How Living Social Coupons Impact Local Market Potential in 2011 Local Business

LocalNet360-Last week a radio show called Talk of The Nation on National Public Radio (NPR) had a segment about some of the inherent problems for small businesses that advertise with Groupon. Additionally, I have a client who has recently experienced the effects of Groupon, which I will address in this article.

Groupon-Good or Bad?
My client owns two restaurants in Southern CA and wanted to attract some new customers to his downtown location. He offered $35 worth of food for $20 and sold a few hundred Groupons.

Similar to the complaints voiced by callers on the NPR show, my client did not have any way to limit the amount of traffic into his restaurant at any one time. Additionally, most of the Groupons were redeemed a few days leading up to the expiration, with the last day having the most traffic.

I visited his restaurant from 8PM to closing on the last night of the Groupon offer and can tell you that it was a trying experience for everyone involved.

People were waiting in line outside up the street and inside the servers were overwhelmed with too many people to serve at one time. Musicians had to repeat their sets to the same audience since the turnover was so slow. Nearly everyone was complaining for one reason or another.

To avoid total catastrophe, by 9PM I got my client to extend the expiration date to people standing in line to reduce traffic and he also offered to extend others inside of the restaurant since some people had more than one Groupon. He also cut off the music at 11PM to speed up the customer turnover. In the end it worked out, but avoiding the situation in the first place would have been better.

The problem here begins with Groupon. They have sold over $500M worth of advertising in the past year and you would think by now they would have enough experience to warn customers of the potential problems associated with their offers.

Groupon and others like Living Social should take the time to educate their customers and not overwhelm them with too much traffic. One way this can be done is to require reservations and/or limit offers to historically slow periods in the day or week, as opposed to an open-ended offer good at anytime.

Planned properly, programs like Groupon can be successful for small businesses, but too much business can be just as bad or worse than not enough. The reason is that dissatisfied customers seldom return. If Groupon and competitors like Living Social are to survive long-term they will need to improve their business models, to include better customer service for their clients and not just sell their Coupons.
As you begin to develop and/or expand your presence on the Internet for your business considers this: Companies like Groupon and Living Social are good short term solutions to help jumpstart your marketing campaigns online. However, you will need to develop strategies that you can deploy yourself, since neither Groupon or Living Social do anything that you cannot learn to do for yourself as you begin to build a customer base that you can then market to on a regular basis. As stated earlier in this series, in order to rise above the crowd you will need more than just a website. Therefore, implementing several Internet based solutions over the next 12-24 months will be critical to the long term success for virtually every small and local business in America.

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