How to Advertise on Groupon: Cost, Tips, and Examples
February 20, 2020
For small businesses, specifically in the hospitality industry, local advertising presents many problems. Many of these small business owners are not experience with advertising techniques and struggle to drive customers to their business.
Experienced small business owners know of the marketplaces they must be apart of to succeed in their communities, think Angie’s List, Yelp, and Groupon.
In this guide, we’ll cover everything Groupon advertising, including:
Groupon, founded in 2008, is a website that offers consumers deals and discounts for just about any type of business you can think of, including restaurants, spas, and retail stores.
Groupon acts as an advertising platform by allowing businesses to promote deals in the form of vouchers and cashback through linked-credit cards. These deals are limited in terms of both time and quantity, and Groupon collects around 50% of each purchase.
Groupon started off offering deals in the form of digital vouchers and has more recently started incorporating card-linking, which lets customers receive cashback after using a specific, linked credit card to redeem a Groupon deal. This allows customers to take advantage of the same deal multiple times.
The platform makes it easy for companies to create customized deals and makes them available to their huge user base of 53 million active users worldwide. Groupon suggests customized recommendations for how big a discount should be, usually between 40 to 90 percent off the full price. Once a deal goes live, businesses receive their payouts every 30 days.
Business looking to list deals on Groupon would do best to think of it as an opportunity to increase traffic and attract new customers rather than a vehicle for increasing revenue right off the bat.
Because they do take about half of each purchase, Groupon really makes sense for smaller, local businesses with relatively inexpensive goods or services that could benefit from additional marketing or public awareness. Some examples might be companies like performance venues, travel agents, or spas.
Above: Example of the many categories for local advertising on Groupon.
There is no upfront cost to advertise on Groupon. However, the company takes a share of the revenue earned when its users redeem a coupon through the marketplace. Adding to this, Groupon requires companies to have discounts of a certain percent.
A potential scenario is Groupon requiring a business to have 50 percent off coupons – and then take 50% of the earnings from the sale. This leaves the business with 25 percent of the original sticker price of an item or service.
1. It Raises Awareness in Local Markets
Possibly the biggest “pro” of listing your business on Groupon is the influx of potential customers who will have the opportunity to come into contact with your business for the first time.
2. Attract New Customers
Because Groupon deals offer customers a much lower-than-typical price point, they are great for attracting and converting new customers. Because they’re getting such a great deal, they may be more inclined to add some full-priced items to their cart as well.
3. Make Room In Your Inventory
Listing deals on slow-selling or soon to be discontinued products to make some room in your business’ inventory is a great way to cut down on profit loss.
4. Supplement Your Revenue Stream
While advertising on Groupon is not necessarily viable as your business’ only advertising effort, it is a great way to give your regular revenue stream a little bit of padding.
5. Increased Foot and Website Traffic
Because of Groupon’s large user base, listing deals on Groupon can bring in plenty of both website and foot traffic.
6. Unused Groupon Vouchers are Pure Profit
About 30% of customers who purchase vouchers don’t actually end up using them, so while Groupon still takes 50%, the profit you do receive comes without any actual costs to account for.
7. Customers May Purchase More
Customers may be inclined to add in some regular priced items to their purchase since they just got such a great deal, etc.
1. Many Consumers Won’t Stick Around
Many times, budget shoppers aren’t looking to build a relationship with a brand, so they will either only make a single purchase, or only purchase when a Groupon deal comes around. This can mean low overall return rates throughout a customer’s life cycle.
2. Making the Wrong Impression with Customers
Depending on the situation, a customer may even translate the discounts offered through Groupon to their idea of the “worth” of your business’ goods or services. This could be bad news for your brand’s image if that idea sticks.
3. Repeat Customers Aren’t Likely
Only about 19% of Groupon customers are likely to return, depending on the type of product or service. Depending on your needs, this might not make Groupon the most viable solution for growing your customer base.
4. Low Profit Margin
Groupon takes 50% of profits from each purpose, so if you’re not really in need of an advertising boost, another advertising solution like media advertising might be more effective.
Groupon makes it easy for businesses to set up merchant profiles and start putting deals together but there are many angles to take and things you can incorporate when setting up your deals to be sure they are successful.
1. Use Groupon’s Tutorials and Training Resources
Depending on the nature of your business and the types of deals you’re looking to offer, Groupon offers assistance to help you get started. They’ll take into account your need for new customers, past deals, and local factors to help you get the most out of their services.
2. Offer Special Deals and Discounts
Food-service companies are very popular on Groupon and can attract shoppers with special deals on particular dishes and drinks. Restaurants are able to set up loyalty programs through the platform to help offset some of those cons we listed above and entice new patrons to make their first visit.
3. Sell Event Tickets
Hosting an event is a great way for businesses to excite customers and remind them why they love your brand. Selling tickets to your event through Groupon can really help market your event and get your message boosted to plenty of local deal seekers. It’s a great options for live music venues, bar events, and more.
4. Use Groupon’s App and Online Merchant Tools
Take advantage of the app and online tools offered by Groupon. You can redeem vouchers by using barcodes or the customer’s name with the app and access useful sales data and redemption statistics in Groupon’s Merchant Center.
5. Train Staff on Redeeming Groupon Offers
New customers won’t be impressed with a business that doesn’t prioritize stellar customer service no matter how good the deals are. Be sure to familiarize all employees with what’s being listed on Groupon and how customers will be able to redeem their vouchers to safeguard against any miscommunications or uncomfortable moments.
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There are tens-of-thousands of businesses using Groupon’s marketplace for local advertising. To help your small business craft a local marketing campaign with Groupon, we’ve curated five examples of the best brands advertising on Groupon.
1. Websites: Preschool Prep
This business, which makes videos to help children start learning to read, used Groupon to gain more visibility with parents and other entities not situated within the education industry. Preschool Prep was able to leverage Groupon’s advertising power to become a national brand.
2. Restaurants: Big & Little’s
Location: Chicago, Illinois
Big & Little’s is a small chain of restaurants in Chicago that was able to use Groupon to grow their business and bring in lots of new customers who ended up becoming loyal ones.
3. Instructional Classes: Ohlone Archery
Location: San Francisco, California
When this archery instructional center opened in San Francisco, finding customers turned out to be more difficult than expected. Ohlone Archery found Groupon to be the most effective marketing tool to bring more customers and profits to their business.
4. Dance Studios: MaZi Dance Fitness
Location: Chicago, Illinois
MaZi Dance Fitness studio has used Groupon to bring in new customers by offering deals for their classes at a price point they’re comfortable with starting out.
5. Breweries: Books & Brews
Location: Indianapolis, Indiana
Books and Brews is a book store and brewpub which used Groupon deals to build their initial customer base when they realized they were having a difficult time finding customers outside their original investors.
Additional Resources for Small Business Advertising:
Businesses that offer a food menu keep customers in their business longer and make more money. Oh yeah – did we mention it’s 100% free?
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