According to the Groupon.com site, you can find ‘deals’ with local merchants that range from 50 – 90% off regular prices. Exciting! For buyers? Absolutely! For sellers? Perhaps. Hard to say.
COST OF SALES
Any CPA will tell you that a ‘fair’ price for a product or service is what a willing buyer and seller will agree upon. In this economy, price ‘discounting’ has become a popular strategy for generating new revenues, customers and leads.
GROUPON . . . Wise Choice or Dumb Move?
I have no problem with the idea of attracting interest and stimulating sales with a (temporarily) reduced price. Even a ‘deeply discounted’ price like a Groupon special. But what Groupon reveals, because of the extreme discounting, is a myopic perspective about what you’re doing when you use any ‘incentive pricing’ to attract new customers.
I’ve used Groupon several times. Each time was a ‘serious saving’ opportunity. Sadly, I’ve never been sent any follow-up offers (without the discount!) where the cost of using the ‘lowball’ pricing would be recovered. Not once. That’s dumb. If you use incentive pricing to attract new revenues, be ready with a follow-up campaign to leverage the initial experience into a profitable, ongoing relationship.
KEY POINT:
Reducing your fees may be a good idea IF . . . you plan for the subsequent offers that recover your cost-of-sales while building relationships and profits
