Why use Groupon when you can blog for your small business?

money making business

If you’ve considered using a Daily Deals site to promote your small business – read on and see why blogging might be a more sustainable – and more affordable alternative to growing your customer base.

As a”recovering” advertising account executive – I see Groupon and other daily deal sites differently than most people do.  In my opinion, Groupon’s success lies not in the “great deals” nor their ability to deliver those deals inexpensively to consumers by using email.  (By the way – interest in email marketing is way, way up thanks to Groupon’s success.)

The real key to Groupon’s success is a double edged sword of “deal tipping” combined with the prospect of “free” advertising for the merchant.

Deal tipping was a clever way to turn consumers who wanted to score big savings into the role of “brand advocates.” In order for any given deal to “tip” and become valid – there had to be X number of deals sold.  In the beginning – deals didn’t always “tip” despite the fact that early adopters of Groupon were actively involved in social media.

Social media + highly motivated consumers iso big discounts =  viral marketing.

However, the real “genius” in the Groupon model was to be found on the other side of the equation – with the business owners who were “lured in” by an irresistible offer.

Groupon offered merchants a flood of customers – while not charging a “fee” for the advertising.

I preach often on the value of “solving problems for your customers” and that’s exactly what Groupon offered to small business owners.  Whether it was a new restaurant in town or a spa with an empty parking lot – business owners were literally tripping over themselves to give the Groupon solution a try because in their minds – since they didn’t have to write a check – they had nothing to lose and only customers to gain.

The goal of any daily deal discount promotion should be customer acquisition but that isn’t a popular metric to track amongst startups.  David Skok is a serial entrepreneur and writes about CAC in his blog post “Start Up Killers

To compute the cost to acquire a customer, CAC, you would take your entire cost of sales and marketing over a given period, including salaries and other headcount related expenses, and divide it by the number of customers that you acquired in that period.

Few startups do this kind of analysis – and when they do perform it – they’re often shocked by the figure they see.  This is why my head spins and I spew pea soup when a business owner balks at the cost of blog hosting which includes automatic updates for the software. For less than the cost of a single monthly dinner out with your spouse and a few hours of your time – a small business owner can create a business blog which can be not only an effective – but a cost effective customer acquisition tool.

I have cut approximately 1000 words from the previous rant paragraph. Give me a moment while I clean up my keyboard and screen.

It’s been reported that Groupon rejects up to 70% of the initial “deals” offered by merchants.  Why?  Because merchants in general don’t want to create the compelling offers needed to win new customers.  That’s the difference between Groupon and ValPak.   When business owners use ValPak for coupons – they’re in control and as a result – the offers are less than compelling.

It’s understandable that a business owner who’s used to running his own deals – and seeing a 1-4% coupon redemption rate  – would be overwhelmed when confronted with a “real deal” negotiated on behalf of consumers by a daily deal site like Groupon.

Free rarely is whether its online or offline. For some, it’s a hard reality check to cash.

However, some business owners are getting “smart”… as reported by the Business Insider.

Joe Hargraves of Tacolicious said that he has probably gotten 40 pitches over the last year from Groupon and other daily deals salespeople. He refuses them all — his prices are already low, and he doesn’t think he’ll gain anything by one-time discounts to people who otherwise wouldn’t be interested in his place.

Instead, he takes the several thousand dollars per month he would spend on daily deals marketing and other forms advertising and makes regular trips to Mexico, which helps him improve his product. He also blogs about his trips, which creates a much more personal connection to his customers. (emphasis is mine)

Want to learn about Tacolicious – visit their website which – oh, by the way – is a WordPress blog. There you can read about the people – their stories – and the causes they’re supporting not to mention finding recipes and other special events.

The thing is – because they have a blog – if Tacolicios would ever decide they wanted to run a “daily deal special” – they could do so by simply creating their own email marketing campaign.   They could offer customers the ability to sign up for their email list on their blog and then – get this – REWARD those customers with their own discount offers.

Here’s where this idea gets really exciting.  See, the “deal” you have to offer via a daily deal site has to be heavily discounted – because you’re talking to people who don’t know your business.  You have to offer a HUGE discount to get consumers to take a chance and try your company.

It’s a lot easier to get people to come back to your business than it is to get them to come in the first time.

When you create your email list – and promote it to your current customers – you can offer them deals in much the same way Groupon does – only better.  These are people who know your business – so you don’t have to offer them an outrageous discount to get them to come back.  Even better –  even if you do offer an outrageous discount – you don’t have to give 50% of whatever they’re paying for your deal to the daily deals site.

Will the daily deal sites fade away?  It’s not likely.  As long as there are business owners desperate for customers and who are desperate to reach them- but not desperate enough to blog and build their own email marketing lists – there will always be fodder for the local daily deals site.

Comments

  1. says

    Very well written and thorough article! One question however, do you know if groupon or similar companies, offer an upper limit on the number of coupons sold? does a small business owner have the ability to choose not only the minimum number of coupons to activate the deal, but also the maximum number?? Thanks again!

  2. Kathy says

    As a general rule – no – the “daily deal” sites do not allow small businesses to place a limit on the number of “deals” sold. It’s a HUGE problem and one of the biggest complaints users have with the service. However, if you use your own newsletter and your own business blog to publish similar deals – not only will you have the ability to limit the number offered – but you won’t pay 50% of the proceeds.

    Ah – but there’s the rub. The daily deal sites are thriving because many small business owners don’t want to invest the time and capital in building their own email list for their business.

  3. says

    Daily deals site are actually good in nature. It’s just that when we dive into this marketing strategy without even having the thorough preparation and understanding how to change the obstacles into opportunities,that’s when we’re doomed to fail.