Groupon and LivingSocial are both becoming leaner by the day, the former in stock valuation, after losing half of its value in 2015, and the latter having laid off half of its workforce in March 2016. Whether they will have another uprising and make daily deals hot again is unpredictable.
It is still too early, however, to count them out as an irrelevant marketing channel. A study from Rice University‘s School of Business surveyed 150 small businesses in 19 cities spanning 13 industries. Massage therapists, spas, salons, and chiropractors were the industries that benefited the most from Groupon while restaurants benefitted the least. Why? Unlike restaurants, health and beauty related businesses were not offering anything for a discount other than their time and experience.
One of the main concerns that small businesses were vocal about is that voucher customers do not often return and pay full price. The other was that existing customers began user voucher discounts as well. Therefore, Groupon appears to be a waste of marketing dollars if a business offers a product or service half-off to a customer who shops there only once and does not come back.
Let’s walk through how to fix this and use Groupon to your advantage –
Lesson #1 – Do not offer one-off deals
You were played and you know it. Your client who used a Groupon won’t be back. Bummer. However, you probably wouldn’t come back either. People use the discounts that businesses advertise solely to take advantage of them. Without the discount, you would not show up for an appointment. And just like other people, when the deal for the service for which you paid half-off for is over, so are your friendly visits.
The author of the Rice University study, marketing professor Utpal Dholakia, suggests a modest yet crafty solution to these one-off customers: instead of promoting a particular service such as a chiropractic adjustment, a massage, or a facial, the business owner should promote a particular dollar amount.
In other words, offering a $50 voucher for services worth $100 that require multiple visits to fully redeem increases the likelihood of customer loyalty. A first-time customer might come in to get a chiropractic adjustment, and then choose to sign up for the newsletter and agree to a monthly recurring treatment. “You have to take advantage of an opportunity to cross-sale other products and services. You have to prepare your staff to engage customers. You have to be careful how you structure the promotion,” says Dholakia.
Lesson #2 – Use it as an advertising platform
To sign up and appear in any of Groupon’s business categories, you need to offer a service well below your regular price. However, this service can be essentially anything you care to give for less. What really matters is that more eyeballs will land on your Groupon’s page and be aware that you exist.
Onto the important: Do not promote your services. Rather, use this opportunity to impress them with business awards, business recognitions, your mission and commitment towards the local community, your long-standing business record, and the unwavering passion you have for what you do. Viewers might not buy what you advertise, but what matters is that they know about your business, and hopefully you made a big enough impression on them that they look for you off Groupon.
Lesson #3 – Increase reviews
Now that your brand-new-customer has received a great deal and (hopefully) great service, make the next step and ask her if she would write a review on Yelp. Incentivizing consumers to leave a review on Yelp is forbidden by Yelp’s policy guidelines, but you can ask them to join in on the conversation on Yelp while still playing by the rules. You can send an email saying: “Look at how well we’re doing on Yelp. Feel free to join in the conversation.”
Whichever avenue you find best for you, do it.
Yelp is a substantial tool. Michael Luca, a Harvard Business School professor, concluded in a recent study that a one-star increase in Yelp rating leads to a 5-9 percent increase in revenue.
With that in mind, you have a great reason to start spending a respectable amount of time persuading your customers to leave a review on Yelp. Neutral reviews are better than no reviews at all.
It is alarming how few small businesses ask their customers for reviews on Yelp. How many times have you been asked to leave a review? Probably not many. But how many times have you left a review on Yelp when asked to? Probably many times, provided the service was good. So, the next time you get your brand-new-customers from Groupon, make sure they leave content and with a Yelp task on their to-do lists.
To sum up: Yes, Groupon is still a viable marketing channel. But if you don’t follow the three strategies above, you are shooting yourself in the foot by giving away half or more of your service cost for nothing in return. If you follow the points above however, Groupon can be a very profitable marketing channel.
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As always, we’d like to hear from you! Groupon lover or hater? Have your say and let us know how it has worked for you on Twitter at @KolauMarketing, or via email at info@kolau.com. Any questions? Drop us an email at info@kolau.com and we wil feature your business and question on the blog’s section Ask Dan’s weekly.
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