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To those who use groupon and the like...
Feb. 1st, 2010 04:08 pmA number of people on my friends list like to spread the word about discount offers through such sites as groupon, buywithme, and the like. I have participated in two such campaigns so far, and I would like to give you a bit of the merchant's perspective.
Typically, we either lose money or just break even on these deals. Not only are we encouraged to give >50% discounts, but on top of that these sites take their cut -- between 25% and 50%. When I ran my "$50 for $125 worth of framing" promotion, I only saw $35 for each voucher. If a customer comes in and uses a voucher to buy exactly $125 worth of framing, my cut barely covers the cost of materials (sometimes not even). I write off the labor, overhead, and opportunity cost in return for having acquired a new customer.
This only works out in the long run if said customer then goes on to generate more business at full price either by (a) spending significantly more than the amount of the voucher, (b) becoming a repeat customer, and/or (c) recommending us to their social circle. If these voucher offers do not generate significant long-term benefits, merchants will stop offering them.
( (the incident that made me write this note) )
If I ever do this again, I'm making one change: one voucher per customer, period.
Typically, we either lose money or just break even on these deals. Not only are we encouraged to give >50% discounts, but on top of that these sites take their cut -- between 25% and 50%. When I ran my "$50 for $125 worth of framing" promotion, I only saw $35 for each voucher. If a customer comes in and uses a voucher to buy exactly $125 worth of framing, my cut barely covers the cost of materials (sometimes not even). I write off the labor, overhead, and opportunity cost in return for having acquired a new customer.
This only works out in the long run if said customer then goes on to generate more business at full price either by (a) spending significantly more than the amount of the voucher, (b) becoming a repeat customer, and/or (c) recommending us to their social circle. If these voucher offers do not generate significant long-term benefits, merchants will stop offering them.
( (the incident that made me write this note) )
If I ever do this again, I'm making one change: one voucher per customer, period.
