Bad Retail Advertising: Groupon & Online Coupons

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

This part illuminates how Groupons and the rest are training your customers to wait.

Did you ever see the Broadway version of Les Miserables?

In one key moment, the stage clears and a giant barricade set arrives. It takes a few minutes to cantilever into place and, at the performance I saw, several audience members applauded the set moving into place.

Like, "Wow, look what it did!" Of course, that wasn't the story, that was a footnote. The applauding audience members were not in the story but in the mechanism of the production.

So too with people touting how many Groupons or other online coupons they sold in a short period. That isn't the story. .

Can you get people to buy a deal in a hiccuping, lurching economic recovery as a backdrop? Of course.

Look no further than at the housing tax credit giveaway that artificially inflated activity for a limited period and simply stole from future sales, hence the eye-popping drop of 27% in home sales in July 2010.

And what happened to home buyers who didn't buy in time to get the credit? They figured out that if they just wait long enough the government is bound to bring it back.

So why rush to buy now?

The April tax credit was, after all, an extension of one that expired last November.

Using coupons trains your customers to wait.

Like a bus, there’ll be another along shortly. Consumers have now been trained to wait. And you know what? They are rewarded every time.

As to business owners, even though Groupon specifically bans using a similar site for a year one commenter said on a previous blog, I'm sure there are plenty of clones operating under the radar who will approach the Groupon business owner with glee.

That's because there are businesses that exploit people's naivete.

Because business owners tell themselves the last coupon “worked so well” they continue to give away their brand and profits for others’ gain. Circle closed, customers love it. Business profit goes further down the hole.

Not Best Practices Material
And when they show up at conferences and Association meetings, they will brag and tell others that this was a "best practice" to emulate. I'm afraid conferences and Association meetings are being planned right now featuring such breakouts as "cutting edge" and "outside the box" successful promotions.

Nothing could be further from the truth.
If you meet such a person or presenter at a meeting, ask for their hard numbers:
  • Exactly how many were sold?
  • How much did they lose for each and every one?
  • How many coupon clippers purchased in excess of the discount?
  • How many of their regular customers purchased?
  • How was their bottom line for the following 12 months?
Don't let them get away with "they think" or "hope" - only hard numbers.

The true answers will not be worthy of any applause.

Tomorrow: Part 6: The Great Lie of Converting Groupon Users To Be Your Customer
This is an 11-part series on Groupons and their ilk, discounting and couponing in general and why they are all so damaging to your business. That's whether you are a large brand like GAP or a regional chain or local independent retailer. Here are the previous posts in case you missed them:

Bob Phibbs, the Retail Doctor®, has helped hundreds of small and medium-sized businesses in every major industry, including hospitality, manufacturing, service, restaurant and retail. He is a nationally recognized expert on retail business strategy, customer service, sales, and marketing. With over thirty years experience beginning in the trenches of retail and extending to senior management positions, he has been a corporate officer, franchisor and entrepreneur.

Learn how to improve your business with The Retail Doctor's Guide to Growing Your Business.