|Susan Solovic, The Small Business Expert is an award-winning entrepreneur, an attorney, a New York Times best-selling author, a media personality and a highly sought after keynote speaker.|
Considering a Groupon? 5 Pitfalls You Must Avoid
A friend lives in a townhouse and it’s about time to pressure wash the exteriors. The homeowner association got a few bids, but one owner spied a Groupon deal, which would have been significantly less expensive. He tried, unsuccessfully, to talk all the other owners into jumping on the Groupon deal.
Had he been successful, imagine what the owner of the pressure washing business would have thought. First he’d be elated that so many people snagged his Groupon, but when he started to do the work and realized he was going from neighbor to neighbor in this one townhouse complex, he probably would have been steamed.
Chances are the homeowners would have all scheduled their cleanings at different times so his crews would have been driving to, setting up, and breaking down at the same location multiple times. It would have been extremely inefficient.
Groupon, and similar discount systems, have worked out well for many small business owners, but often the story is exactly the opposite. You need to understand some of the pitfalls of using deep discounts for customer acquisition and have a clearly defined rationale for choosing Groupon or one of the other “daily deal” kinds of promotions.
Here are five questions to ask and points to consider.
As I said at the beginning, Groupon, and other daily-deal deep-discount strategies can work, especially if you use it to kick off a long-term relationship with a customer. After all, virtually every small business customer acquisition strategy comes with a fairly high price tag. Just be sure that the lifetime value of your customers are worth the initial investment.
These deals can also be useful if you have some old inventory you want to liquidate or think the exposure your business gains could be effective advertising. For example, when the pressure washing business trucks are out in neighborhoods, they are painted with the company’s name, logo and telephone number. Had he gone back to those town homes repeatedly, people might have noticed and said to themselves, “Hey, all those homeowners seem to like doing business with this outfit. I’ll give them a call…”