Just read How Effective Are Groupon Promotions for Businesses, which was a survey-based study of 150 businesses that ran and completed Groupon promotions between June 2009 and August 2010. (If you don't know what Groupon is, skip to the end.) Below are my key takeaways:
- The key factor contributing to whether Groupon worked for the small businesses (as measured by profitability of the promotion) was employee satisfaction within the small business. (Happy employees is good businesses ... whoda thunk?!)
- Restaurants appear particularly susceptible to negative outcomes; spas appear particularly susceptible to positive outcomes.
- 42% of the business would not run Groupon promotions again, even though 66% of them thought it to be a profitable promotion. ("There is widespread recognition among many business owners that social promotion users are not the relational customers that they had hoped for or the ones that are necessary for their business’ long-term success.")
- Groupon competition will be tough. "Based on our study’s responses, the news for Groupon’s competitors appears to be decidedly bleak ... few respondents had positive things to say about other social promotion sites."
- Social couponing is in its early days yet, with innovation likely necessary. "Although the majority of Groupon users are satisfied and intend to run another Groupon promotion, an industry in which two in five customers are hesitant after a first purchase, and where the customer base is a relatively limited pool of small businesses with strongly interconnected social networks that could quickly spread news of dissatisfactory results, may need to modify its overall strategy."
For those unfamiliar with the Groupon model, the study describes it succinctly:
Marketing circles have been abuzz in recent months with the sky-rocketing popularity of social promotion sites. At present, Groupon is perhaps the best known and certainly the largest one of these sites. It features a daily deal for each city it operates in, offering consumers a significant discount for a local business or event, such as $40 worth of sushi for $20, or a $175 facial at a spa for $59. Consumers buying the Groupon must pay its price upfront, and then have a certain amount of time, up to a year, to redeem it at the business. Groupon promotions have a social aspect. Each promotion is valid only if a certain minimum number of consumers – pre-specified by the business – purchase the deal.