Online Couponing: Is It Really a Profitable Tool for Small Business Owners?

The popularity of online coupon websites and smartphone applications, like Groupon, Living Social, Daily Deals, and Scoutmob (just to name a few) is growing-fast.  Businesses use these sites to extend impressive discounts from  50 to 70% or more off to customers, and gain (theoretically) a larger customer base in return.  This advertisement option is very   appealing to small and new businesses, but its long-term effectiveness is still debatable.   While this new tool is helpful for people looking for great deals,  it does not guarantee that people will buy    anything beyond their discounted purchase.

With the failing economy, it’s no wonder why sites like Groupon are prospering.  Groupon has multiplied sales by 100 in just 12 short months.  They reported $100,000 in revenue in January 2009, and increased their revenue to $10 million by January 2010.  This rapid growth rate is both phenomenal and can be dangerous as basic business strategy and marketing principles show: the fastest growing businesses have a tendency to fail with equal speed.  Groupon, however, seems to be beating these odds.  They are clearly doing something right.

Screenwerk.com posted a study on Groupon indicating that 42% of the businesses they surveyed (who had used Groupon) would not use the site again. These businesses had various explanations for their feelings, but overall, showed that their Groupon driven customers did not return after the deal expired.  These findings shouldn’t come as a surprise given the cash-strapped nature of today’s economy.  However, the study also revealed that 58% would use Groupon again; providing support that this method of sales does work for a small majority of companies.

While Groupon is only one of the many online coupon websites, this specific study brings about valuable information for small businesses considering an online coupon site to grow their business. Online coupons are a great idea, but business owners need to use caution to ensure that they can afford the deal since repeat business is no guarantee. Here are a few questions that McCauley Marketing Services has devised to ask yourself before using online coupon sites to market your business:

• How big is the online coupon discount you are giving?
• Will this coupon website discount still allow your business to profit?
• What is your goal in using online couponing? (Growing your customer base, getting your name out there, offering customer relationship management, etc.)
• Is your company’s profit dependent on repeat buyers? (Don’t forget to be mindful of your current client base)
• Will your marketing strategy be compromised if no one buys more than the coupon?
• Will your advertising offer gain anyone’s attention?
• Did you double check the site’s terms of agreement? (Protect yourself!)

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