Consumer Tips

Group buying coupons (businesses)

Online coupon promotions can be an effective tool for businesses to reach new customers.

The marketer will team up with a business to extend a deal that becomes active when a specified number of people commit to buy, which encourages consumers to share the offer with friends.

If the minimum number of buyers commit, the offer "tips," consumers get the discount and the business gets the coupon revenue less a fee of around 50 percent. If the offer doesn't tip the business pays nothing for exposure before an audience that Groupon describes as predominantly college-educated, employed, female, and under 35. No wonder businesses tune into the pitch.

The downside, reported after-the-fact by overwhelmed businesses, is that daily deals can over-perform and under-deliver, resulting in unanticipated onslaughts of frugal customers who arrive with no intention of making add-on purchases or becoming repeat buyers.

Some things to consider before offering an online coupon:

Be clear about your return on investment (ROI).
If you're looking at the coupon as a revenue source, change your perspective. You're offering a discount on your product, plus the marketer will take anywhere from 40 percent to 60 percent. So purely as a profitable revenue source, the coupon is a loser. The return was in the form of brand exposure and new customer development.

Be sure you can manage what you're offering.
Understand your business' threshold when it comes to brining in new customers. How much product do you have available, and do you have the staffing capacity to service the onslaught of new customers. Consider date-specific offers to limit redemption exposure and direct discounts into a quiet period.

Be sure the daily deal fits your clientele and business model.
If a business needs to modify who it serves or how it operates to make the promotion work, it simply may be too costly or difficult, without the long-term payoff of repeat customers.

Be clear about the conditions of your offer.
The last thing you want is for your offer to become a dispute with a new customer. Make sure any terms and conditions are absolutely clear to avoid misunderstandings and complaints.