Groupon: Is It Right for Your Service Business?


groupon-logo

What is Groupon?

Groupon is a website that offers impressive daily deals to consumers all across the United States. Small businesses sign up with Groupon to offer big discounts to customers in their city. In return, Groupon guarantees the businesses that a large number of people will take advantage of their deals.

Groupon Pros:

  • Groupon can bring you dozens of new customers, some of whom may become repeat customers. Potentially, if you retain these customers long-term, your initial Groupon investment could lead to substantial future revenue.
  • Groupon raises awareness of your brand in your community. Even if they don’t pursue your deal, many Groupon users will see it and thus become aware of your company. Depending on how large your town’s Groupon community is, the value of your Groupon deal—before anybody even calls up your business—could be comparable to that of an ad in your local newspaper.

Groupon Cons:

  • Groupon’s margins can be very, very good, or very, very bad. When you lower your prices, you’re already taking a big chunk out of your bottom line. Groupon further lowers your revenue by mandating that you split your coupon proceeds with them. At the end of the day, if you don’t watch your margins (and aren’t able to upsell any of your Groupon customers past the minimum price of the coupon), you could end up actually losing money.
  • You may not have adequate staff to handle the influx of new Groupon customers. If you’re a field service business, you only have so many techs and so many trucks. Booking a lot of jobs that you can’t (in reality) make it to could cause massive damage to your business’s reputation.
  • Your Groupon customers might not come back. In an ideal world, you’d be able to convert all your Groupon customers into decades-long repeat customers. But a number of factors could lead to these customers being one-timers. Some Groupon users are eternal deal shoppers. After all, why start paying one maid service or carpet cleaner full price for regular maintenance when you can take advantage of Groupon coupons from every cleaning company in town?

The Skinny:

For cleaning businesses, Groupon may be more trouble than it’s worth. To determine if Groupon will benefit your business, do the math. (Jay Goltz wrote a great article on exactly how to do it: http://boss.blogs.nytimes.com/2010/11/23/doing-the-math-on-a-groupon-deal/.) If your cleaning service can complete lots of jobs very quickly (i.e., you’re a window cleaner or office cleaner), Groupon might be right for you. Carpet cleaners, restoration specialists, plumbers, roofers and other service businesses that involve multi-hour appointments may not be able to fulfill all the jobs that Groupon creates for them—and unless they’re upselling a lot of Scotchguard, their ROI for these Groupon jobs could end up being quite low.

Have you ever used Groupon? What was your experience like?

(This article was previously published on the ServiceMonster blog. To learn more about ServiceMonster’s field service software and marketing programs, please visit principalfocus.com.)

About Biondom

6 comments

  1. i have a Sears franchise 45 miles away that will come to my town for a 4 room deal on Groupon for $100

    3 hours plus with driving for $50…

    yikes.

  2. Very well written and thoughtful piece on Groupon, but I believe they are more flexible on the splits now. The concept is not new. What’s new is the power of the internet applied to the concept.

    Steve Mastio
    BusinessBridge.com

  3. Im not convinced Groupon is right for any service company .. youd have to race to keep from being so deep in the hole on these type of jobs .. how could you do a good job when youre racing .. forget about pleasing the customer .. theyre likely to find another deal for the next time .. its not even working for free .. youre actually paying to do the work .. Groupon would be great for food or movie deals Groupon might get more service companies if they would reduce their cut to 10%
    I tried to make a deal like clean protect and odor treat for a specific amount, then the discount etc.. Groupon rejected our offer .. they recommended we do a 3 room for $99 .. of course we declined

    • Spurlington – Take another run at them. Also remember that the “concept” of Groupon is what I believe in. DOD – deal of the day, double bubble, two for one, buy one get one free… that’s what I believe in. Have you considered your local newspaper (online version)? They are often more flexible and have a more targeted market. I will tell you this… I also believe that when a person takes advantage of a service offer like your 3 room special – they seldom just want that specific offering. The opportunity for margin and still get the new client is in the up sell and the efficiency of the offering and scheduling.

Single Sign On provided by vBSSO