the Leeds area normally £ 70.00 is offered at £ 29.00 provided the voucher is used in May or June.

100 vouchers must be sold for the deal to go ahead, they are and it does. The member gets a meal for less than half price.

So what’s the catch?

Basically there isn’t one. The member gets a meal at less than half price and the restaurant owner gets over 100 couples in his restaurant over a two month period. A win – win situation.

However this has to be paid for, and it is, by the business owner.

He must first of all agree a discount with Groupon and they will be looking for a voucher price which gives a  50% minimum discount from a provable previous rate. They will also want to see some written proof that this is not a fictional inflated rate.

Then Groupon have their own charge of 30% of the voucher price. Not much left for the business owner. Lets just look at that. Our £100 package offered on a £50 voucher means the business then pays 30% of their £50 to Groupon i.e. £ 15 which lets them take home £ 35 for a £100 package.

So unless your product has a 200% mark-up you are losing money

Why would a Small Business do this?

 

Earlier we mentioned three reasons but there are others:

  • The package offered is high profit item
  • This is a loss leader and it is hoped that the customers will come back or become regulars.
  • The customer will buy additional services or goods at full price during their visit.
  • To establish a new business and get it talked about.

Three of the above have a degree of justification but I would certainly question the likelihood of customers coming back. Whilst it is possible I personally think that a lot of the customers obtained by this method will resent paying full price for something that they had bought previously for much less.

Some may indeed be cheap skates who never go anywhere unless it has a large discount offer ( sorry Old Cynic talking ).

Can’t the business owner cheat a bit?

 

Well we have already mentioned inflating the original price but there are other ways. You only have to look at eBay to see this next one although on eBay you should be able to spot it before you buy.

In the states where Group buying is more established there have already been several high profile failed attempts to cheat or bend the rules.

A famous example was a florist who offered flowers worth $40 for a voucher price of  $20 but then added a $19 service and delivery charge when they arrived. Obviously Groupon will try hard to stop this sort of thing from happening in order to maintain the integrity of their product.

My advice would be “ Don’t even think about it”. The possible effects of it backfiring are far worse than anything to be gained.

What can you legitimately do to maximise your Profits?

 

Sell additional products or services. You may well do this anyway. Some examples:

  • Restaurant offers single course meal and then sells additional drinks, starters or deserts.
  • Childs entertainment centre offers children’s party for 20 sells extra places, special prizes, adult meals and drinks.
  • Hotel has the Balmoral suit empty most nights so they offer it at the price of an ordinary room – it costs little more to do and may also sell meals and drinks.
  • Theme park offers low cost admission sells food and souvenirs and admission to areas not covered.

The list is almost endless.

What businesses are currently using this selling method?

 

Currently the following categories of business are using Groupon to sell their packages.

  • Fashion & Beauty
  • Entertainment
  • Electronics
  • Diet & Fitness
  • Beer Wine & Spirits
  • Hotels & Restaurants
  • Automotive
  • Accessories
  • Consumer Packaged Goods
  • Travel
  • Financial
  • Health & Pharmaceutical

Even if your business is not covered by the above, if it will benefit you and you can come up with a package it is worth considering.

One last Point

 

If you would like to attract oversees visitors you can have your package advertised in one of the countries covered by Groupon. For example a Country Hotel close to sites of great interest to tourists could offer a one or two night stay package this could then be extended at normal rates if required.

Shop Around

Up to now we have only looked at Groupon but there are alternatives that could possibly offer better term to small businesses than those shown above. Livingsocial is the only onr that has exactly the same business model the others are largely traditional coupon producing and promoting companies. Here are some with UK involvement:

  • Livingsocial.com
  • Couponsinc.com
  • Woot.com
  • Yelp.com
  • Coupons .com

If you want to learn more join as many of the above as you want it won’t cost you anything to look.

A final word. By all means use Groupon or an alternative to promote your business but only as a part of a tactical plan. It is unlikely that you will make any profit from the sales made via this method unless you are in the type of business listed earlier. Please look at it carefully before making a move.

Brain Gregory- Set Upand Grow

www.setupandgrow.co.uk[/hidepost]

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