in Marketing & Media

Groupon A Good Deal For Local Merchants? Looming Data Will Tell

Groupon Offer For Maid BrigadeGroupon is killing it. It’s experiencing meteoric growth and (as of this writing) is was on the verge of a $6 billion dollar acquisition by Google. The “deal-a-day flash-sale group-buying coupon service” is rewriting the rules on local business advertising and marketing.
Groupon has been popular with consumers and businesses alike. According to many sources, the company’s annual revenues are near $1 billion $2 billion and its subscriber base tripled this summer to 35 million users. It’s impressive, and I have tremendous respect for this startup and its founders.

I’ve been intrigued with this story both as a student of the marketing industry and one of Groupon’s 35 million users. I’ve subscribed to the service for over six months, and opening the daily email has become routine morning reading. I find the tongue-in-cheek promotional emails humorous and entertaining — certainly a relief from the wasteland of dry and spammy marketing language I encounter. My primal — no, vulture-like — instinct to take advantage of a killer deal has sucked me in.

But when I step back and observe my own Groupon buying behavior, a different picture emerges. In over six months, I’ve made a total of three purchases and spent less than $200. I purchased two half-off Swedish massages from a mid-range spa, and I took advantage of the Gap’s summer promotion of $25 for $50 worth of clothing. If it weren’t for these Groupon promotions, I would never have made these purchases, and I have no plans to do any future business with these merchants. I fell for the deal, but not much else.

My experience aside, there have been abundant stories of success, failure and indifference among local merchants. But one thing is certain: Groupon has introduced a new kind of marketing to local businesses of all sizes: extreme, instant access to flash-sale promotional event opportunities that deliver a fire hose of awareness and customers to your door. With this comes the thrill of a customer avalanche, and the potential to kickstart business by converting deal hunters into repeat customers and incremental sales — hopefully enough to justify the cost of the promotion. For most businesses, these are high-stakes adrenaline shots with uncertain outcomes. Anecdotal reports suggest results are transformational for some, and not for others.

With all the hype, it’s important to remember these services represent new territory. This is a new form of marketing and there is not a lot of history or data to predict near-term impact or long-term outcome. For most businesses, these flash-sale promotions are highly experimental and packed with hopes of high, positive impact. Over time, patterns and best practices will emerge around business categories, product categories, demographics and consumer purchasing behavior. This will introduce better planning and targeting — and ultimately, better and more precise outcomes. This form of marketing will eventually become more of a commodity and less thrill and chance. It will just take time.

For consumers like me, deals eventually need to become more relevant. Considering my three small purchases in over six months, my rational side believes flash-sale coupon services are not worth my time. The creative email copy is fun, and an occasional deal is enticing. But I would like to be matched up with more relevant businesses with whom I would do repeat business. I’m short on time, and I almost feel guilty for imposing a loss on a business that I’ll never see again. Relevance will be key to the growth of this exciting new marketing category.

What’s your experience with deal-a-day coupon and flash-sale services?

This also was my latest column in MediaPost.