* This is an updated version of a popular post from 2012 in which I outlined why Groupon (and others like them) are killing businesses
I feel dirty.
Today, against my better judgement, I purchased something using Groupon.
I feel bad for the local business who just got completely and utterly ripped off by Groupon, and subsequently by me. As a marketing and branding writer and speaker, I am paid to help businesses succeed. So buying something from a service I ethically despise made me feel terrible.
Here are five reasons Groupon sucks:
1. They force your business to put a value on your product or service that is far below it’s actual value. Once you’ve established that your $100 product is actually worth $25, you’ve screwed yourself out of any chance to charge $100 again with any credibility. In my case, I just bought a $1000 product for $199. You can be damned sure that I’ll never pay $1000 for it again. Ever.
2. They reward bargain-hungry customers who have no loyalty to the business. Instead of giving your biggest discounts and best deals to your loyal customers, Groupon forces you to give your biggest discounts to those who have zero loyalty to you. The biggest discounts and rewards go to customers who will abandon you the moment your competitor offers a lower price. How do you think that makes your long-term loyal customers feel?
3. They give you the perception of increased business thanks to a rush of transactional customers who are only concerned about finding the best price. The moment you stop offering the very best price, these customers will go elsewhere and never come back… until you drop your prices again. Every time you try attract a customer like that, your profit margins go down. Never has a great business been built on the back of low profit margins.
4.They create a rush of artificial business that, quite often, overruns your ability to care for customers in the manner you are accustomed. Because of the inevitable drop in customer service, you piss off your regular customers who give you the bulk of your business. This is especially true in service industries like restaurants, spas, and places where spaces are limited. Regular customers who love you can’t get in, or don’t get the high level of service they expect, because you’re too busy accommodating people who bought through Groupon.
5. They are crack cocaine; highly-addictive with a short-lived bump. Once you’ve experienced the high, you want it again. And again. And the only way to get it is to keep going back to your dealer to hand over your profits to them. Pretty soon, you’re broke. And there’s no rehab for bankrupt businesses. If you do a Groupon run today and see a short term bump in sales, what will you do this time next year when your year-to-year tracking shows a huge sales week? You’ll run back to Groupon so that your week matches last year. And repeat.
Rock Star brands would never work with corrupt concepts like Groupon.
Can you imagine Apple offering a Groupon discount on the iPad?
Can you even dream of Harley-Davidson offering a Groupon discount on a Fat Boy?
Can you fathom Starbucks going to Groupon to sell more Vanilla Bean Frappacinos?
Groupon and their clones are not valid advertising options. The only thing being advertised is low price. Is that what you sell?
They are not great ways to bring in new customers who will eventually pay full price. They don’t attract that type of customer.
They are not a viable way to build a long-term business. They rely on you making less money. Is that your business plan?
Instead of the short-lived rush of a hundred new bargain-hungry discount shoppers, start building a rock star brand.
Rock Star brands don’t compete on low prices alone.
Rock Star brands provide value to their customers, because true value transcends price.
Rock Star brands turn those customers into fans who keep coming back.
Rock Star brands deliver the kind of emotional satisfaction that customers want to pay for!
Learn how to build a Rock Star brand by reading Brand Like A Rock Star, available now for digital download or home delivery.