I will confess a bit of title hyperbole when I wrote Monday’s article: Email Coupons: The New Way to Kill Your Business. The topic incited several passionate responses in the blog comments, on Twitter, and through email. The response was fairly evenly split, but those who supported the Groupon and LivingSocial coupon discount schemes, were probably more passionate, some questioning my judgment. I’ve had a couple of days to reflect, and thought it would be wise to clarify a few things.
First, I still think it’s a bad strategy for local and small businesses. Some argue that it’s a good way to introduce new customers to your product or service. It’s not. It may be a good way to get some foot traffic, or website traffic, but it’s not a good way to introduce a product or service. A customer’s first impression of your product should not be, “I got it for half price.” First impressions last.
Now, let’s look at this from the customer’s perspective. Are they participating in these half-off promotions so that they can be introduced to new products? Nope. They’re doing it because they want a deal, because they want to save money. Unless your brand and your business is focused exclusively on low prices and deals, those aren’t the customers you want.
If a business has to give 50% off its product or service to get people to try it, that business has to admit failure. Failure to communicate value, failure to reach enough people with their message, or failure in pricing. Somewhere that business has failed to convince enough people to buy their stuff at their current price. So they think they can give the business a booster shot with 50% discounts. But it doesn’t fix the underlying problem.
Is there a better way? Yes. Unfortunately, it’s probably not what the Groupon groupies want to hear. The better way takes more time and a long-term perspective. The better way is to construct a solid brand identity, then build an experience and a promotion plan around that identity.
If a business is in desperate straits, they might be tempted to try Groupon or LivingSocial, or some other 50% off promotion with a local newspaper or TV station just as a short-term solution. But rarely are short-term solutions really solutions. My experience is that they’re the gateway drug into more short-term solutions, and soon the business finds itself in a constant search for the next instant fix.
Now, I’m going to surprise you. I’m going to share with you my personal story of coupon success and maybe it will give you an idea of how to judiciously use coupons and discounts. A few years ago, I gave a potential client a coupon good for one month’s free service. That’s right, I gave my stuff away for free. Nearly four years later, that business is still my client.
Here are the differences: First, they had expressed an interest to buy and asked for a proposal. Second, they did not ask for the coupon, I gave it to them during my proposal. Third, it was a big ticket item. While I’m not the most expensive consultant around, I’m not a $20 purchase. Finally, there was no cost of goods. It cost me no money to give them the coupon, just my time (which I would have been giving them anyway had they purchased). It was the only time I’ve ever personally offered a coupon. And I’m not sure if I will again.
So, can a business have success with discount strategies like Groupon and LivingSocial? Of course. But not most businesses. If you do decide to use this 50% discount strategy, heed this advice: Don’t offer the discount on your marquee product or service. Don’t train customers to think they can get your primary product for half off. Give the discount on a related product or service. If they want the good stuff, send the message that they have to pay full price.
A Word About Perspective
This blog is written for entrepreneurs and small business owners who actively run their own business. It is directed to small to medium-sized businesses who operate on a local level or within a narrowly defined niche. All the advice I give on this blog is a product of my practical experience. It’s the same advice I give to my clients. In fact, this post is a result of a client sending me an article and asking my opinion.
I appreciate the opposing opinions. But it doesn’t change my mind, as I’m sure I have not changed the minds of those who embrace Groupon. If you have a discount success story, please share it here. I’m always willing to learn.