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The proportion of Groupon customers who are already their customers.

But in order to know if it makes financial sense as a customer acquisition tool, merchants need to know two key numbers: Traffic is not necessarily profitable traffic This is my opinion, but I have some facts to back it up. Buying Groupon stock could be as bad a deal for investors as running a Groupon offer is for merchants. Groupon’s financials also raise questions about its ongoing viability. In many cases, running a Groupon can be a terrible financial decision for merchants. (This post applies to Groupon operations in the United States and Canada it’s different in other parts of the world.) They get the cash up front, but pay for it with deep discounts over time. The $21,000 that the business in this example gets for running a Groupon is essentially a very, very expensive loan. Groupon is not an Internet marketing business so much as it is the equivalent of a loan sharking business. With Groupon, your potential losses can increase with every Groupon customer who walks through the door and put the existence of your business at risk. With a newspaper ad, the maximum you can lose is the amount you paid for the ad. There’s no way a business will sign up for #1. Most merchants would laugh you out of the store if you asked for $60,000.Īlthough they sound completely different, #1 and #2 are really the same-it’s the Groupon business model.īusinesses are being sold incredibly expensive advertising campaigns that are disguised as “no risk” ways to acquire new customers. Even getting $200 a month ($2,400 a year) is a high hurdle to meet.

I’ve been working on local for a long time and I know it’s hard to get small businesses to spend money on advertising. In exchange, you’ll give my customers cheap products for the next year. You get $7,000 in about 5 days, another $7,000 in 30 days and the remainder in 60 days. No guarantees if they will ever come back, but they’ll come once. You’ll get a whole lot of customers coming through your door. You have to choose between two propositions: He blogs at reDesign and Tweets you’re a small business owner. Editor’s note:This guest post is part of an in-depth series looking at the daily deal industry written by Rocky Agrawal, an entrepreneur who has worked on local products since 1995.