We’ve already discussed the 5 steps to making your own Groupon deal. Now, let’s get into more detail.
The most important element of your Groupon deal is the discount you offer. If your discount isn’t good enough, you won’t attract enough customers. But if your offer is too good (in that your discount is too large), you will lose a lot of money.
This article will guide you through selecting the best discount for your business.
What Customer Do You Want to Attract?
There are two general types of customers: one-time and repeat. You need to determine which customer is better for your business. If a customer buys your service or product less than once every 6 months, you should attract one-time customers. If it’s more than once every 6 months, shoot for repeat customers.
Usually higher priced items attract one-time customers, such as cars and TVs. Lower priced items attract repeat customers, such as office supplies and food.
The Two Types of Offers
Just like there are two types of customers, there are two types of discounts: the one-time and the repeat discounts. Logically, repeat discounts attract repeat customers, and one-time discounts attract one-time customers.
One-time discounts are the kind you see on Groupon. With these discounts, businesses offer huge discounts on a one time purchase. For example, “50% off any hair service.”
Repeat discounts are not as large as one-time discounts and require repeat purchases. This could be, “Buy 4 car washes, get the 5th free.”
Each has it’s pros and cons. One-time discounts attract far more customers. However, you are less likely to get any repeat business. Repeat discounts attract fewer customers, but are more likely to garner repeat business.
Does it Make Financial Sense?
Whichever discount you decide to offer, make sure it makes sense…in dollars.
I heard of one business that almost went bankrupt running a Groupon discount. This could easily have been avoided if they actually thought through the dollars. Here’s what happened:
For simplicity purposes, this business decided to offer 50% off a $100 product through Groupon. In addition, Groupon took an additional $5 from each sale. So customers walked out the door with a $100 product for $50, while the business kept $45. The problem was, the product COST $70 to make. So after each sale, they actually LOST $25. Let’s say they sold 1,000 of these discounts. See how the damage could add up very quickly?
How could this have been avoided? Simple. Sit down and do the calculations. Figure out how much money you will make (or lose) with each discount. Do you make enough profit for it to make sense? Or maybe it advances another goal, such as getting your name out there (in which case, it’s ok to lose money). Just make sure that in the process, you have enough cash to keep your business running.
And that is your Groupon deal. Next time, we’ll discuss getting your customers on your email list so you can send them your deal.
How do you like these tips on making your own Groupon-esque deal? If you find them valuable, sign up below (or click here) to get each new post in this series delivered by email.