There are a lot of small and local businesses looking to learn how to advertise on Groupon. But the cost of advertising on Groupon and Living Social isn’t quite clear until it’s too late. Group and social deal websites seem lucrative on the surface but can quickly become a slippery slope. We’ll cover a few reasons why businesses considering ads on Groupon or Living Social should consider alternatives like One Up Digital’s sales and promotions package, or doing digital marketing themselves.
1. Losing money twice, sometimes three or four times
Groupon requires businesses to give a discount on all products and services advertised on their site. The average is about 50% (sometimes much more). On top of that, Groupon then takes 50% of the final sale price, leaving the business with a mere 25% revenue on their own product, on average. After paying overhead and employee wages, many businesses suffer a total and complete loss on their Groupon deals.
But won’t customers return after their wonderful experience and become lifetime fans? Most customers using Groupon or Living Social are deal seekers, looking for the easiest and fastest methods to save a few bucks. It’s not uncommon for the same customer to redeem a deal with false profiles and sign-ups again and again. When a business removes the deal, that customer vanishes, never to return, onto the next deal your competitor supplies.
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2. They want to play the middle man for your business
The true cost of advertising on Groupon is immense. But what’s worse, is you have to operate on their playing field. There’s but only a small link near the bottom of Groupon business pages that links to an actual website off Groupon. They put customer reviews all over pages. They often use beautiful stock photos to make the business look better and fit their own vision for their site. There’s no hours or phone numbers present on pages to speak to the business directly.
Why do they do this? It’s all a ploy to keep your business and your customers on their site. The need to maintain reviews, the way they portray your business to look better, the lack of options to contact you, it’s all a well thought out strategy to keep you and your customers coming back to them instead of going directly to your business or website. By being in the middle, they make more money, while you make less.
3. They hurt your brand, product, and retention
After all is said and done, the customer has claimed their Groupon advertisement from your business, what are you left with? Not much. To repeat what was mentioned in #1, Groupon’s core users are looking for deals, not the best business or product available. They’ll always remember Groupon because of the deal. They won’t remember your business, website, or products.
Besides losing a lot on deals, your business has effectively told customers what your products and services are ACTUALLY worth to both them and you. If a customer paid half price the first time, why would they return to pay full price? Consumers are less likely to return to your store and pay full price ever again, now having a negative opinion and perceived value of your business and products. You’re now stuck in the vicious cycle of providing deals as often as possible to coax those customers back.
4. There’s no real competitive advantage
This touches on all the previous points but bears repeating. You might think Groupon provides a competitive advantage, or that they’ll do all the advertising for you. If your competition isn’t on there, you’re likely getting most of the customers, right? Wrong.
Not only can your competition easily sign up and offer better deals than you, but Groupon will also put their deals right next to yours. Forcing you to offer better and better deals, while making less and less money.
Their advertising and marketing won’t just put you in competition with your nearest competitor, it puts you in competition with all local businesses. Not to mention large and national companies that are allowed to post on Groupon as well. All these businesses are competing against yours for the eyes of shoppers looking for the best possible bargain with no real loyalty.
5. There are better alternatives that cost less
Now that we have a better understanding of the true cost of advertising on Groupon, and why you shouldn’t do it, let’s try something that does work. Digital marketing.
There are tons of tools available to small business owners willing to devote a little time and learning to execute their own advertising. With email marketing, digital advertising, websites, and proper local SEO, one could easily achieve what Groupon provides without much cost.
There are affordable done-for-you systems like One Up Digital’s Coupon Advertising that can achieve everything Groupon does without any of the negatives. Best of all, it’s entirely about your business and products. There’s no competition because they offer exclusive areas. They’re sending real local customers to the website you own, with all your deals and coupons on it. Your business can get a dedicated coupon website, free domain name, monthly coupon email blasts, local digital advertising, and more, all for less than the losses accrued through Groupon deals.