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Alien Danger Using Groupon For Business

[This is an excerpt from my coupon marketing book, Groupon: Why Deep Discounts are Bad for Business]

Did you see the movie Alien? Of course you did. Remember the scene?

Yes THE scene .

The one with the alien popping out of the chest of the guy while at dinner with everyone?  The alien had used his body as a host and destroyed him.

The online discount sites, “deal-of-the day” blogs and their ilk are using your deal to build their lists.

The customer loyalty is going to their pages, their offers, their friends – not yours.

I think you’re delusional if you’ve been thinking otherwise.

The money that could be making your shopping experience more competitive, keep your inventory fuller and letting you hire better is vanishing. And you’re the magician.

groupon ebook coverHandouts

In a New York Times article recently a woman complained about what’s wrong with America, “You cannot sit and expect someone to hand out to you.” Yet the rise of all these discount coupon sites shows Americans WANT someone to hand out to them.

Milt Garner, a legendary hardware store owner in Los Angeles used to say, “There are people who will go to great lengths to convince you that your money, in THEIR pocket, is good for you!”


They’re Groupon customers – Not Yours

Used to be if a customer was on your list, they would get better treatment, special perks or advance notification of your big sales.

Anyone who walked into your store during your promotion could get the sale prices too, but your best customers were (rightfully) your priority. After all, your regulars are the ones who pay your bills month in and month out.

Groupon and the other online coupon sites attracts people to their list, not yours. Those “deal of the day” coupon users are really a customer of theirs – not yours.

So if your good customers happen to notice a Groupon, they get it. But if they aren’t on your list, another company gives them a better deal than you do.  And a question mark arises whether you are overpriced since the online coupon company can save them so much money.

And that’s dangerous.  Think of it this way…

You’re the Florist
Do you remember the last time someone sent your flowers? Do you remember the florist? Or the person who sent them?

I’ll bet its the person who sent them.

Groupon and their clone online deal companies are the person sending the flowers, you as the merchant are the florist providing the flowers.

You aren’t memorable, the other guys are.

Even worse, you’re footing the bill!

Tomorrow: The Perfect Storm For Businesses To Welcome Groupon

This is an 11-part series on discounting, couponing and why it is so damaging to your business.Here are the previous posts in case you missed them:

Related posts:

Posted by Bob Phibbs, the Retail Doctor on August 31, 2010.

This entry was posted in Marketing and tagged , , , , , , , , . Bookmark the permalink.

4 Responses to “Alien Danger Using Groupon For Business”

  1. Daniel says:

    woah. florist. deep. Excellent metaphor.

    It actually has reminded me of our live radio event for our grand opening. In hind sight the people who came to our store where just there for the free pizza. Some even asked “Do I have to go in?” I decided there’s an entire culture of people who just plan Saturday lunch for wherever the radio is every Saturday.

    They weren’t interested in me. They were interested in the pizza.

  2. Stephen says:

    I think one of the fundamental problems is that many people in the online or tech world have no clue as to the cost structure associated with retailing. Tech is largely a business with little or no marginal costs to ramp up or down. Once the program is written, or once a site is set up, and you have enough bandwidth, you can replicate it unlimited amounts fo time for virtually no additional cost.

    In Retailing of actual goods this is impossible. The cost of goods is always going to be in the 25-50% of first ticketed retail range. Ad to that the overhead costs like rent, store build etc, and wages, and maybe allow about 5% for marketing, and you have a potential profit margin usually in the 3-10% range.

    So friends in Software or with tech proposals come at me with conepts that require a lot more margin than any retailer I know has to spare. Groupon is a prime example. Groupon takes a 50% cut, for basically selling a pdf file. If they were workign on a 5 or 10% cut, and you could come up with a deal that would generate cash flow, traffic, and attract a good potential long-term customer, then it would be great.

    I much more easily understand a Gilt or Vente-Privee, whcih utilizes “their” list to help you move stale inventory. That is making money while offering a brand or retailer an actual inventory cleansing service, like a TJMaxx.

    • bobphibbs says:

      Yet many bricks and mortar businesses Stephen don’t have a clue as to the cost structure of such online discount coupons. I would agree with you about Gilt and the rest helping the retailer. This is all due to the perfect storm I talk about in today’s part four in the series. Thanks for commenting!