More and more small businesses are taking the same approach as Gino’s East and saying no thanks to Groupon (Image credit: Socialshout.wordpress.com).
Somewhere, someone at Google was smiling last week as Groupon’s stock fell 30 percent to it’s lowest price since IPO — below $3. But it only takes a quick review of Groupon’s business model to make you scratch your head and wonder what that someone smiling was thinking when Google offered to buy Groupon in late 2010 for $6 billion.
It’s safe to say that at the height of Groupon’s popularity, almost everyone, even Google, bought into the hype. Trouble is, you can’t build a successful business on hype. Long-term growth requires an actual investment in something much more tangible — your customers. From the Chicago Tribune story:
A Raymond James survey of roughly 115 merchants that used daily deals services during the fall found that 39 percent of merchants said they were not likely to run another Groupon promotion over the next couple of years. The top reasons cited were high commission rate and low rate of repeat customers gained through offering a promotion.
That’s the problem Groupon’s had all along. The company has never seemed to realize that its core customer is not the individuals who sign up to receive daily deal emails, but the small businesses it claims to target. Yes, the same small businesses that invested in something that looked and sounded to good to be true and then found out it was. The same small businesses that lost significant amounts of money to new customers who only came for the one-time deal, didn’t spend a dollar more and never really planned on coming back.
Now you can argue these small businesses should have known better. I did in a post last year when I said I’d never recommend Groupon to any of my clients again until something in their business model changed. Should smart, savvy business owners have been able to see that running a Groupon was nothing more than a marketing tactic with no guarantee of forming actual customer relationships?
Maybe. But most didn’t. And Groupon did nothing to help them see it or provide value when their one-day coupon party was over, which is why the company is in the shape it’s in. Maybe, for example, Groupon should have been thinking about how to get customer emails for its small business clients — and not just its own use — so those companies could remarket to their new customers and perhaps turn a deal into a relationship.
Every dog has its day. There are tons of one-hit wonders. But really successful brands stand out because they make an investment beyond the hype that shows their in it for the long haul. They invest in their customers…something Groupon has still to do.
Nicely put. Groupon needing to get a grip on.
A savvy small business would award its Groupon customers with "VIP cards" for extra $ off on bundled services, or punch cards for rewards after x number of purchases, would collect e-mails from them, collect data from Groupon about where else their customers shopped, and offer Groupon customers $ off for referring friends as new customers. Friends who are willing to pay full price.
@Go2Juliet So a savvy company would launch a Rewards program...right? Agree, Groupon could have built its biz model on facilitating rewards programs and the benefits for companies that come with them -- many of which you highlighted above. That's where the not understanding who its actual customers are burned Groupon.