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TMWstudio offers a series of informative essays on small business communications, written by TMWstaff.
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The ECoupon Phenomenon

CAN E-COUPONS BRING IN NEW BUSINESS?

Since 2008, group-buying services – also known as ‘daily-deals’ sites, like Groupon, LivingSocial, WagJag and many others, have become a popular way for local businesses to market their products and services.

When they are implemented properly, they can

Retailer websites, like dealstreet.ca, couponseh.ca, and redflagdeals.com, aggregate digital coupons from a variety of retailers – providing a collection of the best deals.

caution

However, many businesses have found out the hard way
that this new marketing trend needs to be approached
with caution.

  • E-coupons are not often instant money makers – see Can you afford it? below
  • There is a danger of becoming known for cut rates rather than a product or service of good quality - diluting your Brand. The underlying message could become either “We’re desperate!” or “Let’s face it –our prices are too high in the first place” (Bob Phibbs, a retail consultant and author, has written a book on the subject, Groupon: Why deep discounts are bad for business)
  • Success is dependent on the consumer experience. For example, waiting staff in a restaurant can become cranky if their tips plummet because the bills are much lower.
  • E-coupon users are not necessarily repeat consumers. Short-term clients are more interested in getting a lower price than in the quality of a product. A 2011 PriceGrabber survey noted that 78 per cent of respondents said they purchase local deals mainly because they like saving money. A mere 19 per cent said they used e-coupons because they wanted to try out a new product or service.
  • Many E-coupon users are bargain hunters and can be very picky. According to an article in the MIT Technology Review, they are also more likely to generate online reviews than the average customer - and negative ones at that.
Groupon

LivingSocial

WagJag

CAN YOU AFFORD IT?

Take a service like manicures. The coupon companies take half the cost of the coupon*. For example: If you offer 50% off a $100 service, the coupon company takes $25, leaving you with $25 to cover labour, materials and overhead.

A restaurant's typical cost of product is one-third, and cost of labor is another third. Add in the overhead and the profit margin is driven down to something like 5-8%. Often the restaurant has to increase staffing to cover the increased number of patrons, which of course increases the cost.

A Toronto butcher once offered $400 worth of meat for $100. He was deluged by so many new customers that it became a nightmare. His staff was verbally abused by frustrated buyers (CBC Radio – The Current)

Oregon café owner described offering a Groupon deal as “the single worst decision I have ever made as a business owner.” They lost more than $8,000.

According to a 2010 study by Rice University, 40 percent of businesses who used Groupon would not use it again.

*
although these days - with the increased competition - you may be able to negotiate a better deal

E-COUPON SUCCESS STORIES

Of course, it's not all bad ... lessons have been learned and many business owners in-the-know have been able to use the marketing tool successfully.

Groupon Works, not surprisingly, offers hundreds of success stories . Zoomars Petting Zoo in Orange County, CA is a classic example.  Their business went from 200 people a day to 2,000. And, the Great River Fishing Adventure out of Vancouver was so pleased with the first campaign that it ran six more.

USING AN E-COUPON SERVICE

Before deciding

  • Make sure you’re using the right site – check their target demographic
  • Make sure your product or service is truly impeccable – the coupon event will generate a blast of reviews.

Consider the deal - What can you afford to offer?

  • Consider it as an expense, not a money-maker – do the math (Coupon price/2 > cost?)
  • No need to offer super-deep discounts – in fact
  • Create a new product package … Make the offer unique, buzz-worthy
  • Compose your ad properly – good info, not just marketing hype

Consider the effect – How will you handle the increase in business?

  • Limit use to quiet days / Consider limiting services to off-peak hours
  • Motivate employees to perform better – give incentives – supplement servers tips
  • prep your staff – be ready for a rush of traffic
  • Be strict about sticking to the terms of the coupon - don't let bargain-hunting consumers bully you into a better deal.
  • Be careful about the expiration date
  • Offer new deals often - but for one week only

Create the coupon – How will you make sure the effect lingers on?

  • Capture emails to build a mailing list
  • Offer a return-visit coupon or a share-with-a-friend coupon
 

GOING IT ALONE

Not sure you feel comfortable using a Daily Deals service?  Well, there's no reason you can't offer traditional coupons yourself.  Let charity fundraisers know you are happy to provide coupons for silent auctions. Use word of mouth as an incentive for coupons – “20% off the next visit for you AND the person you refer”.  Or, use a service like FlyerPack to deliver your coupons.

ALWAYS FOLLOW UP

Be proactive about getting feedback

  • Get private feedback – avoid negative online reviews
  • Get instant feedback – while the experience is fresh in their minds

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KINGSTON ON

 

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