I think a lot of people misunderstand what Groupon offers a business. Basically it's advertising, but in a way that makes it affordable for small businesses. The company offering their deal, is putting their name out there, and only has to pay for it when someone walks through the door an makes a purchase.
Tradition advertising means paying for your brand to be seen. Magazines, newspapers, ect can target markets, but not to a very large extent. Google, Facebook, ect can target their market better, and businesses only pay when someone clicks (ie shows a bit of interest in the company). This is why they are stealing traditional advertising revenue. Groupon took this one step further, and made it so that businesses only pay when a customer walks through the door. This opened up advertising to much smaller businesses, Mom and Pop shops, since there is no upfront cost.
You'd think that Groupon would be trying to target their deals better. Have a "select your interests" when you sign up. Yipit is doing this, and it's a pretty cool take on it. That type of service adds a lot more value then a generic daily deal.
It would have been advertising if it had a longlasting effect.
Consider that once you do a groupon for a 20% < discount, it is going to be very hard to get that customer again for the full price of the product. So what do you get from the supposed advertisement? A single customer that may or may not give you his business again.
That's not advertising. That's what's crassly known as 'opening your legs'.
That's exactly what advertising is. You're paying for exposure and a chance that you can convert him to a lifetime customer. You can say the exact same thing about Adwords, and display advertising. You pay for each click that may or may not give you a single sale, let alone a lifetime customer. You pay for an impression that may not influence a customer's buying decision in the future...
Groupon may be a bad form of advertising for most businesses.. but it's still advertising.
You are absolutely correct. But Groupon doesn't give that impression. The impression you get from a Groupon is "I got this really good deal for $10, why would I want to return for $20?"
In a classic ad the full price is stated upfront. You convert your customers on that, not on a completely unsustainable one-time deal.
Yep, you are right. It dilutes your brand. It's a reason why most luxury brands like Prada and Louis Vuitton stay away from flash sites like Gilt and RueLaLa as well. It's also why Apple rarely has sales on iPods or iPhones.
By giving out discounts, you're training people to expect deals forever, and that's unsustainable.
Treating GroupOn (and similar costs) as advertising/marketing is indeed the correct approach and certainly one the company pitches.
However, something worth considering: is the GroupOn audience worth buying? Anecdotally the answer seems to be "no" as repeat business is well below expectations, regular customers use the coupons, customers will use coupons at times when you'd otherwise be busy and the typical profile of the GroupOn customer suggests they tend to spend the absolute minimum for the coupon.
Honestly I'm shocked the GroupOn IPO is oversubscribed. Still, probably not bad for an opening day sell.
I'd love to see solid numbers on what percentage of their sale price companies are spending on different forms of advertising.
Considering the general bargain hunting nature of Groupon-derived customers I wouldn't be surprised if they're possibly the most expensive and the least converted advertising business out there.
Tradition advertising means paying for your brand to be seen. Magazines, newspapers, ect can target markets, but not to a very large extent. Google, Facebook, ect can target their market better, and businesses only pay when someone clicks (ie shows a bit of interest in the company). This is why they are stealing traditional advertising revenue. Groupon took this one step further, and made it so that businesses only pay when a customer walks through the door. This opened up advertising to much smaller businesses, Mom and Pop shops, since there is no upfront cost.
You'd think that Groupon would be trying to target their deals better. Have a "select your interests" when you sign up. Yipit is doing this, and it's a pretty cool take on it. That type of service adds a lot more value then a generic daily deal.