Even a five-year-old knows that if something sounds too good to be true, it probably is.
Groupon is a quickly growing new business in the online advertisement and public relations world. The basic premise of Groupon is that companies, small businesses, services or anybody who has something to sell can pay a certain sum of money to be the ‘deal of the day’ in whichever market they are located that Groupon serves. A different ‘deal of the day’ is offered on the website everyday, with the idea that with more people taking advantage of lower prices they will try new places and activities. This brings in a much higher customer stream for the business for the time period that the coupon is valid.
So why the hubbub about Groupon being a bit of a ripoff? It may seem too good to be true for Groupon’s clients, but for Groupon it’s just good business. Customers get what they want–discounted prices on goods and services they might not otherwise have splurged on. The companies get what they paid for–greater publicity and word-of-mouth. Groupon gets exactly what they want–money, money for providing the incredibly simple service of loading a coupon online everyday for one of their 50 million plus users to print out and use as they see fit.
Evidence found in a study undertaken by computer scientists at both Boston University and Harvard University have found that a business may actually hurt after a collaboration with the deal-making site. After a ‘deal of the day’ feature, companies receive a marked increase in purchases and online reviews. The reviews are often much more negative than the average before the coupon landed. While some customers become more interested in a services or goods provider after noting their large number of reviews, the negative rating often takes business away. When this is added to the fact that at least one third of companies using Groupon actually lose money from the interaction (not making as much because of daily deal combined with Groupon’s flat fee) the site garners a bad rap all of a sudden.
But Groupon is not at fault. If their client was unequipped to handle the influx of customers or unable to handle the financial burden of a temporary net loss they should not have hired the middle man. Groupon knows they are the middle men, and they’ve turned their relatively superfluous position in dealings between company and customer into a highly lucrative, billion dollar business. What Groupon is doing might seem underhanded, and it may seem ridiculous that they are growing as they are when their performance record is so poor.
Customers don’t feel the Groupon sting in any way other than the coupon’s business may not have as efficient of service. Groupon certainly doesn’t feel the sting. The only party that needs to watch out are Groupon’s clients, who should do their research, consider their goal of working with the site and make a game plan to handle customers for the busy days while enticing them to return for all the regular days.
Just as with Facebook freebie offers, Groupon offers something everybody wants. Groupon offers exposure. The end result of using Groupon is not necessarily going to meet expectations–but that shouldn’t be blamed on Groupon, just the party who initiated the collaboration.
Allana Wooley is a freshman anthropology and history double major from Marble Falls, Texas.