Is Groupon Bad for Business?
Do deal-a-day sites like Groupon really bring in bigger profits? Bob Phibbs, the Retail Doctor, says "no" and explains why in his new book, “Groupon: You Can't Afford It - Why Deep Discounts Are Bad For Business And What To Do Instead”
"Groupon is bad for business. That's been reported in major newspapers like the New York Times,” he said. "My blog has hundreds of Groupon reviews and comments from business owners along with Groupon case studies from retailers who have lost money when they invested in coupon sites."
"A lot of attention is given to these deal-a-day sites who tout numbers of certificates sold as success, but the hard numbers of sales, repeat business, profit per customer and lifetime value of the customer are rarely, if ever, looked at," says Phibbs, who consults with retailers and delivers
speeches to major corporations and trade groups. "It's not the fault of the retailer. They think they are doing the right thing because they keep hearing the marketing messages that say they will make a fortune."
Unfortunately businesses adopt common fallacies, including:
-- "It's just a cost of marketing,"
-- "It gets me in front of new customers,"
-- "They'll come back and pay top dollar."
The reality is that these customers don't return to those stores. Instead, they look for the next bargain. Phibbs, the Retail Doctor, tackles all the fallacies of deeply discounting a product or service in his new book and offers, "The trouble with being the lowest price in town is that someone else will offer an even better deal. In the end, retailers, restaurants and service providers lose their profits and don't acquire the hoped-for long-term, repeat profitable customers."
Phibbs began gathering this research on his Web site after highlighting a Groupon horror story of a small business owner. In his new book, he takes it one step further by asking "Is Groupon bad for business?" He offers an in-depth look at the real numbers of these deals and how they can hurt businesses. What he's learned in his research is that the Groupon business model does not bring in more profitable customers. In fact, they tend to be a losing proposition for the business owner, sometimes in the form of irreparable damage.
About Bob Phibbs, The Retail Doctor
A retail consultant and frequent guest on MSNBC concerning marketing, branding and business strategies, Bob Phibbs, CEO of the Retail Doctor, has helped thousands of businesses in the retail, hospitality, manufacturing, service, and restaurant sectors.