As a local business one of the hardest avenues to break into is successful advertising. Without the advertising there would be no business regardless of how popular your shop or restaurant might be. Many people turn to local newspapers or pamphlets to promote the business but now we have Groupon.
Groupon is a viral website designed to “promote” business deals. The deals revolve around receiving $30 worth of merchandise from a store for $15. The $15 difference is split between the business and Groupon. This means for restaurants who want to promote their business are spending $7 to give people $23 worth of food. The problem is that the community on Groupon is set by frequent customers of the businesses. It seems that the everyday person who is looking for a new place to eat will not be on Groupon hoping that a new restaurant that they like will appear on the daily deal. What does this mean for you as a business?
The customer base you already established is getting cheaper food. The demand of your restaurant is already set because they are frequent customers. You didn’t need to give them a big coupon for their return business. The design of Groupon is appealing but when stepping back as a business you can realize the costs greatly out weight the benefits. Try promoting coupons the old fashion way, because this allows the profits to not have to go through a 3rd part company like Groupon and you can set what deals you want to a brand new set of customers.
So when is Groupon benefiting business? Any type of business that sells expensive merchandise and can afford people to save $15 dollars on a $200 purchase are in the clear. Then Groupon acts like your typical coupon which segregates people with different elasticity of demand for a certain object. Someone who is willing to print off the coupon online already knows about your business. Someone who walks in off the street might have seen an Ad in a news paper but more often than not want a certain item are are unlikely to go to Groupon.
For the time being Groupon is an ideal fad for businesses and people who don’t understand the economic thinking behind the website. They are literally doing nothing and receiving a billion dollars a year in revenue. People who frequent Groupon are not looking for new and exciting businesses but instead their old traditional spots that might appear in the deal.