Groupon (and many copycat companies) coupons offer a daily deal with discounts up to 80% off normal prices. Clearly a great deal for consumers who take advantage of them. But what about the small business owner? Yes there is a big surge of ‘instant’ customers, but a recent study shows that many of these customers are ‘deal seekers’, who use the coupon, don’t spend more than the coupon face value, and never return. If you consider the amount of discount that the small business owner needs to make, plus the fact the small business owner has to pay the credit card merchant fees, is responsible for tax, and the majority of any liability, then maybe not such a great deal for the small business?
One other factor is that a huge-discount coupon can easily upset your regular customers. How do you think it will make your current regular paying customers feel when they find out you are offering the same service at 50+% off?
Competing on price alone is not a long-term strategy for success. You need to build up your brand (rather than discounting it), build loyal customers and offer great value. People will pay full price when they feel they are taken care of and there is good value. So for long-term growth, don’t make massive discounts, instead invest in your own marketing and brand name on the internet, where people are looking now…
