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Is Groupon Worth It
Groupon has been sweeping the nation. In addition to Groupon, many other sites with the same business model have popped up – Deal of the Day, Living Social, Screamin’ Coupons, the list goes on. The idea behind the sites are one great deal a day delivered to your EMAIL inbox (side note: gee, seems like email isn’t dead 
), heavily discounted and it can’t be bought until x amount of people have purchased the deal so it “tips”. This caveat, along with the great price point, makes it a prime candidate for sharing.
Forbes claims Groupon is the fastest growing company ever. When Gap advertised with them, they sold 441,000 and $11 million worth of coupons (or Groupons) in a single 24 hour period. Although, while $11 million seems like a lot, I have to wonder if it’s a lot to a national brand like Gap?
While Gap was a national deal, even the local ones are selling like hot cakes – the recent Vegas deal for Nothing Bundt Cakes sold over 2,500. I have to wonder how many sales they do in a day, but I imagine 2,500 in sales is a good day for them… then again since it was 50% off and then Groupon took at least 40%, they made $15,324 vs. the $51,080 they would have made if they didn’t participate in Groupon and sold the same amount.
I have to wonder. For businesses, is participating in Groupon worth it? Sure, there are pros – no upfront advertising dollars. The Groupon model is a revenue split, so advertisers aren’t on the hook upfront. With this model, in theory, the publisher promotes the deal harder and better since the more sold, the more money they make. The other pro is that it drives exposure and consumers into a place where they otherwise might not have gone. And finally, I have to think there’s bound to be some breakage and/or people spending more once they’re there.
But, do the cons outweigh the pros? When you’re discounting your product by at least 50% and then giving Groupon a cut, how much money are you really making? In addition, there’s the psych thing- if you’re discounting your product by 50% was it really worth the full price to begin with?
What do you think? Is Groupon worth it for businesses?
Posted in Advertising, Interactive Media, Marketing
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