Is Groupon Marketing Worth It?

Today’s trick question: who is more popular Lady Gaga, The Beatles or Groupon? Drum roll! Groupon - they are cranking out coupons as fast as Donald Trump flips real estate. But is Groupon Marketing worth it? Depends on your brand, gross and net margins, customer focus and marketing objective. Read on.

Let’s start with the bottom line for  your brand or business. You absolutely need to know what’s the lifetime value of a customer to your business before you can start giving away those coupons to anyone and everyone. If these numbers don’t work (lifetime value versus marketing cost) then your much better off investing your marketing dollars elsewhere.

In our research and based on utilizing Groupon Marketing for multiple clients, we’ve unearthed some insight that may impact your decision about using Groupon. Although we cringe at the thought of writing something that is au contrair to the sparkling multi-billion dollar valuations Groupon and Living Social have achieved.

Bottom Line Analysis - No Silver Bullet

• That wonderful Groupon customer coming in to your store or restaurant is also displacing that customer you’ve spent years and maybe lots of marketing dollars building a relationship with.
• Our research indicates these customers are fickle and they are not brand loyalists.
• Groupon customers are really/really (!) value driven - “how big a deal am I getting?”
• Groupon’s customer service is far from exemplary in many cases. This isn’t all their fault (lest we sound like we are bashing them) - am sure they are experiencing some growth pains.
• Your putting your brand at risk working with Groupon. At the end of the day their massive email list is pushing out deals and your customers may associate brand value with Groupon and not with you. This is not a good thing. They “own” your customer to a certain extent.
• Many savvy merchants and brands are not using Groupon as they feel their brand is being cheapened by association with Groupon. Look at the travel industry and what happened to major chains versus sites like Priceline or Hotels.com - these online businesses have more marketing muscle now than the brands they represent.
• The one big positive our research showed us was on the cash flow that Groupon generates for many businesses. The sheer volume (which can be another problem) of these deals can help to infuse some cash into your business quickly.

Our recommendations if your diving into the pool with Groupon

• Remember Groupon is a marketing channel not a sales channel!
• Know what your incremental cost of sales is? You must know this number going in. Don’t include your fixed costs as part of your analysis.
• Are you cannibalizing existing customers? If you are this may not be a good thing. And, if you don’t offer these deals to your existing customers, this can be a challenge as well.
• What are the redemption percentages?  We’ve seen 60-85% on average. Factor back end operations accordingly and expect a bow wave the first few days.
• If your getting just bargain shoppers what is the likelihood these consumers will turn into real/downstream customers?  Know going in that cash flow and brand awareness may be your sole drivers.
• What’s the bottom line advertising value to getting your brand exposed to some finite number of customers in your local market?  Although this exposure can cut both ways.
• Advertising is relative as Don Draper says. What are your normal customer acquisition costs? And how do these costs overlay with a Groupon Marketing Campaign?
• Get ready for the masses - Groupon can defintiely deliver the numbers. And, you may want to cap the number of coupons that can be redeemed and the time period as well.

We tell our clients that Groupon is definitely not a silver bullet. But, it may have a place in their marketing mix if they understand all of the numbers and factors going in. But, as you can tell from this post, we have some healthy skepticism and concerns.

In the long run, your brand might be much better off investing a like amount in marketing dollars in blogging and integrating a CRM app into your business and building your own email database. Enabling you to have much better control over your marketing costs, direct contacts with your customer and doing some wonderful things for your SEO and content development and curation.