What You Can Learn From Groupon’s Failure

In 2008, the deal site Groupon, burst onto the scene. They were the latest online darling, threatening to change how business was conducted online. In 2010, Forbes magazine dubbed them as the “fastest growing company in web history.” That same year, Groupon’s CEO, Andrew Mason, famously turned down a $6-billion acquisition offer from Google. Mason, was famously quoted for believing that Groupon would have a $30-billion IPO.

By now we know the daily deals business model is a novelty. Even Andrew Mason (who was ousted in 2013) admits the model stinks. Last month he told the Associated Press that Groupon was a “stupid, boring idea that just happened to resonate.”

Offering a great deal via a discount is an age old advertising technique. So if Groupon has become known as a failure for basing its business model on steep discounts, how do local business owners avoid the same fate?

Steep discounts are not about promotions. The strategy must be client acquisition. Here iis how to make sure you keep that focus to succeed.

Groupon Users Are Trained Discount Hunters

None of us are ever going to build a profitable business if our new clients have no loyalty other than to their own pocket book. This is the problem that happened to the companies that used Groupon. The GAP famously lost

You MUST Make Your Own Deal

Groupon takes 50% of the revenue from local merchants using its platform. For already discounted deals, this can cause calamity for the bottom line. When we control the discount and the channel it is presented from, there is much more profit.

Focus on the Relationship, Not The Deal

It is no coincidence that the rise of Groupon coincided with the 2008 recession. A lot of very nervous business owners saw Groupon as a way to entice ever stingy buyers to their stores to hopefully keep the doors open. A lot of the sales from the Groupon deals were from scared buyers to scared providers. Not a great way to start a relationship.

Now that the dust has settled, it is time to go back to making wise business decisions. There is no more wise decision to create opportunities for new relationships between a service provider and its marketplace.

If you have not read an earlier post I made about having a followup offer specific to the discount buyers, you need to read that to help prepare a game plan LINK TO IT.

Facebook offers seek out the profiles of those who are most likely to want to do business with you, NOT freebie seekers.

This fact needs to be understood or you could be missing out on the real beauty of Facebook advertising. Groupon catered to those who created accounts specifically intending to pay the least amount for products and services in their local areas. However, when you target buyers for your Facebook offers, the ads are displayed to those who are predisposed to already do business with your industry.

This is how Facebook is setup, as opposed to Groupon. However, because people likely to do business with you are not on their phones looking to buy, offering a free or discounted offer is intended to get them to stop and click. We are using curiosity of predisposed buyers in combination with a deal. That makes it more likely our Facebook offers resonate with the exact type of buyers we are looking to attract.

Just because there is a great deal, do not confuse Groupon with Facebook.

Even better than that, once we get an interaction with a Facebook prospect, we now own the relationship, not Groupon or even Facebook. That can be leveraged to a much higher extent. I will discuss that in more depth on a different post.

So for now the opportunity to get to our best clients is one that must not be overlooked. Worse, it can not be discarded as associated with a system that did not work. The same principles of all great marketing are applied. There are no shortcuts like those who got enticed with all the easy traffic from Groupon. Serve your market well and you will be rewarded, not destroyed.

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