I have never been a fan of Groupon and similar discounting services, believing that they succeed more in cultivating the deal hunter mentality rather than delivering the promised legions of loyal consumers for participating brands. Management cartoonist Tom Fishburne is also not a great fan and captures the danger beautifully in the above cartoon and his notes which accompanied the cartoon.
“The last time I tried to redeem a Groupon, I arrived at the sushi restaurant to find an “out of business” sign in the window.
“The restaurant had launched a daily deal promotion six months before. Half-price sushi at a good restaurant is a great deal for consumers (more interesting than the eyebrow waxing and air duct cleaning deals I usually see). Sure enough, the restaurant was suddenly and constantly full, and I saw Groupon printouts on most of the tables every time I went. From all the traffic, it looked like a very successful restaurant — until the moment they went out of business.
“The daily deal bandwagon of the last couple years has created a number of cautionary tales like our neighborhood sushi restaurant. I think the lessons apply to any premium brand that uses price promotions, a tactic that long predates Groupon of course.
“There’s a role for price promotions to bring in new consumers. But tread carefully. Deep discounting carries seen and unseen costs. Beyond the discount itself, it can bring in deal hunters who will never buy full price and it can train your customers to only buy you on deal. If you’re not careful, it can irreparably impact your profitability.”