As a consumer, you’re probably a big fan of Groupon. After all, who doesn’t love getting 25, 50 or 75 percent off services from their favorite stores and restaurants? While this site is very popular with consumers – it boasts 70 million subscribers – Groupon isn’t always a win-win experience for business owners.
A study from Rice University showed that Groupon promotions aren’t always profitable. Of the 150 businesses surveyed, 66 percent said their promotion generated money. Despite more than half making money, just 42 percent said they would consider running a deal again. Keep these numbers in mind while you’re deciding whether to use the daily deal site.
If you’re considering offering a discount with a dance class Groupon, here are some pros and cons that you’ll want to weigh before clicking “OK.”
Pro: Groupon Helps Create Your Deal
No need to fret if you’re not a whiz with words. Groupon will not only help you pinpoint services that will sell effectively, but an associate will also give you a hand with the web copy. This comes in handy if you’re not so great at crafting compelling advertisements.
Pro: Bringing New Customers In
Getting new dancers in the door is always a good thing, especially if you’re the new studio on the block. If you choose to run a dance class Groupon deal, it’s safe to bet that you’ll see some new faces in the studio. People love discounts, so this is a good way to edge out some of the more established studios in your area and give your school a competitive edge.
Con: Having to Discount Your Services
While you’ll likely get some new students out of your Groupon promotion, you’re not going to make the same money as you do from regular dancers. No one is going to purchase your deal if you only discount 10 percent – the appeal of daily deal sites is that businesses offer services with steep discounts.
Because you’re only going to be making a portion of your usual revenue from Groupon deals, make sure you will still be bringing in enough money to pay your fixed expenses. Otherwise, you may be better off using traditional marketing tactics to bring in customers who’ll pay the full rate.
Con: Groupon Takes a Cut
After you discount your prices to attract customers, Groupon is going to take a portion of the money you make. The New York Times explained that Groupon usually takes 50 percent of the revenue, so if you sell $500 worth of classes, you’re only going to receive $250.
This can be problematic if you had to discount your prices a lot to begin with. If you offer your services for 40 percent off through your promotion, then Groupon takes half, you’ll end up with 30 percent of the money you would have made if the customers paid full price.
Pro: Getting Paid Immediately
However, one upside to the Groupon method is that you get paid right away. Even if the Groupon buyers never show up to redeem their classes, you’ll still get your money from the site.
Con: Attracting Bargain Seekers
Inc. magazine explained that another less-than-desirable outcome of Groupon is that it attracts people seeking deals. Many of the students who come in as a result of your promotion may only be looking to redeem their classes – not to sign up for more. As a studio, one of your long-term goals is likely to build a solid base of returning students, and if Groupon buyers are only interested in the bargain classes, they’re not going to contribute to this objective.