Is Groupon Good for Your Start-up?

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Have you noticed that the business publications end up hovering around certain fads that every business owner “should” utilize? While these publications have your best intentions at heart (most of the time) they sometimes forget to remind you that your business is yours and a not all tools are right for everybody.

We’re not saying that social networking isn’t right for you but before you use valuable time to learn how to use some of these tools to your advantage, take some time to evaluate their ROI for your business.

The newest business fad that is making its way around the business article circuit is Groupon. If you haven’t heard of it, Groupon offers online coupons to its members and once a certain amount of people purchase the groupon, it becomes active. Groupon is largely based on local businesses and users sign up for their community groupon portal.

Business owners often offer incredible deals in the hopes of enticing large amounts of people to their store or website in the hopes that selling their products or service for very little profit will produce repeat customers who will pay full price in the future.

But does it Work?

A recent study attempted to answer this question. 150 businesses that had recently ran a promotion through Groupon were asked if the promotion was profitable. 66% said that it was. Although this number doesn’t look as impressive as one would think, there’s more to the story according to some experts.

First, small businesses are often unprepared for the huge increase in volume that comes from a Groupon promotion. They don’t have enough product, enough employees, or lack other infrastructure items to take advantage of the volume. This can cause a perceived breakdown in customer service that doesn’t produce repeat customers. If you’re going to use Groupon, you need to put a lot of time and resources in to making sure that you’re ready.

Second, a business who is hoping to boost margins from a groupon promotion is going to be disappointed. These are best used as a means of attracting new and long term customers.

Is it for me?

Remember that increasing volume to your business isn’t fruitful unless your product is refined and time-tested. If you’re a new start-up and the business is still in its infancy, consider refining the product and service before going the route of Groupon. You want the large volume of people to experience a great product and service so they come back.

If you serve a niche market with specialized clientele, Groupon may not be for you. If you are a consulting firm who relies on a lower volume of clients at specialty prices, offering a coupon may not be a wise business move.

Bottom Line

Sites like Groupon work for some but not necessarily for you. Don’t get caught up in the “every good business owner does this” articles that are easily found online. The facts are simple: Every good business owner understands that time is valuable and if the return on investment isn’t there, it’s not worth your time.