Groupon: only 18 months old, yet already valued at over $1 billion. It’s safe to say that this innovative concept is at the frontier of social media marketing initiatives – and it’s changing the way local businesses make a name for themselves and get customers through the door.  So, what’s the fuss about?
Groupon is an online service that provides you with a deal every day – one really good deal every day in each city it services (think 50% off at a nice restaurant and for Groupon, that’s a pretty average sort of deal) . The premise is simple: businesses offer a discount (group coupon) that then gets sent to every Groupon subscriber in their city via email. All subscribers who are interested can purchase the business’ offering at a steeply discounted price. The customers get a great deal, and the business gets a massive, instant boost in visibility – not to mention an increase in word-of-mouth advertising and the chance to wow a large audience with customer service. Groupon makes its money by taking a small cut of the discount offered. The business makes money on each sale that Groupon generates and the end customer gets a coupon for the product or service in question. Win, win, win.
The Catch
The catch for customers is that they only get the massive discount if enough other people also buy the groupon on that day. This provides people with an incentive to share the business’ offer via Facebook, Twitter, and other social networks.
Groupon does a few things that conventional advertising does not. First off, it offers direct and measurable exposure. This is measured through the number of emails sent out (the total pool of subscribers in the city), and through the number of users who buy and redeem their groupon at the business itself. Businesses love seeing the direct results of their investment in advertising, and groupon delivers in this regard. Not only that, Groupon has detailed demographics of its subscribers, which it makes available to prospective advertisers:
Second, Groupon is available to advertisers at no upfront cost. Not only does this separate Groupon from other methods of local advertising, but it makes it afforable to smaller businesses looking for some visibility. Groupon makes money on each Groupon redeemed at the business, tying their best interests to that of the business (always a positive when looking at advertising).
How effective are these ads at generating repeat customers? Groupon seems to think they’re pretty effective, and has several case studies of success stories. They also state that 97% of advertisers saw an increase in business, and 90% want to launch another Groupon.
While it’s too early to tell just how instrumental Groupon is as part of a local business advertising strategy, its advantages – low cost, focused audience and measurable return – are all compelling reasons to enlist Groupon to increase local visibility.
If you’re a business owner who’s interested in finding out more about how Groupon works, then visit Grouponworks.com 
They have several handy videos you can watch to get a better understanding of how you can promote your business and make a buck at it in the process.
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{ 10 comments… read them below or add one }
There are also some canadian versions: stealthedeal and Grooster. Grooster seems to have a lot of good deals.
Thanks for pointing these out Alex. I just noticed this one when I did a search for “Vancouver weather” in Google funny enough: http://www.LivingSocial.com.
Groupon seems to have majority of the market in Vancouver
Stealthedeal, wagjag, and grooster have weak sales.. and it looks like another local group buying site is popping up in vancouver http://www.indulgeliving.com . I think they are giving away $10 credits for people who sign up now?
I wonder how many more of these sites are there gonna be? I think LivingSocial & Social Shopper is coming too?
Thanks for pointing out Indulgeliving Joe!
Looking at the win win situation for everyone Groupon does seem to the answer for today’s marketing. But looking at these sites increasing in number looks like competition is increasing for groupon. But for now it does seem to be doing good. Only time will tell.
Yes, I agree. Groupon is seeing a rush of knock off companies trying to emulate their success. That’s the nature of business and the web today. If something works, people will copy it. Not a bad thing necessarily because in a lot of cases the first movers don’t make it. Look at Friendster. It was one of the original big name social networks and it couldn’t cut the mustard. The founder ended up starting a restaurant afterwards
Hope Groupon can keep it’s momentum!
I think the local ones will be able to use their local knowledge with the low-cost model and win eventually.
Indeed – there seems to be a new daily deal negotiator coming out almost monthly; and even more aggregators coming out to bring them all together.
I recently completed a Marketing assignment for a class analyzing ALL Group Buy/Daily Deal/Social Shopping Aggregators… there are as many aggregators as there are Group Buy Sites (no joke)! I think this may be where the Daily Deal business will be headed (not necessarily revenue-wise but perhaps traffic-wise) — assuming collective buying is here to stay and not just a bubble waiting to burst .
But deal tracking in social shopping is still young and I know many people who open up their mail boxes and are OK with having 10 new deals of the day appear, every day. The one aggregator that has been able to do this properly in my opinion is MiserMcGee.Com — though they are probably a little late in entering the arena. They’re currently the only aggregator that’s been able to obtain full deal coverage in Vancouver (though they are only active in Vancouver and Calgary at this moment). I can see them becoming the ‘Craigslist’ of this arena if they keep doing what they do, check out there site here:
vancouver.misermcgee.com
Apparently the site is still in Beta (probably explains why there is no Marketing for the site at all) but they are the only site that has been able to grab ALL deals from ALL daily deal sites (trust me, I went to each site and noted down ALL deals, and then compared the results to ALL daily deal aggregators — this is the only one that was able to track down every single deal). I think this is probably the Primary Benefit that users will seek (deal coverage)… but I guess the question is: how long will it be before dealradar, onespout, and all the other trackers are able to attain this and deal coverage no longer becomes a point of differentiation?
Adam:
This is a very powerful advertising tool, it will be big. Question, If you are a business and promoting your ‘say’ restaraunt, at a 50% off groupon, and you get enough people to buy, what is the cut Groupon takes. And does the percentage varie amoung different deals.
Thanks
Tony
Hi Tony,
Groupon requires that you offer a heavy discount in the range of 40-60% in most cases off your regular price.
Then it takes 50% of what ever is left over revenue wise.
This means that most merchants loose money on Groupon deals, at least on the first order.
The idea is that they will likely expose you to a high volume of new potential customers and you
have the ability to upsell once you land a customer by using them. Then there is the business that is generated
from repeat sales.
I think the percentage is negotiable but you’d have to verify that with Groupon.
I spoke with them by phone when they got started in Vancouver and it looked like
there was some wiggle room on the percentage.
A savvy marketer using their system would make sure to have a well thought out and automated
follow up process for all Groupons that get redeemed in order to make it a worthwhile investment.
You would need to make sure you had repeat sales and upsells in other words.
Hope this helps!
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