Groupon and other online / social media coupon deals…..what’s the deal?

As you probably know the online “coupon” business has exploded as a marketing phenomena.  I read an article yesterday that Google is now getting into the business with a service of their own.  It will compete with the established companies like Groupon, Buy With Me, Living Social and others.   Here’s how these coupon services work:  you agree to offer a highly discounted product or service (typically 50% or more) —- the coupon company broadly distributes that offer via email and incentivizes people to spread the offer further through social media like Facebook.   They collect the money and split it with you 50/50.  So if you offer a $100 product for $50, Groupon gets $25, you get $25 for each one that gets sold.

These things really work, BUT there are some things to be sure you take into consideration.

Cycling studios I work with have sold between 100 and 600 coupons.  Other small businesses report sales in the thousands.  That’s pretty amazing.  OK here’s the good news:

  1. It’s free.  There is no out of pocket expense for you like with traditional advertising or direct mail.
  2. It works, and it will bring hundreds of new customers into your facility
  3. Your name (your brand) gets widely distributed and the awareness for your business will increase

Now here are the things to be concerned with…..and some ideas on how to manage this

  1. Lots of people are pure bargain hunters living on coupons.  They will use it up and you will never seem them again.
  2. You need to be sure to have a strategy for dealing with existing customers who are paying full price.
  3. You need to prepare for the logistics of handling a large influx of new customers
  4. Since you have limited capacity, you want to be sure highly discounted riders are not filling up seats to the exclusion of others.

Most of these issues can be dealt with in the way you negotiate the offer.  You should be allowed to put an expiration date, also to limit the offer to brand new customers if you want.  Further you would likely want to use this at a slow time of year or if you have a large amount of excess capacity so you aren’t shutting out regulars.  Frankly I think these are outstanding marketing devices for start-ups, and even for established studios under certain conditions.

One interesting thing we found, was that almost 1/3 of the folks who bought the coupons NEVER showed up to redeem before the expiration.  In that case you are getting the revenue and not even offering classes—-this is “found” revenue.  I actually have a more detailed analysis of our experience with these coupons if you are interested in discussing, you can reach me at Spynergy Consulting, 781-254-3677.

About Bill

Studio owner since 2004 and active in business plan and marketing plans for multiple cycling studios around the US and Canada. Devoted outside and inside rider, father of 3, teacher of 3-5 classes per week.

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