If you’ve used Groupon as a consumer, you understand that you get deep discounts (50%+) from local businesses. If you’re a business, you realize that that can drive lots of consumers to your business, but you’re only probably getting half of what the consumer pays Groupon; so you may only be receiving 25% of your normal payment.
So the only way that Groupon really works for a business is for that company to receive repeat business (at a higher per purchase level). So for Groupon to succeed, it’s all about their business clients retaining and growing business with those Groupon customers.
The theory for the business is they take a short-term loss on a consumer purchase to establish and grow a relationship with that consumer. The reality is often different, however. The business could be cannibalizing their own business by selling at discounted rates to existing customers. They could be involved with Groupon only to attract customers who buy purely on price (and a deeply discounted price at that!). So if the discount goes away, so will that customer.
To help its clients with retention, Groupon has created Groupon Rewards. They promote a “Hassle-Free Setup” followed by “Automatic Rewards” followed by “Customer Analytics.”
No, Groupon does not say that it is cutting its fees. It’s apparently proposing to manage a loyalty program for your business, where consumers get discounts once they’ve spent a certain amount. Not exactly leading edge stuff, but it does promote consumers buying before they get the discount.
So let’s focus on the broader lesson here. If you want to grow your business in a smart way, getting customers in your door (such as what Groupon has historically done) is only the start; long-term success is driven by retention and growth.
Interested in improving your company’s customer retention? Check out our Fast-Track Retention & Growth Assessment: http://www.cssamerica.com/cssfastrga.htm
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Who funds the “rewards”? The company that discounted their merchandise/service by 25 to 50%. Good to see GroupOn stepping it up and providing value-added services to their clients, but if it represents incremental expense for them its a non-starter. Does address however a big gap in who can afford a viable recognition/reward program. A one-store cupcake location or teeth whitening enterprise can’t afford a CRM/Loyalty “system”.