Social coupons such as Groupon and Living Social are technology platforms that provide small business owners with an effective digital marketing lever. However, a common mistake by small business owners is the ineffective use of these tools. Social coupons are only effective when an after-sales strategy is used to ensure that the relationship with the customer continues after the purchase. Take for example a typical demographic service such as beauty spas. Each beauty spa offering a social coupon will continue to reduce the prices to attract customers; ultimately leading to a digital-cycle-of-addiction that is similar to someone in a payday loan cycle.
Also, a heavy reliance on social coupons can be a sign a business is in trouble and that the business may be lopsided. If the business lacks a follow-up strategy with the customer, then a significant opportunity is being left on the table.
Groupon and Living Social are not designed to be Customer Relationship Management (CRM) tools.
The cost of acquiring a new customer can be up to seven times higher than investing in current relationships with existing customers. Not because these existing customers are expected to always buy a particular product or service, but because there are extremely more likely to leave you excellent feedback based on their satisfaction and customer delight (which are two different things.) A one-star increase in an online-rating can lead to an increase in revenue by more than 10% for most businesses.
Social Coupons can be an incredibly effective tool if used for the right reasons, but it’s a balancing act. A recent study in 2015 (1) focused on Hoteliers in Italy and their strategy for using Social Coupons:
- To balance demand between reservations and vacancies;
- To create brand awareness;
- To build relationships with new customers;
- and to balance changes in seasonality.
On a final note. There are a lot of digital-triggers that can be pulled and most of these platforms are simple and easy to sign up with. However, small business owners should exercise a degree of caution and consider the long-term impact on their business before locking into a lengthy contract with termination and penalty fees.
Subscribing to a platform for business development without the returns you had hoped for is no fun for anyone. These methods usually impact many parts of your business and some of those problems are not always noticeable in the beginning, it’s more of slow decay.
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- Cassia, Fabio & Magno, Francesca & Ugolini, Marta. (2015). The perceived effectiveness of social couponing campaigns for hotels in Italy. International Journal of Contemporary Hospitality Management. 27. 1598-1617. 10.1108/IJCHM-02-2014-0090.