Do You Have a Groupon Offer?
September 9 2010 by David Hadaway
Groupon has quickly become one of the greatest Internet success stories. In less than 2 years, Groupon is generating $500+ million in revenue at lucrative profit levels. Their success hinges on their ability to deliver great deals or coupons and drive large amounts of traffic in a very short period of time. So, what can direct marketers learn from the Groupon model? First, let’s look at Groupon’s description from their website:
Explore Your City at 50%-90% Off
Groupon negotiates huge discounts on popular local goods, services and cultural events. Then we offer the deals to thousands of subscribers in a free daily email. The deals are activated only when a minimum number of people agree to buy. So our subscribers get a great deal and the business gets a ton of new customers. Win-win. More than just a deal site, Groupon is a city guide, a social tool and the best way to experience your city without paying full price.
So, how does Groupon succeed in achieving high response rates? While their success can be partially attributed to several factors, there can be no denying that Groupon’s hook is the offer. In fact, to be featured a merchant must provide an offer that is substantially better than their typical offer. Most Groupon offers are 50% or more off of the retail price. In comparison, the average offer on a direct mail campaign is 17% off of the retail price.
In the Groupon example, merchants are offering a 50% off and they pay Groupon 30 – 50% of the amounts they collect. In essence, their cost per customer could be $30 to $50 or more. I know what many of you are thinking—I’d kill to acquire a customer for as little as $30 to $50 each. Have you tried a 50% offer??
The lesson to be learned is determine what your overall goal’s are (traffic, profit, new customers) and test several different offers. Also, consider increasing the size of your offer and see if you can improve your results.
