Groupon: Good or Bad for Small Businesses?

Last year, Groupon CEO Andrew Mason told Charlie Rose in an interview, "We’re the savior for small businesses. For consumers, we want to reverse this trend of spending more and more time on the computer, and help people rediscover their cities." He Later added, "We found a way to make the coupon cool."

It’s hard to argue with that last part. Groupon has done something right to garner a huge amount of consumer interest, whether or not you’re a regular user of the service, but what about the whole "savior for small businesses" thing?

Groupon and similar services can be great to get a bunch of customers really quickly, but it’s not all rosy.

Ilie Mitaru at PCWorld has an interesting article saying that "Groupon sucks for small businesses," for seven reasons:

1. You’ll lose money
2. The split is actually more than half
3. It dilutes your brand
4. Poor user experience
5. You’ll upset the wrong customers
6. You lose brand control
7. These aren’t your customers anyway.

I’ll let you read Mitaru’s article for the logic behind each of these, and I don’t necessarily agree with all of them, but they are points worthy of discussion either way.

As Groupon grows and other similar services come out of the woodwork, businesses will feel more pressure to use them, especially as their competitors do.

Last week, Groupon filed for its IPO at $750 million. Competitors say this legitimizes the industry, and accentuates the need for comprehensive deals aggregation.

There are 12 Comments. Add Yours.

daniel
June 15, 2011 at 8:15 am

I’d go with bad. Although it might be good when selling over-capacities. But only for certain companies this is the case. I wrote a blog post as well on this subject:

http://www.social-brand-value.com/2011/06/15/groupon-destroyes-your-business/
Stephen
June 13, 2011 at 9:54 am

A currently free alternative to Groupon, Living Social, and others is Hometown Freebies (http://hometown-freebies.com). Registering to gain entrance into their business directory is free. Posting offers/deals to the public is free. Being featured to their subscriber list is free. They do not take any part of the revenue from small businesses. Businesses get ALL revenue!

It’s a great site and alternative to Groupon and other daily deal sites. They just need more small businesses to sign up and get involved.
Frederik Van Lierde
February 1, 2012 at 4:37 pm

I was lucky to buy a company who was was almost bankrupt due wrong decissions to use those Groupon alike services.

When I took over, we stopped all the contracts and now I am using step by step those deas to make the Spa even more visible.

It is BAD because when you do a wrong deal, you will be in trouble with cash-flow and big loss at the end.

It is Good when you follow some principles to link the customers realy to your company ()this is your jobm not Groupons jib as for them they don’t care and preferrable not linked to you as theywant the customers to keep on buying their coupons,

Anyway, I posted 4 tips to be prepared for a Groupon deal on http://wp.me/pzuaJ-74

Goodluck all.
Use A Deal of the Day
July 23, 2011 at 7:58 pm

It’s bad as stated many times if a small business cannot negotiate for a limited buys because then over-capacity and under-service becomes the problem.

It’s good if you can as a small business negotiate for a limited number of buys, if you are going to set a 50% cut on your products and/or services, the commision for the dealer should not be another 50% because that will eat too much to any (if at all) remaining profits.

It’s also good for marketing your business because you are not spending upfront cost for marketing services. But it’s going to be bad if you can’t guarntee good service for the deal buyers.

All in all, it’s good business sense to have products/services on deals site as long as you make good plans to handle in-coming customers well, and don’t over sell your deal or you’ll get all the bad effects. Remember first impressions lasts and you want these customers to be impressed and as a result get them to return to your business.
Matthew Vidimos
August 22, 2011 at 8:14 pm

Whys is Groupon bad for business. Because Daily Deals are Deal Hunters Looking for Deals. Who in their right mind would give their product/service away at a quarter on the dollar ?! Our techteam PeopleDeals got the idea down pat though. So much so that we patented our Share it up technology, a small business owners best friend. http://www.peopledeals.com will quickly show you how it works. Social media and Social Amplification are the way of the future. Increase customer retention, gain more traction, and GET MORE SALES! Dont let your business become outdated. Stop paying for overpriced advertising. Sign up @ http://peopledeals.com/register/r/mrvidimos
Michael King
June 8, 2011 at 4:13 pm

I’d have to agree. Groupon and "Daily Deals" can be a double edged sword for small business owners. The best advice is to run a test and see if it works for that individual business

We recently posted a blog on the same discussion "Local Search: Tips for Small Business Owners who offer Daily Deals Online"
shnwnlct
November 3, 2011 at 10:49 pm

It’s bad as stated many times if a small business cannot negotiate for a limited buys because then over-capacity and under-service becomes the problem.
Steve
June 9, 2011 at 1:55 pm

hi Chris,

I didn’t know alot about Groupon, except that it seems real popular right now, but I think coupons and sales in general are potentially dangerous for small businesses. I think there are better ways to increase sales than having a sale. Once you start offering discount prices, there is the potential for your customers to start to expect them, and then not buy things at regular prices because they are waiting on the sale price…

I’d rather focus on quality and customer service.

Steve, Pinnacle Trade Show Displays
Guest
June 9, 2011 at 1:35 pm

What’s good for Groupon is not necessarily good for the small business.

Are you attracting your optimal customer or bargain hunters?

How many of these customers will use your service or product only because of the coupon?

How many will turn into repeat customers? Or loyal customers?

And, how many small businessess are repeat or or continual users of Groupon?

Where are those numbers?

Bottom line is if you are not making money, you are not in business – you’re a charity.
Afrin Farzana
June 11, 2011 at 6:11 am

Is this true, the Groupon offers represent a gamble for the business owner and the customer?
Guest
June 9, 2011 at 2:35 pm

Looking at many of the Groupon offers in the beauty industry, it is obvious that the people making them are making a loss on each treatment. Given the high volumes, I suspect that the offers represent a last throw of the dice for many small businesses on the brink of failure.

If this is true, the Groupon offers represent a gamble for the business owner and the customer.
camping dude
June 9, 2011 at 5:55 pm

Great for loss leaders, pure stupidity for anything else.

"Looking at many of the Groupon offers in the beauty industry, it is obvious that the people making them are making a loss on each treatment."

it’s called upsell, once you have the customer, sell them something you do make money on.



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Groupon: Good or Bad for Small Businesses?

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