Pricing strategy · Marketing

Startups that have run a Groupon

Helen Adeosun

February 4th, 2014

Hey everyone, my startup runs classes to help caregivers provide great care. One of our trainers for an advanced class has suggested that we run a groupon for a blended class with great job prospects at the end. Have startups had success with groupons? It's an opportunity to see help us price the class better as well. However, I'm worried about the after effects of marketing this groupon with the needs of existing students/perceptions of quality/etc. If we lost money the exposure may be worth it.


Anyone have strong thoughts?
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Leena MBA Content & Publication Manager at NetApp

February 4th, 2014

Groupon's business model's known for churn (in fact it's Groupon's biggest problem as a corporation -- businesses don't come back to Groupon to do business with them again because once is enough). You won't make money off of a Groupon deal in the short term; there are many articles on Google from small business owners that show you the math on that. If I'm not mistaken, Groupon forces you to grossly underprice, and then takes half of your profits from the deal. 

You'd have to have a really great offering to convert low engagement patrons into repeat customers. Have a strategy to maximize exposure through the Groupon, but an even bigger and more involved strategy that focuses on keeping the customers once they walk through your front door.

Phil Strazzulla

February 4th, 2014

Groupons and other deal sites can drive a lot of traffic, but it's typically high churn/low engagement customers who won't share your product and won't come back.  If you can make the acquisition math work, or if you have a network effect in the business, then it makes sense to give it a shot.  But, beware the lifetime value will be much lower than your other customers.  

Marcus Matos Software Development & Information Technology Professional

February 5th, 2014

I've spoken with a few business owners who have run Groupon promotions - primarily entertainment, fitness and restaurant businesses, so I'm not sure if my thirdhand knowledge is applicable.

In short, all of them said they would "probably" not do it again. The issue, as others mentioned, is you bring in customers that are unlikely to return after the deal is over and they aren't very good at spreading word of mouth either.

The bigger complaint though is around the quality of service that existing, loyal patrons receive during the promotions. For example, a local yoga studio was overwhelmed with new customers during a promotion, resulting in very full classes with very little room and even less personal attention. Imagine you're a loyal, long term customer paying full price and you show up to have to squeeze in to a room of newbies who have no idea what they're doing. You might be pretty upset.

So, my thoughts are that in addition to making sure you have a plan in place to convert the deal seekers, is to ensure that you don't alienate or tick off your existing customer base as well. I can't imagine a worse scenario than losing your loyal fan base in an attempt to bring in new (and almost certainly temporary) business.

Good luck!

Ada MBA Accomplished leader experienced in Project Management, Business Analysis, Process Improvement and Training & Development

January 21st, 2015

I've had experience running deals on Groupon.  When I first launched my training business, I decided to give it a try as a marketing strategy (against the advice of my business advisors).  

1. They force you to cut your published price by at least 60%
2. They take 50% of your gross.

Groupon works best for web-based asynchronous courses.  For my live courses, this did not make much sense.  I figured that the deal would provide much needed exposure and I would make up the loss of margin by hosting courses with a minimum number of attendees that would ensure I covered all my costs.  However, i overlooked a very critical point...My company was being positioned as a premium service provider.  Groupon devalued that positioning with the price point.  

Also, as marcus pointed out, regular paying clients would not happy to be sitting next to someone who paid 60% less than they did.  You would need to schedule 'Groupon Classes' individually and exclude your regular paying clients- unless they are making up a missed class or something.

If you are providing a quality service and are positioning your firm as a premium service, i don't recommend you run any Groupon deals.

Cheers!
Ada