Is Groupon Helping or Hurting Businesses? (20:41)

Posted on by Abby Johnson |

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As one of the newest hotspots online, Groupon is growing at an exponential rate. The company even featured an ad in the Super Bowl, although it has sparked some controversy. However, there are some issues with the service that are causing businesses to ask if it is really beneficial.

For starters, the service is a “one trick pony,” according Brian Combs of ionadas. As he explained to WebProNews, the idea of getting a bargain is what drives people to Groupon. People do not go there to check their email or for other services as they would on Facebook.

Another area that could be a problem for some businesses is the lack of control that the business itself has. For instance, Groupon writes the ad copy based on reviews they see, and it also controls when the ad is placed.

“The levers you can pull are somewhat limited,” said Combs.

Some businesses might see this as a load off of them, but other businesses like directing their marketing message and timing. Issues of meeting demand and being efficient could arise as well since businesses don’t know when their promotions are going to run. Businesses have to make sure that their phone systems could handle a potential surge in calls, their websites could handle an influx of traffic, and their internal systems could provide all the products and services in a timely manner.

Businesses also need to be aware of and plan for the waiting period before it receives its cash. Groupon collects the money, takes out its share, and then issues businesses their check later.

For businesses that do use Groupon, Combs stresses the importance of tracking results. In addition, he points out that businesses need to have a plan for following up with customers to try to turn them into repeat customers.

Incidentally, Groupon’s funding round that was released in January has brought up another reason for long-term concern. Although it brought on some impressive new investors, the funds of this round are reportedly going to be used, in part, to provide liquidity to early investors. If this is, in fact, true, it raises concern knowing that people want out of the investment.

On another interesting note of news regarding Groupon, the company is reportedly planning to go public with an estimated value of $15 billion or more. You might remember that Google attempted to buy Groupon last year for an estimated of $6 billion. However, now Google is allegedly working on its own couponing service that is thought to be called Google Offers.

Combs believes that this could be a challenge for Google since the search giant doesn’t have a sales force and prefers automated transactions. Small businesses, especially, like to have relationships with businesses that they work with and have the ability to easily contact them.

“Google doesn’t have anything like this, and I don’t see them building such a sales force,” he said.

In spite of this pitfall, he went on to say that he could see Google Offers getting some traction from businesses that are content with self-service models.

“Whether that will grow to the point where it’s material to Google’s bottom line remains to be seen,” added Combs.

Based on these facts, are these couponing offerings more helpful or harmful to businesses?

Posted in: Advertising and Marketing, Analysis, Applications, Brian Combs
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