Groupon and living social – what’s the deal?

You might be asking: What’s the deal with these deal-of-the-day sites?
Groupon and LivingSocial are daily coupon or “deal-of-the-day” businesses. How it works: as a consumer, you sign-up and they send you an email every day that offers a special deal on a local product or service.
Typically the deal is 50-70% off the normal everyday price. If you choose to purchase the coupon, you purchase it through Groupon or Livingsocial, then redeem it at the place of business.

Consumers love this because the discounts are deep and they are legitimate (not some discount on an artificially inflated price).

The great thing about this service from a business-owner perspective is that most businesses can get on the email blast for a coupon. And, both Groupon and LivingSocial have huge emails lists. This has the potential to expose your business to a huge new audience. Sounds perfect doesn’t it?

However, there is a dark side to using these services. The dark side is the profit margin…..or lack thereof for local businesses. Typically, these services ask that you provide a minimum of 50% off in order to get a listing. Then, they typically charge you 50% of your take from the coupon orders. Thus, you will typically get only 25% of your normal price for each sale!

For some businesses, they can still make money on 25% of normal price, however most businesses cannot. Especially in this economic climate where many businesses are surviving on razor thin margins.

How can my business make money using Groupon and/or LivingSocial?

Well, in fact you can make money using these services if you know what you are doing. However, it’s highly probable that you will not make much or any on the initial coupon offering.

Here is what you want to do. You have to capture the customer in your customer database and try to squeeze as much lifetime value out of them as you can.

Here is how it works: You offer a coupon on a product or service you provide, to Groupon and/or LivingSocial. Try to negotiate with them the best possible terms for your deal. If you can’t afford 50% split, tell them you can only do 60/40 (with you keeping the 60% of course).

Then, set-up a capture database to get all purchasers into your sales funnel. To do this, for all people that purchase the coupon, set-up a special web page on which they are required redeem their coupon. You must require them to go to the page to redeem it by entering their name and email address (or additional information if you choose). They will be happy to do this as they just got 50% off.

Then, as their coupon is redeemed, you may or may not make money as I mentioned earlier. However, now you have them in your database and you can develop a relationship with them over time by email.

To do this, don’t send promotional emails every day. Send them real valuable and/or interesting information every week. Then, when you have a special deal or coupon, send them that by email (or by mail if you decided to ask for their mailing address too when they signed-in earlier).

By using this method, you avoid the problem that most people have in that their coupon is used for a one-time purchase and the customer is lost. Now, you have a new list of customers that like your product or service. Then you can market to them for years and thus get repeat business from all of those people that came to you from Groupon and LivingSocial.

If you are interested in trying this technique but aren’t sure how to pull it off, contact eComand Solutions and we can help you succeed!