Here's a question I've heard posed often: "How do I break into that 'Groupon pie?'"
Groupon is the industry leader in a litany of websites purporting to offer "deals" on local establishments. Generically, these are "Deal Sites". As we are a Local Marketing company, we've had an intense interest in such "Deal Sites" since they first dawned. Here's the skinny.
Deal Sites like Groupon and LivingSocial (the largest two, but by no means the only two) work by structuring deals with local businesses to offer something unique: a greatly reduced price on a valuable good or service. Groupon's name is a portmanteau mash-up of the words "group" and "coupon." The idea is that businesses can profit by selling large volumes of their goods and services at a discounted price, just as much if not more-so than they benefit from selling to one client or customer at a time. It's the same principle that makes it cheaper to buy the larger volume of detergent or a multi-pack of socks, just applied to other goods and services.
We'll use a dentist for this explanation, but of course many other businesses use such deal sites. Dentists may offer a service like tooth-whitening — which costs them only pennies to perform (other than the cost of employing their staff)—for about $250-$300 normally, but offer it at half price on a site like Groupon or Living Social.
This gives some amazing incentive to many people who wouldn't (or couldn't) afford such luxuries a chance to indulge. The businesses benefit greatly from a massive influx of mostly new customers and money, even at half price, because such deals often garner 100's to 1,000's of people accepting them. Even $100 x 100 people is nothing to sneer at (That's about $10,000). And those are all potential repeat customers.
Now, that $10,000 (which is already a discounted cost for the services or goods being sold), is then split between the deal site and the deal offering business. Most deal sites will collect 50-60%, so the actual amount collected by the business from that $10,000 would be usually $4,000 to $5,000.
So in general, they'll actually collect only about a quarter of what they would normally collect when offering a similar good or service at the regular market price. Generally, if structured well, all parties will still come out ahead. Again, that's 100's to 1,000's of new customers to add to the database for a business, which is well worth the reduced initial
You've heard the success stories about such sites. But, if you've looked at all, then you've also heard horror stories of businesses trying to offer a deal on these sites and losing thousands of dollars, nearly going bankrupt, and even having to close their businesses, because they didn't know what they were doing. What gives?
Well, remember, that most businesses will only make a quarter to a third of what they usually earn for the goods and services they offer. They make up for the small margin in quantity sold, and by reaping the benefits of the exposure to potentially repeat customers. Some businesses, however, simply cannot scale well.
There was a bakery in the UK that often sold about 100 cakes per month, that decided to run a Groupon offering of a dozen cupcakes for about £6.50. They sold 8,500 offers. That's over 100,000 cupcakes from a business that usually sold about 1/100th of that volume in a month! They wound up unable to fulfill many of the orders, and having to expand their business momentarily to accommodate the volume, and in the end the offering cost them over £12,000. Not only that, but many people were upset with the massive delay to get their £6 cupcakes, and being internet savvy folks in general, they sounded off on the various review sites, KILLING the reputation of this business.
Experience is crucial. If you don't know what you're doing, you won't come out well often in these deals. You need someone who has experience in these deals to help you.
Yep. Free. See, most deal sites charge you 50 to 60% of the profits. We work with these sites to get you a reduced percentage given to them, and then we just keep some of that. Which means you stand to make WAY more money with an experienced negotiator. We can help you turn these one-time-buyers into rabid, raving fans who will sing your praises to no end and keep coming back for more, bringing friends and family with them. We can help you structure the deals for maximum profitability, all with no risk to you!
So, drop us a line and let us know what we can do for you. Simply fill out the form on the top-right of the page, and we'll schedule a completely free consultation to discuss your options. And when you decide to go ahead and let us broker your deal, you won't pay us a cent until you get paid yourself.
