If you are running coupons on Groupon, there's a 40% chance you are in the haters camp. May be more. If you are not in the haters camp there's 80% chance you will move to that camp very soon.
But it's not Groupon's fault! Here's why.
Let's take an example. Say you sell massage service for $100, regular price. You now decide to run run a 50% discount coupon (very common discount percentage on Groupon). So your customer pays $50. But Groupon charges 50% fee. So, you get $25 in the end. Looks terrible, no question about it.
So, what does Groupon do with that $25? Keeping their expenses aside, most of that money goes into online Ads for example on Google AdWords. Basically, when your customers search for "massage deal near me", they see your Groupon coupon Ad. How much does Groupon pay Google for this? For "massage deals" for instance, Google keyword planner currently shows suggested bid of $2.07.
Now we obviously don't know how much is Groupon's coupon conversion rate. In other words how many people download the coupon after they see it. A lot depends on what's in that coupon, what business it is, etc. With our own advertising, we have seen as high as 40% conversion there. In this case, let’s assume a 20% conversion (meaning 1 in 5 people who land on your coupon actually download it). So in this case just the Google AdWords cost to Groupon will be $10.35. The rest, $14.65 goes in to their technology, people, operations, infrastructure, etc. and in the end their profit (after all they are a for profit company).
So, in some sense Groupon is trying to play a fair game. After all it's saving you the hassle of creating your own landing pages, running and managing Ads, etc. So, you do pay a premium for the convenience you get.
But let's say you want convenience but don't want to pay that much premium. Who doesn't! What can you do to make Groupon Work Better? Here are three simple tips:
Think of Groupon as a Ad Service, not a Coupon Service
First, think of Groupon as NOT a coupon site. Instead think of it as a convenient way to advertise your business online. And convenience comes at a premium. If you don't have the time and resources to handle your own online Ads, just let Groupon handle it for you. The moment you start thinking of Groupon as a "premium Ad service" and not a "coupon service", things will change. Just like any Ad, which is designed to make the customer know about you through some introductory, entry level, often cheap service, use Groupon to promote your entry level services. This will also filter bargain hunters for your premium services and lower your loss.
Don't run Groupon forever!
Second, just like any advertisement, don't run Groupon Ads forever! Pick specific holidays and events. Again, the idea is to use Groupon as a tool to promote your business, at a premium, because you lack time and/or expertise to run Ads yourself.
Find ways to minimize Groupon/Ad Costs
Third, when a customer comes to you and shows you that $50 Groupon coupon, ask them skip Groupon and bring along a friend next time, and you'd give the same service to you and your friend at $40 per person! Guess what, instead of making $25, you just made $80 and got introduced to 1 more customer! Plus made your Groupon bargain hunter happier! This may sound like "cheating" but many businesses already do this. And to be fair to businesses, wouldn't you do that when you are running any sort of Ad anyway? If not, you should! In the end you want to reduce your Ad cost. Period.
Groupon is a great tool to get your name out there without going through the hassle of running your own Ads. But if you are confident about your services, you will always save money by avoiding Groupon and having an Ad manager run your Ads, and if you are expert at Google AdWords, etc. you will save even more by running your Ads yourself. Most businesses can't afford to hire a full time Ad manager, nor have the skills and expertise required to effectively run online Ads themselves. If you are in that situation, look at Ellipsis Online Ads. It could be one option for you.