Don’t be fooled by Groupon, Living Social and the Like, Discounting is Not Your Friend

If you are in a retail storefront business living on small margins, don’t be fooled by Social Discounting services like Groupon, Living Social, etc.  Giving away your product for free is bad advertising and even worse for your business.

Why is it bad advertising?  Well, you are showing that you are not interested in receiving full price for your product, which is a turn off for your established regular customers.  Discounting attracts shoppers who shop on bottom line first, cheapest price second and service/quality last.   You want to attract clients who care about quality and service and are willing to pay for it.  Bargain hunting customers are much less likely to be repeat customers, and much less likely to spend a single penny beyond the face value of the discount deal they received.

How is it bad for your bottom line?  Well, let’s say your offer a Groupon type deal for 50% off, so the customer pays $5 for a $10 gift certificate.   The customer pays Groupon first, and then Groupon Pays you.   So if you and Groupon agree on 50% split of the revenue, you get $2.50 per Groupon purchased.

Well, that is great and all, but if every $10 order costs you $3 in product cost alone, you have lost money EVEN before factoring in your rent costs, payroll costs, insurance costs, utilities costs, etc.  You might be actually losing $5 or more every time a Groupon is redeemed.  YIKES, every time a customer walks in and orders, you are basically taking money out of your bank accounts and handing it to the customer ALONG with free product.

If you deny the customer, well, they go onto Yelp or other review sites and badmouth your business and customer service.  So now, you have paid a customer to receive free product from you and they are trashing your business reputation online.  A tarnished online reputation is a major hindrance to having new customers come visit, as a lot people look at user reviews to decide which businesses they are going to patronize.

Is there a better way to market?  You bet!

Options to consider are email marketing to your Existing and Loyal customer base.  Remember, Groupon is email marketing to people who aren’t likely to stay as your customers since they are regular Groupon junkies dining daily daily on whichever Groupon special that just came out the day before.  They are not coming back until you do another Groupon.  Your existing customer base already knows your business and likes your business, and email reminders are useful in increasing visit frequency.

Sponsoring a local youth sport team.  Yes, this is giving money to those who need it, little kids who are organizing themselves.  This is a great gesture of goodwill in your LOCAL community.  The parents of the kids are going to be very appreciative, and again they are likely to recommend you to their local sphere of influence.

Radio advertising.  It’s not as expensive as it seems, and there are some airtime buying tips that can help you to buy frequent enough airtime to build credibility.  Late night television and cable advertising can be affordable and targetable to a local market.

The best thing about all of these is that they do not require discounting.  Discounting is NOT good for your business, it is NOT good for your bottom line profits, it is NOT good for your existing customers who enjoy a top notch product and services.

Use your marketing efforts to build credibility and a good reputation for your business. Use your marketing efforts to differentiate yourself from the competition.  Just remember Discounting is NOT your business’ friend.

For more information on how Just Elementary, Inc. can help you with improving the bottom line for your business, please contact our Client Care Manager Sonia Chhabra at (888) 926-9193 or by email cs@justelementary.com