Five things to think about before using a group buying coupon

I have just read a news report called “Groupon fights for its life as daily deals fade” which did not really surprise me. I know some of our suppliers have from time to time dabbled with discounting their activities and events through such sites and I have not heard a good story about any of them.

I understand there are about 40 of these discount coupon sites in Australia – which is a lot for our ‘tiny’ population of only 22 million. I thought it time I shared what I know.

1. A discount coupon is NOT a gift card. Put yourself in the customer’s shoes – imagine receiving a printout of an email that says 75% discount on surfing lessons. (This happened to my colleague Lauren and she found out it was re-gifted as well. She was really unimpressed with the person who gave it to her – more on her coupon experiences.)

2. A gift card is what is known as a ‘stored value card’ – it gives the holder an entitlement to make a purchase. A coupon is an introductory sampling offer subject to many terms and conditions – it does not give an entitlement to purchase.

3. The coupon sites say to suppliers “we will introduce you to new customers who will become long-term customers – we are your marketing agent”.

This is fundamentally flawed. A purchaser in a discount mindset is unlikely to change that behaviour by nature, given that they bought the coupon to get a deal. If they have a deal for a meal they will absolutely make sure they do not spend one cent extra, because they need to prove to themselves that they got a deal. It is very hard to upsell a customer in that mode.

4. Coupons also reveal the business model. In other words, they show to the public how a business makes money, i.e. if a supplier offers a discount – and the supplier is named – it damages the ability for that supplier to charge full price to other customers.

I have seen this happen first hand when a coupon customer sat in a restaurant and loudly said to the waiter something regarding his meal deal. Everybody else in ear shot (including myself) felt, firstly, embarrassed and, secondly, let down that we were paying the full amount. It affected forever the way I viewed that restaurant.

5. A business with the sole purpose of making money is not sustainable. I have done a lot of reading in the areas of ‘conscious capitalism’, i.e. businesses with a noble purpose.

You may have heard of Raj Sisodia and his book Firms of Endearment. The basic idea is that successful businesses solve a customer’s problem – they make the world a better place.

Clearly a discount coupon has a place in the marketing mix. The upset is caused when people confuse this sampling program with a voucher, gift card or a present. I eagerly await how the discount coupon sites evolve their business model to reduce this confusion.

This Christmas, whether you are a business tempted to list with a coupon site or a potential customer, remember the purpose of Christmas is about celebration and happiness ¬– and a coupon for a discount will bring neither.

(Disclaimer: I am the founder of redballoon.com.au – Australia and New Zealand’s largest gift experience company.)

Naomi Simson is considered to be one of Australia’s Best Bosses. An employee engagement advocate, she practises what she preaches in her own fast growth business. RedBalloon was named as one of only 13 BRW Best Employers in Australia in 2012 for four years in a row with an engagement scorecard of over 90% in each of those years – the average in Australian businesses is 54%.

One of Australia’s outstanding entrepreneurs, Naomi regularly entertains as a passionate speaker, a blogger and a published author, most recently publishing Five Thanks a Day. She has received many accolades and awards for the business she founded, RedBalloon.com.au including the 2011 Ernst & Young National Entrepreneur of the Year – Industry.