Yesterday I talked about how websites like Groupon are a bargain hunter’s pitfall. Guess what, they’re also a side business entrepreneur’s pitfall! The only party making money in the long run are those websites.
How does this work then? The entrepreneur contacts Groupon. Groupon wants the entrepreneur to offer products or services for at least 50% off the regular retail price. Groupon distributes these coupons. For each coupon spent, Groupon pays the entrepreneur 50% of that amount. So the entrepreneur only cashes 25% of the usual retail amount! No wonder many businesses lose a ton of money when getting involved in a Groupon deal!
Why would the entrepreneur risk this loss? The answer is brand awareness. Entrepreneurs think that they will attract new customers by engaging in a Groupon-like deal. However, the people who respond to these “deals” are addicted to buying stuff this way. They’ll only come into your salon or restaurant once and they won’t come back to pay the full price for your service. Next time they think they want the same sort of thing, they’ll go to the other entrepreneur who offers what you offer for that crazy price. In the long run, it will destroy businesses. These fake bargain hunters are not loyal customers. So why would you want to invest in them?
I’ve been a side business entrepreneur for over five years. Groupon-like advertisements are a waste of money, time and effort. Period.
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