Posted by: Amanda Rick, Senior Account Coordinator
Only 66% of businesses who use Groupon report a profit. Yet, according to the popular company, approximately 95% of these businesses would advertise again and new companies are clamoring to be listed. Have businesses stopped caring about profit margin or is there something larger at work here?
Online coupon sites, such as Groupon and LivingSocial, offer daily deal discounts for local businesses through their websites, email and mobile applications. Because the sites have a pre-determined purchase quantity, users feel a sense of urgency to grab the specials before they’re gone and to share the deal with their friends. And those purchasing the deals are not the only ones who benefit. These sites offer popular platforms that don’t charge companies to list deals; they simply take a percentage of the sales.
As a marketer, these online coupon sites are a great tactic to use in conjunction with a social media campaign to increase website traffic and create company buzz. Users can share the daily deals with their friends through Facebook and Twitter and are incentivized to do so. College-educated women, ages 18-34, make up the majority of Groupon subscribers. This hard-to-reach demographic makes Groupon an advertising avenue that marketers can get excited about.
Many subscribers bring friends when redeeming their deal at a business or store and Groupon estimates 22% of customers return to pay full price. Companies are willing to sacrifice short-term profit margins with a long-term strategy to increase their regular customer base.
Though powerful, online coupon sites like Groupon should not be used as a standalone tactic. They can help businesses create short-term buzz, but they’re most effective as a launching point for a strategic integrated marketing campaign.
