SHould you Groupon_Cheaper Substitutes to Groupon and Living Social?

Groupon, Living Social and others daily deal sights have created an entire industry around vouchers for half off at your local restaurant, service or store.  While the program has been very successful for consumers and the daily deal sites (Groupon revenue in the last twelve months was $1.8 Billion), there is not a lot of consensus on whether it has really helped the businesses that run them. The consensus is that only 19 percent of those voucher buyers will become return customers (source:  http://bit.ly/LhPDm8).

Pros to a Voucher Deal

It can attract a lot of customers.  Whether you like Groupon or the others you have to admit they have tremendous reach through their built in lists.  Add in aggregations services like Yippit and others and they can drive a tremendous amount of traffic to your venue.  It also just another channel to advertising your business and getting your name out at the very least drives traffic to your business.

Cons to a Voucher Deal

Its very very expensive.    You need to expect to give up 75 cents for every dollar the voucher is worth (if not more).  Not only do you give a 50% and higher discount, but the Voucher provider like Groupon, takes 50% of what is left over.  For a $50 voucher, you the owner will only be getting $12.50.

You are building another company’s business, not your own.  Customers sign up for Groupons mailing list.  In addition you have to ask yourself if you want to attract the bargain hunters to your store that tend to populate the Groupons of the world.  Are your prepared for the accounting headache that comes with those vouchers?

Is there a better way?

As a business owner you have to analyze whether doing a voucher deal is worthwhile.  Have you tried all the other resources out there to attract new customers?  I bet you haven’t.  How do you run these promotions?  Read below to find out.

Foursquare

Foursquare is a check in application for customers smart phones.  By claiming your venue on Foursquare, you can run “Specials”.  One of those is a “Newbie” Special for first time check-ins.  Create a 50% off a single item newbie special will attract new customers and cost you not one red cent.  In addition, it’s only a coupon for a single item, not the entire order.

Facebook

Ahh… you finally are gonna have a use for that shiny Facebook Fan page you created last year and have no idea what to do with.  Facebook reaches a huge percentage of the population.  Why not use their reach to attract new customers and create your own deal.  The cost is not only minimal, but builds your Facebook fans, builds your email list and still has all the viral reach a Groupon would.  Even better, it is significantly less expensive then running a Groupon campaign.

But how?  Here is a step by step process on how to run your own voucher deal.

  1. Fan Page – Do you have one yet?  Well sign up here to create one.  Need help creating one?  Let us know.
  2. Figure out what type of voucher you want to provide and its terms.  Valid on certain days or times?  Excludes certain items?  What dollar amount?  Expiration date? How many signed ups before it unlocks?  Max number of vouchers you want to provide.
  3. Sign up at NorthSocial.  They provide the application that lets you run your daily deal on Facebook.  Cost?  Budget $29 a month to start.
  4. Install the App on your FanPage and create your deal.
  5. Create ads on Facebook targeting your city or zipcode to let customers know about the deal.  You will only run these for a week at the most until you get enough people telling others about the deal.
  6. Let money come in.

How do the numbers work out? 

Here I have run the numbers assuming voucher size, number of vouchers bought and a few other conservative assumptions.  I am sure I am missing some things but this gives a good indication of the costs.

Provider Groupon Deal Self Run Groupon Deal Self Run
Voucher Size $100 $100 $50 $50
Discount 50% 50% 50% 50%
Proceeds $50 $50 $25 $25
Number of Vouchers 250 250 250 250
Net Proceeds $12,500 $12,500 $6,250 $6,250
Groupon Take $6,250 $3,125
Run your own costs
NorthSocial $29 $29
Facebook Ads – $25 for 10 days $250 $250
Merchant Fee – Worst case 6% $750 $375
Net Proceeds to Merchant $6,250 $11,471 $3,125 $5,596

 

Provider Groupon Deal Self Run Groupon Deal Self Run
Voucher Size $20 $20 $10 $10
Discount 50% 50% 50% 50%
Proceeds $10 $10 $5 $5
Number of Vouchers 250 250 250 250
Net Proceeds $2,500 $2,500 $1,250 $1,250
Groupon Take $1,250 $625
Run your own costs
NorthSocial $29 $29
Facebook Ads – $25 for 10 days $250 $250
Merchant Fee – Worst case 6% $150 $75
Net Proceeds to Merchant $1,250 $2,071 $625 $896

In every scenario it is a better deal to run your own daily deal campaign versus using a Groupon or Living Social.  If you do want to run a deal through these companies, you are better off doing a small deal, around a $10 voucher and restricting it to one voucher per check out, table or service.  Not only will it interest a lot more people, but if your average ticket price is higher then $10, you reduce the hug discount to a certain extent

The other great thing about running your own campaign isn’t even touched on here.  This includes the fact that you get paid up front instead of 60 days later (Groupon pays you in installments over 60 days).  The second thing, it builds your Facebook fans and your email list at the same time.  Third, the NorthSocial application that you get for $29 a month includes all their applications including Fan Coupons, Photo Showcase and Sweepstakes at the same time.  Even on a $10 coupon the savings pays for North Social for the next 10 months.

Another option?

The same application with NorthSocial will let you host a coupon for people that like your page.  How about a 50% off single item coupon for those that like your page?  What if you only run an online store?  How about a sweepstakes?

Don’t be scared.

The great thing about these applications is they don’t take technical expertise to implement.  They hook up to your PayPal account.  The only extras you might need to pay for are some graphics for your Fan Page.  If you are not comfortable with the applications or just don’t have the time, we can always help you get up and running.  I hope this helps you when the sales person comes calling trying to get you do a deal.

Inspired?

If this post inspires you to run your own daily deal campaign, please let us know how it goes.  We would love to hear from you.


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