Using Groupon To Market Your Business

[thealchemist]

Hi. I have a family member who started a touring business where he rents a coach bus and creates a tour to historic cities across the midwest and east coast. The business has been very lucrative and he's been able to market the business by word of mouth and ads in newspapers. However, he recently attempted offer a special on Groupon that would allow people to purchase a ticket that would cover the bus fair and a hotel room for a two day one night tour to a historic location.

It sounded good on paper, but Groupon wanted him to give buyers a 50% discount for the ticket. Once the ticket was purchased, Groupon would then take 50% of purchase price and leave my family member with only 25% of what he would normally charge for a ticket. This, of course, means he would be losing money. So my question is, to anyone who has dealt with Groupon in the past, how do companies using Groupon make a profit? And can you give any tips on how to successfully use Groupon without losing money?

Groupon is an excellent way to market a business, but if you losing money, then it's kind of pointless.

[jonathant]

I'm not quite sure why you would want to go with Groupon to market your services considering you mentioned that the business is lucrative. The only reason I could think of someone would use Groupon is to generate traffic to your business knowing that you have to take a loss.

You also pretty much answered your question on the last line of your post.

[Toby Milroy]

Yes,
I (and MANY of my clients) do a TONNNN of business with Groupon.
In one of my fitness client's businesses we've sold just over 40,000 groupons since last November. (Multi units)

I've been to their office in Manhattan several times.....most notably in their earlier days....it was an interesting experience. Basically just Row after row of tables (the white plastic folding tables you get at Lowes or Home Depot), and HUNDREDS of phone lines strewn throughout the hall linking the tables.
It was (and is) a MACHINE.

Their "standard" deal is a 50/50 split on the sale. (although they'll never tell you, but if you do SERIOUS volume with them, you can negotiate that a bit)

Anyway....GROUPON is a GREAT deal for MANY small businesses.....IF the economics "works".
One concept that EVERY small business owner should MASTER is the "MNV" or Lifetime MNV. (Marginal Net Value of a customer)
There are a LOT of factors here....but if you know what a customer is "really" worth (taking into account how frequently the will "come back" and buy again at full price, how frequently the will "refer" someone else, etc...) you can do the math and calculate what you need to make it work.

At minimum, I'd recommend structuring a "bounce back" offer that ALL the groupon folks get, a "referral system" that All groupon buyers get, and some additional set of service/upgrades/products/memberships etc that you can pitch them when they show up to accelerate the revenue per/customer and turn them into loyal, referring, returning customers.

I'd also create a "Membership" program that they all get.....where they will then get LOTS of communication from "us", offers, vacation ideas (with back end revenue streams) etc...etc...etc...

Now.....sadly, most folks who are running a small business have a hard time conceptualizing these types of systems, and executing them.
So if your family member doesn't currently have these types of systems, there is a LOT, LOT, LOT of opportunity to maximize that business!
(might be worth talking about.....)

Hope it's useful.

[huggytree]

we use groupons for restaurants a few times a year......one of our favorite pizza places was discovered this way....

I wouldn't do it for my business, but I can see it working for a new restaurant that wants to get discovered

[michaelstark61]

Well I will advice you not to go with groupon as you have to part 75% of your cost with them. Groupon is good for those who wants to establish their business, since your business is going good what the need of going to groupon.