Last reviewed 20 May 2013

Exploring everything possible to maximise your business in the current economic times is essential. Groupon, which has recently launched in the UK, offers a novel approach to business promotion. Deborah Barham Smith reports.

Using a mix of collective buying and social media, Groupon has created an alternative marketing model that offers daily deals consisting of specially pitched offers designed to attract new customers to businesses. The wide choice on offer provides consumers with a huge array of vastly discounted products and services ranging from satellite navigation systems, restaurant deals and photography lessons, to a session with an accountant. Breakaways, both home and abroad, also figure highly.

As an online tool, campaigns can be monitored to a high level of detail and, consequently, return on investment (ROI) can be measured more easily, compared with more conventional marketing practices.

Where to start

For those companies wary of involvement in online ventures such as this, experimenting with becoming a consumer first will provide some insight into the process for your own customers.

Prior to signing up with Groupon, companies are advised to critically analyse their individual business situation to ensure they are ready for a Groupon deal. A campaign will bring numerous customers, so it is essential that processes within the company should be running smoothly in order to be able to handle the ensuing rush.

Groupon provides a comprehensive, 13-page welcome pack, which itemises the process for potential partner businesses (http://www.grouponworks.co.uk/welcome-groupon/).

Preparing

Richard Jones, Director of Partner Management, stresses that the key to running any successful campaign is “preparation, preparation, preparation”. One tip on its website reads: “Preparation now, will reap rewards later.”

Companies wishing to use Groupon for promotion will work closely with a specific member of the Partner Management team, while also building a relationship with a local business consultant allocated to them. As part of this collaboration, a member of the team will calculate the optimal number of customers relative to regular traffic, and calculators will be customised to address specific dynamics of key industries according to type (eg number of covers able to be dealt with in a restaurant, table turn-around rate, through-put capacity in a despatch department, etc).

Groupon will work with companies to establish realistic discounting levels (that is, pricing to acquire more customers while ensuring major losses on discounted services or products will not occur ― Groupon provides guidance on this issue). This will involve verifying that prices have previously run for 28 days to adhere to pricing guidelines. If an offer has a health element, such as with some beauty treatments, the company will check into the medical side of any claims made.

The company uses professional experts from areas such as the Advertising Standards Authority, the Compliance Institute, the Financial Services Authority, and even the Serious Fraud Office, to ensure accuracy in campaigns.

Design of the campaign

Groupon’s team of creative writers and graphic designers handle all the editorial details of the campaign: writing persuasive opening sentences; engaging public interest; and ensuring the most appropriate company profile. The company’s USP will be highlighted in text using humour, where appropriate, to maintain customer engagement, and designers will create simple and eye-catching images for the business. To enhance the campaign, companies may also be asked to provide samples of press pieces, testimonials and customer reviews to help demonstrate a record of quality products and services.

Groupon is a company that favours video on its website. This is the number one method of communication and, to get offers to customers quickly, there is a downloadable app for smartphones (http://www.groupon.co.uk/how-works-groupon-mobile?a=8sUf).

Being prepared for feature day

It is important to be ready for feature day. Companies will be advised with regard to phone support, website readiness and different practices to use during the rush of enquiries/sales. Groupon’s customer services manage any questions related to deals to enable companies to focus on the influx of new custom. Companies will be provided with a feature checklist that includes:

  • ensuring websites and phone systems can cope with extra traffic

  • dedicated e-mail addresses to deal with Groupon enquiries

  • guidance on additional stock needing to be ordered

  • guidance on training despatch people.

On feature day, once a minimum number of people have purchased vouchers, deals are then activated, thereby guaranteeing paying customers.

The Merchant Centre

The online Merchant Centre is Groupon’s comprehensive campaign management tool, a hub for companies to manage their promotions. The Merchant Centre can now provide companies with analytics to help them see, in real time, the ROI from using the voucher system. It allows companies to understand how they are performing across other deals offered through Groupon's platform.

By logging on to the personalised Merchant Centre, companies can access the following information:

  • sales figures

  • redemption history

  • payment history

  • customer demographics

  • customer feedback ― which can be responded to.

Groupon provides guidance on using the Merchant Centre and payment methods when a campaign is underway, as well as a short, instructional video highlighting how to make the most of its functionality. It plays a key role in providing companies with access to important information, such as valuable customer insights regarding the promotions, and tracking the success of promotions. It also contains features such as spread sheets, where vouchers can be verified by checking the security codes required to redeem them, and customer comments can be viewed, allowing companies to respond.

Groupon now surveys consumers on their experiences when they redeem a deal, to provide companies with an insight into both how they are performing with customers and repeat business potential.

The Groupon redemption cycle

Once a customer has purchased a voucher, whether for a service or a product, the voucher will have a security code associated with it. This will, in turn, be listed and e-mailed to the company the day after purchase. Companies will then be able to check the validity of any vouchers by cross-referencing the codes on the list.

In addition to Groupon’s Merchant Centre, companies also have the option to redeem vouchers using the free Merchant app. Any redemptions made via this app are recorded on the online Merchant Centre under “redemption history”. Payments for all valid redemptions are made to clear within 7–14 working days, via bank transfer.

Occasionally, businesses are turned down by Groupon because they do not pass qualifying credit and quality checks, and because Groupon wants all three parts of the triangle (partners, consumers and themselves) to be completely successful.

Case studies

Andrew Hill of Manchester Photographic

Andrew Hill of Manchester Photographic is an advocate of Groupon, believing that the 20 or so campaigns he has run with its help has expanded his gallery business exponentially. Although not a photographer, he says he loves the medium. In a recent interview reported in The Guardian he said: “People were asking whether we taught photography and it developed from there. The photography school is the engine room of the gallery. It is open seven days a week, with up to three classes a day, ranging from beginners to advanced. We run courses to appeal to everyone ― landscape, portrait, street safari ― and it is local professional photographers who come in and help. We get a staggering range, from schoolchildren with their parents to 70-year-old retirees looking for a hobby."

Now, through Andrew’s close association with Groupon, he has found his courses are well subscribed, with 97% of clients willing to return, and he has a new air-conditioned school with another studio attached. Hill says he is shortly to get the keys on another venue, which is 6000 square feet; the success with Groupon having been phenomenal. For example, last Christmas Eve, they sold 800 places for their Manchester at Night course. Since August 2012, the school has had 6000 people through its doors, and because the company operates seven days a week, Hill says they are always able to cope with whatever numbers they get booked in.

“Using Groupon has made the business what it is. For the volume of traffic we have been able to manifest, and the income that we receive, Groupon provides a great service and has helped expand the business. I would be devastated if the relationship with Groupon did not continue because they are providing a very good service.”

He feels that, nowadays, people like to go for the easy option (by using the app on a smartphone), as well as the chance to get amazingly discounted bargains, hence the escalation of online shopping and with it the successful rise of Groupon.

Commenting on the success of Manchester Photographic despite the recession, Hill says: “It is having enthusiasm for what you do. I enjoy coming to work, which is the biggest clue.”

Lee Donaldson of Clear Crystal

Lee Donaldson of Clear Crystal has, through his business expansion backed by Groupon, recently been able to donate £25,000 worth of jewellery to the Radio Key103 Cash for Kids appeal a charitable project aimed at alleviating child poverty around the Manchester area).

Clear Crystal was set up by Donaldson with what he loosely calls “a franchise”, with partners not actually buying their way into the business, but rather selling the products via various methods, such as party plans. In addition, Donaldson runs Groupon campaigns three times a month, which can result in as many sales as 7000 pieces of jewellery. At the same time, the company is still attracting returning customers paying full prices.

Since working with Groupon UK, Lee is now running campaigns in Ireland, Austria, Denmark, Sweden and Germany, and is anticipating expanding the jewellery business even further afield.

With a guaranteed despatch turn-around time of 24 hours and the input of Groupon attracting many more customers, Clear Crystal has successfully exploited the Groupon model.

Conclusion

The Groupon business model is one that lends itself to a wide variety of businesses, whether they are product based, manufacturers, or part of the service industry. It is encouraging when times are difficult to know that alternative methods exist to make your business a success.

Further information