Pros and Cons of Using Social Coupons to Grow Business

by Erika Napoletano

Maybe you get these emails in your inbox every morning — from Living Social to Amazon Deals, Groupon, Scoutmob and others, they're chock full of fantastic deals for you, your business, home and family. So you may start thinking: Hey, maybe my business could benefit from putting a deal on one of these sites, too!

Social coupons are powerful tools for businesses at any growth stage, but they're not without their perils. Before making the leap to doing a social coupon in hopes of boosting business, let's have a look at the pros and cons. If you decide to forge ahead, you'll be equipped with better questions and expectations throughout the process. Shelly Kramer, founder and CEO of V3 Integrated Marketing out of Kansas City shared the inside scoop on how her firm advises clients on the potentially tangled web that is social couponing and daily deals.

Can a Business Like Mine Benefit?
Here are the basics of social couponing: Your business teams up with social couponing site to offer a good or service at a discount to its regular price. The social couponing site keeps a percentage of each sale (often up to 50%) and you get the rest. The site you contract with then blasts your deal out to their massive subscriber list and the dollars are supposed to start rolling in.

The benefits for many types of business are clear. There are people out there willing and ready to buy deals from dry cleaners, hair salons, creative services for business owners, consulting and more. Whether virtual or physical, you're looking at the potential of a fair number of new feet inside your door. But let's have a look at the impact this influx of new customers can have on your business, for better and worse.

What Are the Pros?
Social coupons can be most effective in boosting specific segments of your business. If you're a brick and mortar business and you find your lunch hours or certain days of the week are slow, why not offer a lunch deal or mid-week cut and color appointment to get more feet in the door? Not only will you be encouraging existing customers to visit at new times, you'll also be adding to your bottom line by not taking customers away from other segments of your business. Lunch traffic won't detract from dinner folks and every salon owner knows that Saturday customers are Saturday customers for a reason, ranging from kids to work and travel schedules.

If you're a new business looking to raise awareness for your new shingle, social couponing can also introduce people to your business for the first time. There's little downside; you'll have cash in the register and feet through the door. A word of warning, however: be prepared for the influx and make sure you can handle the flow.

What Are the Pitfalls?
Inc. Magazine published a thoughtful piece called "The Top 6 Hidden Costs of Daily Deals" outlining some key things for any business considering social couponing to keep an eye on:

Customer flow: Are you staffed to handle the onslaught?

Process: How will you process the social coupon redemption? Will this slow down your staff and how will you verify the deal is legitimate?

Reviews: Online reviews are critical to most brick and mortar businesses. If you're not adequately prepared to deliver and over-deliver, you might be subject to the phenomenon that Yelp reviews by Groupon users are 8% lower than non-social coupon customers.

Harming/frustrating your existing customer base: Will offering this deal interfere with your ability to service your existing customers? Website slow down, inadequate staffing and parking inconveniences should be taken into account.

Tipping variances: Restaurants with tipped staff, beware. Social couponing lowers the dollars coming in the door and thus lowers the tips for your wait staff, baristas and other tipped employees. Think about the overall impact on your staff and business prior to committing.

Real, new business: Forrester Research, a leading analyst firm, found that only 30% of deal buyers are typically new customers. Are you training your existing customers to think that your goods and services are worth less than they are?
In addition to these hidden costs and considerations, Kramer advises that businesses limit the number of offers that are available. This way, you're not surprised by a deal that went big when you didn't plan for big. A smaller, successful social couponing offer can be repeated and the lessons you learn from your first can be applied to the next for even greater customer and bottom line satisfaction.

Kramer also warns businesses that social couponing isn't a panacea to slow traffic. Take a look at your entire business model and see if social couponing will boost a successful or growing business, or if it will add just kerosene to one that's already down to the embers.

Will social couponing offer your business the boost you seek? With a savvy approach, including managing for deal traffic, staffing and providing a pleasurable customer experience, you'll be miles ahead of your competitors who were just focused on getting the feet in the door. Instead, you'll be poised to bring those feet back for a return visit — and without the discount. That's sweet news for your bottom line.

Sources:

For more information about Shelly Kramer and her firm, V3 Integrated Marketing, you can visit them online at www.v3im.com.

Inc.com, "Top 6 Hidden Costs of Daily Deals"

About This Author

Erika Napoletano is an author, columnist, speaker and branding strategist, hailed by Forbes as a “spinless spin doctor.” She's a twice-published author, including The Power of Unpopular (Wiley 2012), a columnist for American Express OPEN Forum, an acclaimed speaker from TEDx Boulder 2012, and speaks at conferences across the U.S. on the inherent power of truth in business… or as she refers to it, the power of unpopularity.


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