Getting Groupon Right: How to Build Loyal Customers Through Deep Discounts
Guest post by Anita Brady
Offering a coupon to get new customers through the door should still make money for a business. That’s a historic marketing principle that hits at the core of pricing decisions for any business. If you’re selling a product, how much should you mark it up from cost? Even if you offer a coupon for 20 percent off of its normal retail price, shouldn’t the business still be making a 30 percent profit?
That number balance has been thrown askew in recent years by the popularity of daily deal sites like Groupon and Living Social. These online portals ask participating businesses to offer their product or service at 50 percent off of its usual cost, and then collect as much as 40 percent of the remaining sum. That leaves small businesses making only about a third of what they might on the same product at full price.
So why would any business participate? The answer is simple: to bring new customers through the door. Groupon‘s pitch is based around critical mass — if your business needs a shot of energy or awareness, what could be better than attracting several hundred (or more) new customers through the door, all at once?
It’s a great concept, in theory. Unfortunately, as daily deals became ubiquitous, so did serial Groupon shoppers. Many people purchase and use the coupons but never return as a full-price customer. Who can blame them, when there’s likely another daily deal for a similar business they can utilize the next time?
This phenomenon has taken a major cut at Groupon‘s bottom line, playing a role in the slide of its share price from as high as $30 last November to roughly $12 throughout May. The company launched a rewards program this month to encourage loyalty, but that responsibility truly lies in the hands of the business owners and managers themselves.
If you’ve used a daily deal offer before or are considering one in the future, follow this advice to ensure you convert first-time customers into repeat visitors:
Everyone is a VIP
Groupon has developed a stigma. Due to the portion of daily deal buyers who never plan to return, no matter what, (and tip poorly at restaurants and service-oriented businesses), it’s no secret that some establishments have responded by shunning the very customers they sought to bring in the door.
This happens most often when a daily deal has an extended expiration date. Perhaps a business offered a Living Social coupon and experienced a rush of customers for a week, some of whom acted entitled, tipped poorly, or made clear their intentions not to return. That then reflects on the person who comes in with a coupon six months later.
No matter what your experience has been with daily deal customers in the past, treat each coupon holder that walks in the door like a fresh start. Give them the same service you would give your loyal patron who visits every day, and you’re likely to earn a repeat visit from your coupon buyer.
Connect and Engage with Social Media
You know one thing about every single person who walks in the door with a daily deal coupon — they are willing to shop online. Take advantage of that! The Groupon customer base is Internet savvy and knows how to shop for a deal. Respond to that by staying in touch with them via Facebook, Twitter, and an email newsletter.
Engage with your customers while they’re at your business or visiting your website. Offer them a second coupon (it doesn’t have to be 50 percent off) for giving a ‘Like’ to your Facebook page or for submitting their email address.
Build your database, but don’t send spam. Make sure that every Tweet, email, or status update has exciting relevance, either about a new product or a special (but significant) discount solely for the recipients of your message.
Practice Smart Up-Selling
It’s no secret that businesses want their daily deal customers to purchase something beyond the coupon while they’re at their establishment. This can be tricky, however. Remember that Groupon buyers are deal-savvy, so they’re unlikely to want to double their expense with a costly full price item. On the other side of that coin, they’ve already paid for their Groupon in advance, so it may even be easier to get them to break out their wallet on the spot.
Consider a ‘Groupon only’ deal for customers that come in with a coupon. If you’re a kayak tour company, give your coupon customers the option to extend their tour at a deep discount or the chance to buy a water bottle or t-shirt just over your cost. The best way to take advantage of further up-selling is to push products that have your business name or logo on them. If you can send a first-time coupon customer out the door with your business name splashed across their shirt, chances are they’ll return (and do some free marketing for you in the process).
What other ideas are out there to ensure that daily deal buyers become loyal customers?
Industry veteran Anita Brady is the President of 123Print.com.
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