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I‘ve been talking to some small business owners from all over, including right here in Tallahassee, Florida. There is a great new marketing company that oozed into towns all over the US, and if local businesses don’t watch out, it will be the end of them.
Of course I’m talking about GROUPON®, and I have nothing but the utmost respect for what this mega email marketing company has accomplished. They waltz in to every town they target, grab up lots of email addresses, and then they offer a daily coupon special to save money for the subscribers. At first blush it appears to be a great service. In fact, my brother Danny, a Florida real estate attorney, told me about it months ago, and he absolutely loves it.
So why the warning about GROUPON®? Because their business model appears to be capable of putting local businesses out of well, business. Here is a simplified version of how it works.
GROUPON® approaches a local business, say Joe’s Paint and Body Shop, and offers to do a mass-email campaign designed to get Joe more business. They ask Joe to offer a limited number of coupons for 50% off (or another deep discount) for one of Joe’s services. Joe must agree to pay GROUPON® an amount of money that could be 1/2 of what Joe receives from the coupon sales.
Sounds like a great deal. Joe’s customers get a huge savings, Joe gets more business, and GROUPON® is able to earn a good bit of money for this email campaign. But here’s the problem. In our example, Joe is working for 25% of his normal rate. I don’t know about him, but this Joe couldn’t do that. My profit (from what I can remember about profit all those years ago) is no where near 75%. In fact, most businesses are lucky to profit 15% in a good market. So Joe is grossing 25% and his costs are most likely in the neighborhood of 85%. Thus Joe is losing roughly 60% per GROUPON® customer.
Now if the GROUPON® gig is worked wisely, Joe may give 50% off on a service that requires the purchase of other services. But this is not always the case. I have heard stories about restaurants that have gone out of business because they did not expect such a rush of customers at the discounted rates. They could not recover from the losses of just one campaign.
Now technically, shame on the business owner for not doing the math up front. How many customers can you lose 60% with before you have to shut the doors? Surely there has to be another way!
Joe-Pon For Tallahassee Coupons
| Enter Joe-Pon the free-coupon service for businesses located in Tallahassee (Leon County). Here is a program that can benefit everybody in Tallahassee, without our local money being sent to Chicago and our local businesses having their backs broken. The benefits for all are super:Customers: I will assemble a “Joe-Pon” email list. I promise that this list will never be sold to anybody and will only be used to feature the regular mailing of coupons to the subscribers of the Joe-Pon list. These coupons will be great deals very similar to what you would see with a company like GROUPON®. They will be limited, because the savings for the customer will mean the local business is losing money, but [only a little].
Local Businesses: I have created a form on my site for you to request a coupon campaign. This campaign will be free of charge, the only money it will cost you is the discount that you pass on to the customer. Instead of you having to pay for advertising, you can invest a similar amount in a direct email campaign through the discounts that the customer receives. CENTURY 21 First Realty: Though we will not receive any money for this service, it is part of our paying-it-forward approach to doing business. We hope that our happy Joe-Pon subscribers and all of the businesses involved will refer their friends and family members to us when they need to sell a home or buy a home. |
So, let’s get the ball rolling. Every reader can do their part in making this service work for everybody. Click on the social media sharing buttons and tell your network of friends about Joe-Pon. Once we have a large enough subscriber base, businesses will be attracted to start offering significant savings to you in the form of coupons! So tweet, share, Digg, Stumble, Reddit, Mixx it up, Buzz it up, and forward a link to this post to everybody you know.
Hey Billy Poole, how about you tell everybody on your list about Joe-Pon and you and I will get together and put the first big coupon deal together. I know your low prices coupled with a discount is going to hurt, but I want some 1/2 off 1Fresh Stir Fry!
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{ 3 comments… read them below or add one }
Groupon is evil. People just don’t see it. It’s probably the possibility of getting a discount on something that they probably don’t even need that makes them blind to the reality. But this idea of yours could probably work out. At least it seems like a fair deal, unlike groupon and similar “deals of the day”.
Thanks Heather. I don’t see Groupon as evil, just as a competitor. Even the businesses that hire Groupon (especially the businesses that hire Groupon) must view Groupon as a competitor. If a business begins to rely on Groupon for email marketing, what will happen when this growing email list starts to work for their competition? Paying Groupon today ensures that its list will grow, which requires a steady future use of the list. Businesses beware!
You really have to look at your own business niche to determine if something like Groupon will work for you. Similar to what you’ve mentioned, I’ve seen how high-end restaurants have had their profits crushed from promotions like this that were geared toward hopefully bringing in new long-term customers. In these high-end types of cases however, you’re appealing to the “McDonald’s” crowd – customers who will only ever go when the price is artificially low, so you’re not even gaining new customers but simply losing out on the ones who come for a one-time-only dine out at your expense.
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