Saturday, May 7, 2011

To Groupon or Not to Groupon

Groupon is amazing for consumers, but I'm not sure it's so amazing for business owners. For the last year, we've been contacted by Groupon and many Groupon knockoffs, asking us to offer a deal.

For any Groupon virgins out there, here's how the deal would work, assuming Pacifier offers a $40 gift card for $20: Would-be customers buy the deal on Groupon's website. We can specify a minimum and maximum number of deals sold. Of the $20 paid by the customer, $10 goes to Groupon, and $10 goes to Pacifier.

Under this deal, we would essentially be selling products at a 75% discount. But...let's just say we need more than a 25% margin to stay in business.

Groupon sales reps like to counter my skepticism with the following points:
1. They bring in a lot of new customers
2. These new customers will be repeat customers
3. These new customers will spend a lot more than the $40 gift card
3. We get some revenue upfront

We did offer a deal like this last holiday season with a local company. I think we sold about 150 gift certificates. From that experience, we've learned that #2 and #3 above do not seem to be true. (Just so it's clear - I'm not sneering at anyone out there. I am one of those deal-seekers who rarely spends well above the gift certificate amount. I do, though, always tip at least 20% of the bill before the's the former waitress in me. Unfortunately, customers do not tip at retail establishments, so our employees would not benefit in this way from such deals.)

However, I am willing to experiment. So tonight, I had the brilliant (I hope) idea of running our own social media deal through Facebook. In fact, it's going on right now here:

To publicize the deal, I've created a Facebook Event Ad targeted at the Twin Cities area. Hopefully this will attract some new customers outside of our current fan base. I love trying new marketing approaches, especially with Facebook (it's fascinating how Facebook has changed our personal and business lives). We'll see how it goes.


April said...

I love this idea but think that setting it up on your own is a great plan! That way you don't have to pay a middle man and still offer deals for your fans!

Daphne said...

Is this offer a no go since there was not 100 people by 5/15? If so, I will stop recruiting. If this offer is still a go, will it be $40 I can use on one purchase? Thanks.

Kristine said...

I understand your points about not getting a big chunk of money up front. You can't look at groupon as a money making venture. You have to approach it as a very cheap and effective way for a small business like yourself to advertise. I've lived in MN for a long time and am a "green" mommy who loves to buy eco products. We cloth diaper, the whole nine yards. And yet I have never heard of your store until I was hunting around for "chewbeads" recently and found your store listed as a retailer on the chewbeads website. I would have been in your store had I known it existed. Groupon is the largest coupon company out there and people like myself keep tabs on it. By posting a deal, you directly market to people like myself. The reason I am posting is because I am a stanch supporter of business like Pacifier, businesses who think outside the box, are on-offs and offer an alternative to walmart like stores like Babies-R-Us. Your biggest struggle is getting eyes on your company, and this is where groupon can change that. If you decide to do groupon, come up with some sort of deal or points system (like a punchcard, something similar to what Carter's does) that keeps people coming back. Get them to fill out their contact info when they come to use their groupon for a chance to win a crib or stroller or something. That way you will always have their eyes via mail for future sales or promotions.

Good luck!