I recently came across an article by the owner of Posies Cafe. She discussed her experience of using Groupon and how Groupon ultimately cost her business more than what it brought in. While she admitted to making a mistake, her story illustrated the fact that taking short cuts doesn't work in social media anymore than it does with other approaches to marketing. I'll admit to being a bit skeptical about Groupon, especially with how much money they make, as opposed to what the business makes. If a coupon i under a certain amount Groupon takes all the money and otherwise gets half of the coupon. They could argue that the payoff is that the business gets a lot of exposure, but there's no guarantee that new customers will actually stick with the business after they've used the Groupon. By the same token, some of that responsibility is on the business to provide a customer experience that will stand out to new customers and get them back into the store. The business also has to enforce the Groupon agreement, even and especially when potential customers won't, such as when they bring in multiple Groupons.
In conversations I've had with several other businesses, they've noted that while Groupon did bring some new awareness for their business, the cost involved wasn't beneficial in the short run and the majority of customers who came through, only did as a result of Groupon, and didn't stay. And in the case of Posies Cafe it cost 8000 dollars to use Groupon. Not exactly a profit for Posies, even if they got new customers, because between the wholesale cost and then the cost of Groupon, it will take a long time for that business to make back that money, let alone realize a profit.
Businesses have to carefully weigh the benefits of a social coupon site vs the cost of the social coupon sight. Quantity of numbers doesn't guarantee a profit, especially if the profit needs to be split with the social coupon site. And while there might be more visibility and even more customers walking in the door, the other question is whether or not the new clientele is actually the clientele the business wants.
The reason I advocate for using social media to build relationships with people is that the relationships you build lead to stronger customer loyalty than any coupon will. Businesses that get involved in their communities, both on and offline can benefit from investing time into building relationships with the people who frequent the business location. A social coupon site can't replace relationships with coupons and can't guarantee lasting clientele as a result of generating coupons. It can guarantee visibility, but visibility is only useful if you can translate into meaningful business relationships that benefit everyone as opposed to just one or two parties. And while it's true that social coupon sites need to also make some money to offer what they do, the critical question arises: How much is too much for the small business that's trying to use social media to attract clients and chooses social coupons sites as a way to do it? I'll stick with investing my time in social media conversations, and leave the coupons out of it.
On a different note, The comments to the post have ranged from people chastising the owner for being transparent and noting that she was taking a marketing risk to others who've sided with her about how Groupon treated her. Check out the comments on her blog. It's worth reading for a perspective from both sides.
http://socialmediatoday.com/taylorellwood/190655/do-social-coupon-sites-benefit-businesses?
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