Could Groupon's New Rewards Program Help Your Business?
Groupon’s daily deals for customers don’t always bring good fortune to their sponsoring merchants, as this cafe owner's experience demonstrates. Now a new program called Groupon Rewards aims to win over skeptical sellers — and those who’ve previously failed to see any return on their Groupon investments.
Groupon Rewards, which launched Sept. 28, is a customer-loyalty program that’s tied to customers’ credit cards. Merchants who sign up can create special “rewards” coupons for customers who purchase a set amount of product over a number of visits. For example, customers who spend $100 in a month can unlock a coupon that lets them purchase $15 worth of additional merchandise for $5. No special cards or codes are needed: Groupon uses customers’ stored credit-card numbers to track how much they spend and unlocks rewards once they’ve reached the milestones set by merchants.
So, is Groupon Rewards a good deal for your business? Here are a few pros and cons to consider:
Pro: Groupon Rewards shows you how many of the site’s users become repeat customers. Merchant accounts deliver analytical data that indicate how often customers return to your store, and how much they spend per visit. That’s valuable information, especially when you’re launching a new marketing initiative (such as a daily deal) and aren’t sure what the payoff will be. (ToMuse offers a detailed calculator app to help you determine whether or not you've gotten a positive ROI from your group buying promotion.)
Con: Customers are tracked only by the credit cards they use to set up their Groupon accounts. This means that if customers opt to use a different credit card the next time they make a purchase, the repeat visits won’t go on record. It also means that Groupon, not you, retains possession of the most valuable marketing data regarding your customer base. If you want more accurate details about how often people make purchases at your shop and control over your customer list, you may be better off offering your own in-store rewards card.
Pro: The program is likely to inspire more sales per customer. In a survey of 150 Groupon merchants conducted by Rice University’s Business School, many business owners complained that customers rarely spent more than a coupon’s value or returned to the establishment. Groupon Rewards gives your customers added incentive to spend beyond the initial coupon’s price, and you’re free to set how much your customers need to spend to unlock a particular coupon.
Con: It’s unclear whether merchants will get a cut of the profits. Groupon takes a hefty cut of profits — typically 50 percent — on its daily deals. TechCrunch recently reported that merchants may not see any profit at all from the Rewards coupons, though Groupon claims that it has yet to decide what the merchant split will be.
Kathryn Hawkins is a business writer for Intuit and is passionate about solving small business problems.