Wednesday, February 8, 2012

Reason 2 Groupon will Kill Your Business

Imagine a sales person comes into your office.  He has this great idea for you to get new clients with no upfront expense.  He has developed a network of hundreds of people that will hand out coupons for a $100 of cleaning all over the city.  All he wants in return is the right to sell this coupon for $50 and to keep half the money himself.  You will lose at least $35 on each coupon client you work for but imagine all the people that will try your service and buy more at full price.  It is an interesting idea.  So you ask some questions.

Service Owner:   Where are these coupons going to be handed out? 
Sales Person:  We have thousands of people that wait for us on the street corners every day.
Service Owner:  But where, exactly?  Do you do Highland Park?
Sales Person:  We have too many users to track, they are all over town but we always sell at least 200 of these.  
Service Owner:  Will you sell them in Over the Tracks?  I do not service that area.
Sales Person:   We will sell all over town but you can clearly state on the coupon that it can only be redeemed on this side of the tracks.

Now would you sign up for this?  You have no idea who is going to get these things.   This guy could be standing in the welfare line.  He could be going to the local college.  He could be going to the worst most dangerous neighborhoods in town.  You have no idea where he is going to hand these things out.   Let’s be 100% clear, this is EXACLTY what Groupon does.  They do not care who buys the certificate.  They will sell to anyone.   I think this is part of the reason a FEW cleaning companies have had some success with Groupon, they got lucky.  In their area Groupon happened to go a slightly better demographic.  I did a small Groupon like offer and it seems they all sold to college kids in my area because that is who subscribed to Groupon. 

Even worse, Groupon is least appealing to the people we most want to attract.  What we are selling is really free time not cleaning.  We are selling the time and relaxation they are going to get from not cleaning their own home.  These are people that value their time more than money.  These kinds of people are the kinds of people that do not have time to read a bunch of emails and offers every day to try to save a few bucks.  They do not want to print out coupons or keep track of codes.  The customers we really want are seeking to make their lives simpler and Groupon does not make their life simpler.  Simply put you have no control over who is going to get your message and even worse, the people you really want are not going to use a service like Groupon.  And this is reason 2 of 5 why Groupon will kill your business.

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