4 Reasons Why Your Small Business Should Never Use Wordpress Groupon

I’ll confess, I’ve never been a fan of Wordpress Groupon and I’ve never bought one daily deal from their service.  I do think it is an interesting business idea and four years ago I realized that the word coupon was being searched for more than sex and can see why the creators of Groupon launched the service.

In theory it is a great idea, have a central hub in which you can offer products and services to local business for a discounted rate.

Except its not working.  Groupons stock has taken an 82% nose dive since it went public and its rival "Living Social" is doing no better.

Investors are trying to get out as fast as they can ad its proven to be a poor business model and a bad idea for small business owners.

I would never, ever, ever, ever, ever, ever, ever, ever consult a small business to invest in a Groupon deal and here are four reasons why.

1.  Its expensive.

Groupon sells the offer and keeps 50% of the profits while the business owner is left holding the bag and having to deliver the services.

Just ask the owner of a restaurant in Portland Oregon as he says it was the worst business decision he ever made.  It cost him $8000 and his restaurant was flooded with customers, stressed out his staff, received poor service and will probably never return ever again.  And, according to the New York Times, Muddy’s Coffee House – which serves coffee and granola – had to take out a loan to cover its Groupon losses otherwise it would have went out of business.  Another bakery in UK had to take out a loan to cover the cost of the extra workers she had to hire to make the 102 000 cup cakes that were required to fulfill the Groupon offer.  She too says it was the the “worst business decision she has ever made” as she lost 12 000 pounds ($20 000 US) on the deal. 

According to a survey done last year by Business Insider, more than 50% of Groupon’s Small business Customers said that they would never use the service ever again nor would they recommend using it to other small business owners.

I consulted with the owner of a local cleaning company who used Groupon and Daily Deal and other such services and nearly lost his shirt and had to cancel a lot of the deals as he lost a lot of money in trying to fulfill the amount of individuals that were looking for cheap cleaning services.

2. You Get One Time Customers

A lot of the customers who buy Groupon offers never return.  They simply come in for the discounted offer never to visit the establishment again. Again, this is what happened with the local cleaning company.  A lot of the people who took him up on his Groupon offer were simply wanting one time cleaning services for a cheap price and were not interested in becoming long term customers. As Eric V. Holtzclaw shares on Inc.com; “the Groupon customer will not return just to “get a deal” or “because of a deal.”   You will regain their loyalty by delivering a great product and or service”. According to a Rice University study done by Dr. Utpal M. Dholakia, an Associate Professor at the Jones Graduating School of Business, Rice University, found that just 36% of customers buy goods or services beyond what was offered in the deal. Worse, less than 20% return to the business for full-price purchases.

3.  Its a Poor Return on Investment (ROI)

I hope you can see by now that not only is Groupon a poor choice to use for your business but it will also offer a poor return on investment as you will end up losing money and not making money.  No matter what marketing campaign you implement for your small business you need to make sure that you are going to get a positive return on investment.  That is that the advertising dollars should make you money and not cost you money.  I myself would not spend $1 on advertising if it was not going to make me more than $1 coming back and believe it or not there are marketing strategies which can do this for you. 

4.  Groupon Ends Up With The List

There is a saying you may not have heard but should know if you are in business and that is, the money is in the list.  The basis of any business should be to build a list of customers that you can continue to market to on an ongoing basis.  This is how a business can continue to thrive and make profits on an on going basis.  Most business owners think that the only way to acquire new business or increase profits is by acquiring new customers rather than marketing to the ones they already have but the problem with most small business’ is that they don’t keep a record of the customers that they already have.  And in this instance the list of customers goes to Groupon first rather than the small business owner (if they even get a list of customers at all)

I could probably come up with a plethora of other reasons why you shouldn’t use Groupon to market your small business but I don’t want to be seen as Groupon bashing.  Sure the service is great for the company but I hope you can see it is bad for your small business.

There are plethora of other effective and low cost ways in which you can market your small business. I happen to be a Hidden Marketing Assets Consultant which is a system based on the teachings of legendary marketer Jay Abraham and has a 100% guarantee of increasing the sales of your business.