Groupon Great for Consumers, Less so for Companies

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coupon.jpgADOTAS – If only the owners of Posie’s Cafe had read the new report from Rice University’s Jesse H. Jones Graduate School of Business showing that while social discount site Groupon is pretty swell for consumers, about a third of businesses found their couponing campaigns unprofitable.

Surveying 150 businesses across 19 U.S. cities and 13 product categories, 66% of respondents reported a profitable campaign with Groupon, while 32% said the opposite. More than 40% said they would not run such promotions again.

Associate professor of marketing and study author Utpal Dholakia found that Groupon campaigns offered the most benefit for companies when campaigns did not cannibalize sales to existing customers. Unprofitable campaigns fell victim to low rates of spending by coupon users and low rates of return sans coupons. Dholakia noted that many Groupon users are merely deal hunters.

Posie’s dilemma, in which a Groupon deal turned unprofitable to the tune of $8,000, became a viral tragedy this month, especially after a highly publicized incident of Groupon fraud in Atlanta. The owners could have used the finding that restaurant campaigns fared the worst. Spa and salons, however, did absolutely fantastic.

Interestingly enough, the business services reported largely negative views of Groupon competitors. When it comes to a daily deal, apparently it’s Groupon or bust.

1 COMMENT

  1. groupon only makes groupon money. what business would want 1,000 cheapskates to show up and demand $20 worth of food for $5?

    How does that benefit the business? it doesn’t, it merely tells your loyal customers that they have overpaid

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