Wednesday, October 20, 2010

Does Groupon Help or Hurt Businesses?

The Street.com reported recently on a new study by Utpal Dholakia, associate professor of marketing at Rice University's business school. He conducted a survey of 150 businesses that had signed up with Groupon in 19 different cities. Interestingly, and rather surprisingly, 2 in 5 businesses reported that they were not likely to use a Groupon promotion again.

What happened to cause dissatisfaction at a number of businesses? Well, it turns out that some firms aren't well-equipped to handle the huge surge in customer volume. As a result, some customers have a rather negative experience. Moreover, employees can become frustrated by the hectic situation. Interestingly, some of the customers who may be the most dissatisfied are the loyal, local customers who visit that business regularly, and who may not even be aware of the Groupon promotion. They are not used to waiting for a table at the restaurant, for instance. Now, they find themselves with a long wait, delayed service, and the like.

Firms, then, must take great care when using a Groupon promotion. First, they have to be ready for the surge in volume. That means taking a close look at core business processes as well as manpower levels. Second, they have to consider how their most loyal customers will respond to the sudden surge in new customers. Of course, it's not just the increased volume that may turn off new customers. Companies need to be mindful that the customer responding to the Groupon promotion may be different in kind from the core loyal customer. Those differences, if substantial enough, can cause challenges in providing high levels of service. Clashing customer expectations, needs, and wants must be considered carefully, as this new set of customers arrives.

3 comments:

Brian said...

Groupon creates two very significant effects. First, loyal customers who normally pay full price become alienated. Not only is their service experience disrupted, but they are superceeded by a bunch of "johnny come latelies" with no loyalty or connection (and, worse, who have identified themselves as being price driven buyers). Also, businesses offering general discounts suffer as their customers grow accustomed to waiting for "deals" and/or not sticking when price specials expire. Groupon is most effective for new businesses looking to raise awareness or others with significant (and specific) overstock. The long term rewards rarely exist.

Jeannie said...

Thank you for posting this. Now I know that i don't have to go the Groupon way for my business...

smith said...

Groupon works with you to structure an offer that will maximize the value to your business in a variety of categories such as restaurants, health, beauty, services, products, and more. I hope this blog is useful for my How to join Groupon business.