With a minimum of a 50% discount on all offers, these sites really offer customers value for money that is almost unheard of in the retail sector. Some deals offer an astounding 90% discount!
So it is clear that customers obtain great value from this online medium, so too do businesses. Businesses get exposure to hundreds of thousands of potential customers/clients by providing a door-busting offer that is sent out to the sites database. Some databases are in excess of 500,000 here in Australia. However, there are some basic conditions these sites govern themselves by:
- Minimum number of offers must be purchased for the deal to be validated.
- Coupon site generally takes 50% of profit. Depending on the offer, this can sometimes be bargained down to 30%.
- Business is given 50% of sales generated at the end of the offer and the remainder upon redemption. Thus if a customer doesn't redeem the voucher, the site keeps the money paid and not the business itself.
On paper, this sounds great!! Lets have a look at some of the major problems that have become apparent:
- Customers are losing trust in these websites as expiry dates are not clearly stipulated (This was also mentioned in Saturdays Herald Sun, querying whether this could lead to the end of these sites).
- Businesses are going broke! Small businesses are selling too many vouchers, putting them at a loss.
- Scheduling and customer overload: businesses are unable to sustain and cater for all the vouchers sold, infuriating customers and tarnishing the businesses reputation. This has a negative effect on customer loyalty. A recent study at Rice University looked into 150 businesses that had used Groupon in the past. Whilst 66% said it was a profitable venture, 32% found in unprofitable and 40% said they would never consider using it again!
- One-time customers - the wrong customers are attracted to these Social-Coupon sites that are in for a bargain and unlikely to return.
Whilst these Social-Coupon sites can really leverage a business and increase awareness, they can also do a lot of damage and potentially run a business into the ground. What are your thoughts? Have you purchased a coupon online and been unsatisfied with the offer or found it to be misleading?
This poses many questions on the future of these sites. Their ongoing existence really is up to us as consumers to determine. If they continue to send the smaller businesses into financial deficit and mislead customers, I can't imagine they will persist for much longer.
A great post, Kate. Yes, these coupon sites really are just the bottom-feeders of the online world, equivalent to the bargain $2 shops. Shouldn't marketing be about developing long-term relationships with customers?
ReplyDeleteOr is there a valid place for services such as this? What do others think?
I have never used it, never really even much interest in signing up, to me it will be just another spam email or message that comes through on my phone.
ReplyDelete@Wags, you raise an interesting point but in some way the starting point of developing the relationship would be to create trial at least, and in the traditional sense, sales promotion (which is what these sites do) is the way to do it. With any sales promo, the same goes, you will always have your one time customers, but this is why if you know that these people have come on the basis of this sales promo, or social coupon, you need to seriously offer them value, they are potentially trying out what you offer, make it worth while and they may return, even if they didn't intend to initially.
Ross