How to use Groupon for your business

So many horror stories, and yet they can all be avoided. Learning how to use Groupon for your business really means . . . what do you know about your business?

How do you make money?

The first step in using Groupon for your business is understanding where money is made in your business. For most businesses, a customer’s seventh purchase is more profitable than the first purchase because of the media cost required to acquire them as a customer. In that case the money is made in repeat buyers.

Some business owners understand that if they can get a customer to come in a 5th time, that customer will likely come in many more times. They may have detected customers who don’t make it past 4 just don’t have the same proclivity to shop there regularly as the ones that make 5.

In some businesses the money is made in large items. For example a watercolor painting store may really do well selling the large canvases and specialty brushes, whereas their paint-by-number and smaller painting kits don’t have the same margin. For restaurants that may translate to big money in catering dollars compared to the high cost of the single slice pizza customer.

Part of learning how to use Groupon for your business is understanding what kind of customer makes you the most money – and what is it about those customers that are different than the rest.

Defining the strategy

Before we get to Groupon, it’s imperative to understand the path that someone takes from before they know you exist until they are buying your high margin items. How does that path compare to the customers who never make it to the high margin items? Drawing or tracking the path that your customers take on that journey will give you great insight into what types of marketing you should be doing.

While it’s not easy to do, tracking the source of your customers over the long term makes enormous business sense and well worth the money spent. For a cleaning company it would be great to know if the “get your bathrooms squeaky clean” or “spend time with your kids, hire a maid” produced the most profitable batch of customers.

Crafting the Deal

If your ideal client is the mom who buys a full year of gymnastics lessons, because that parent is likely going to buy 2, 3 and 4 years of gymnastics lessons, then it makes sense to create a special that encourages mom’s to buy a full year. Whether that special is on a flyer, in Groupon or through e-mail it doesn’t really matter. Anyone gained through that effort is likely to be a customer for the next 4 years.

Suppose it is the large, blank canvas buyer that makes you the most money. . . If that’s the case, is it the beginner painter or more intermediate painter who takes on a large canvas painting? If it’s the more advanced, perhaps creating an offer for a very specialized art technique class would appeal to intermediate painters – the ones who buy the big canvases. An “intro to painting” class may not be as lucrative in the long run.

For the businesses that need customers to come in that magic 5th time to make all the difference, perhaps the strategy is to get a loyalty rewards card in their hand, which offers a discount or free item on their 5th visit. Defining the type of customer that takes and uses loyalty cards is what’s to be decided then. That’s whom you direct the deal or special.

The messaging in the special, whether it’s Groupon or not, is critical to the success of the marketing. There’s a huge difference between a list of serious, intermediate artists who’ve bought at your shop versus a list of beginner artists who just wanted to try their hand at painting. Which list can you monetize later?

Using Groupon

Determining how to use Groupon for your business comes down to what you can afford to pay to acquire customers who fit the mold of your most profitable ones. If that gymnastics mom is going to spend $2,700 over the course of 4 years with you, would it be worth spending $150 to acquire that customer?

Groupon doesn’t work too much differently than ValPak, Yellow Pages or Billboards. If you post the same deal at all 4, you’ve got all the same expenses- just allocated differently. With Groupon, you may be offering $75 of services for $30 – which means you end up with $15. If you did that same ad in ValPak, Yellow Pages or on a Billboard, you’d get the whole $30 from the customer – except you’d have to write a check later to pay for the media. Either case you end up with $15.

The key to Groupon is starting slow. Create a deal that isn’t super fantastic, like $75 worth for $55. You might go broke doing $75 of value for $5 – and attract the wrong customers. Then try at $45 and see who that attracts, if not enough lower the price to $35 the next time and see what that brings in. Test. Test. Test.

If you play your cards right you’ll craft a deal you can sell anywhere, anyday, anytime and hopefully everyday.  And the testing you get through Groupon can certainly be repurposed into your Yellow Page ad, your Billboard and anywhere else you advertise. The only other problem you have to consider is cash flow. But that’s a different discussion.