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Does Groupon Kill Small Businesses?

September 16th, 2010
8 Comments


The sad tale of Posies Cafe’s experience with Groupon, Groupon in Retrospect, shows the dangers of offering heavily discounted services to an unlimited supply of customers.  While I think the majority of the fault lies with Posies not really thinking through the implications of the promotion, it also seems like Groupon’s sales rep was all too eager to walk them off the edge of the cliff.

I spoke with John, a Groupon rep, and we started formulating the idea. He didn’t have to sell me on the concept, I understood and thought it was genius. Then we talked pricing. We were going to offer a $6 for $13 (pay $6 and get $13 worth of product) because John told me people really respond to deals that are over 50% discount. It wasn’t starting off as that great of a deal for us, but we kept talking. Then we talked the percentage split. John told me that when the consumer pays less than $10, Groupon usually takes 100% of the money. What?! He reassured me that most customer buy more than the $13, and that we would never have to advertise again after taking advantage of their network.

On the plus side, check out the comments, trolls aside, and see a great example of how a SMB uses social media to engage with its customers in a positive, open fashion.



Tags: Groupon

8 responses so far ↓

  • 1 Andrew Shotland // Sep 17, 2010 at 1:01 pm

    I just reread the part about how Posie’s Cafe would never have to advertise again if they used Groupon. It’s out of context but if that were the case wouldn’t that mean that you would never have to use Groupon again?

  • 2 Rick Jones // Sep 17, 2010 at 5:06 pm

    Well I think that this shows that you would never ever listen to the sales guy without getting other business owners previous experiences.

  • 3 Andrew Shotland // Sep 17, 2010 at 5:10 pm

    Given the amount of press and backlinks Posie’s is getting today blowing $ on Groupon and blogging about it may be one of the best SEO strategies of the year

  • 4 Colton // Sep 18, 2010 at 8:54 am

    I would have never thought that Groupon could negatively affect a business. As awesome a marketing technique as using coupons and such a large audience that Groupon has, you’d think it would work out nicely. And on top of that, I thought that you could limit the amount of coupons you could sell there, as I always see “3 remaining” or such when I’m visiting.

    Who knows. I guess you gotta be smarter with your advertising that just opting in to doom. =/ Coupons are an awesome idea, but you can’t just jump in like it will make your business boom. You have to be strategic about it.

  • 5 Great American Floors // Sep 22, 2010 at 1:09 pm

    I am a business owner and this is a very interesting article to read. thank you for posting it

  • 6 Marc // Sep 22, 2010 at 1:12 pm

    i always shop at Groupon thank you for the interesting article.

  • 7 Google Top Placement // Oct 6, 2010 at 2:57 pm

    Moral of the story? Everything in writing!

    This story is depressing. What a rip!

    Anyone know the normal Groupon split?

  • 8 patrick // Oct 18, 2010 at 4:26 pm

    100% is a little steep for most of my clients to swallow.

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