The Dark Side of Groupon Sites

Let me just say up front that this post is based on the experience of a single restaurant owner and should be taken in that context. However I was quite surprised, yesterday, to hear the individual’s experience with Groupon, after I brought up the group-buying phenomenon. I’ll paraphrase what I was told by the owner.

This particular restaurant, located in the middle of the country, had just opened and needed customers. It also had gone over its construction budget and was short of “marketing” dollars. So it turned to Groupon. Initial promotion suggestions from the restaurant were reportedly rejected by Groupon as being insufficiently aggressive. The final, accepted, promotion was very aggressive, such that the owners feared there might be no margin on these Groupon customers.

I was told that while businesses can specify a minimum threshold of customers, required to honor the offer, they cannot specify a maximum or cap the number of respondents. This created fear that there would be 1,000 takers of this particular deal. It turned out that there were just under 500, according to the restaurant owner.

One one level this is a great result: 500 new customers potentially to spread the word and become repeat business. This was the owner’s precise objective.

I asked if he had tracked these new customers and determined how many repeated. The owner said no. I also asked whether they “got the list,” the email addresses of those taking advantage of the offer. He told me that Groupon wouldn’t give him the list, which I found literally shocking.

The restaurant owner’s experience ultimately turned out fine and the promotion “worked” in terms of getting people in the door. But he also speculated and talked about the experience of smaller service businesses such as hair salons or dentists, which must service customers in a serial manner.

He said that his wife had, as a consumer, taken advantage of one of the Groupon offers in connection with a salon. She called and couldn’t get an appointment until many weeks later — the demand was so great. If there are 300 customers who take advantage and make appointments right away that may suck up an SMB’s time for weeks. Imagine weeks of work with very thin margins.

The restaurant owner complained that “there are things Groupon doesn’t tell you.” He said the restaurant’s website got hit with tons of traffic and their phone was ringing off the hook. “You basically have to become a call center,” he said, after the deal hits. “Most small businesses aren’t prepared for something like this.”

But he did appreciate that Groupon offered “pure performance marketing” as opposed to clicks and even calls, which were more speculative. He obviously didn’t like some of the Groupon policies (i.e., not divulging emails, lack of a cap) and the lack of education or information to prepare for the experience.

Assuming that this story is accurate it seems to me that the “group buying” model as presently constituted is unsustainable. Consumers love these deals but SMBs are going to become increasingly ambivalent about them. They “work” in that they get people in the door in a very direct way. But unless that initial foot traffic is smartly leveraged and there are repeat visitors or great word of mouth the value of that initial frenzy is minimal and debatable.

As more Groupon-like sites seek to gain consumer attention there will be an effort to get deeper and deeper discounts from businesses. As an initial matter that may work, but over time this may backfire and undermine the ability of these sites to get businesses to participate. It’s also largely a one-shot deal. The restaurant owner I spoke to probably wouldn’t go back to Groupon because of the limited margins.

Platforms like Perry Evans’ new Closely represent a similar model but enable the SMB to control the flow of promotions and set their terms.


154 Responses to “The Dark Side of Groupon Sites”

  1. Ed Kohler Says:

    The margins on the offers I see in Minneapolis appear to be thin to none. In the case you describe, there’s nothing preventing the business from promoting their own email list, twitter account, facebook fan page, having a business card drop, etc., in order to build direct relationships with their first-time customers. Not doing that isn’t Groupon’s problem, and says more about the business’ marketing savvy.

    • Online Video Service Says:

      The advantage of Groupon is it gets the name out there. From cruises, to music stores, to restaurants.

      The key thing here is that the business has to be savvy. They have to have a compelling offer and not only that but assume that it will attract a lot of free loaders. Some businesses might benefit from this. For example, if you run a dramatic theater that isn’t filling in seats, might as well fill in some extra ones through Groupon. They might buy food there or become a life long fan… or never come back at all. You have to account for all of that.

      As Ed points out, savvy is the key and Groupon isn’t for everyone.

    • PhoenixLocal.Biz Says:


      Most business don’t even know that this is indeed marketing, just like placing an ad in a trade magazine, or using Google AdWords.

      • Mac Musick Says:

        Has this thread on this blog become the self promo thread for Phoenix Local Biz. Too much already.

      • PhoenixLocal.Biz Says:

        Well, @Mac Musick, I do believe this is a public/open forum, isn’t it? Maybe I should apologize for being knowledgeable in this area, and trying to help fellow business owners? As a former marketer I would think that you would understand the importance of your customers finding you. If I were to remain silent, and just lurk on these boards I wouldn’t be able to provide valuable insight to these SMB’s. Some of these businesses need some serious help. They can see the potential for Groupon, but just don’t know how to fully use this tool.

        I think your attitude is your main problem. Calling coupon users “moochers”, and being in the marketing biz, but bashing the biggest marketing tool out there. It’s THAT attitude that cripples a business, and can force it to close its doors.

    • Mac Musick Says:

      I had 17 years of experience in marketing and advertising prior to the advent of Groupon. I think my opinion is based on a valid understanding of what works well. I would never recommend Groupon to a restaurant. Return on investment, not “butts in seats”, is the best measure of effective advertising. A well crafted marketing plan may or may not include paid advertising.

  2. brittney Says:

    Groupon customers would likely be highly peeved if Groupon just handed over their email addresses to businesses to do with as they please. Spamming is not something people want in their lives, and companies handing over emails in that way often get lots of blowback from those who thought their email addresses were private.

    Why would Groupon compromise the inboxes of those who buy from them?

    • CRuhmann Says:

      Groupon is the one handing over emails – obviously to people paying them – my friends an I who signed up for Groupon – immediately started receiving over 50 SPAM emails a day – imagine if you receive emails on your phone – how many irritating vocal notifications per day – and you can’t unsubscibe to these bozos lists.

    • Seth Gardenswartz Says:

      This is exactly the problem-the business is discounting 50% and giving half of that to Groupon. Groupon only has your email because it has promised to continue the racquet for your benefit. If the business can’t get more than your one, 75% off visit, its not worth it to participate. If you are clipping coupons, you should be ready to pay some price for the pleasure.

    • PhoenixLocal.Biz Says:

      Groupon, or any other Daily Deal Site does NOT give an email list to the merchant. Well, they may, in certain situations, but most generally not. That’s a legal battle they would rather not get into, and could shut them down.

      There are many ways the business can capture this information. You don’t need to just get it through Groupon. Customers will voluntarily provide this data to a business they are working with. You can make voucher redemption dependent upon receiving this data, etc.

  3. Greg Sterling Says:

    Understand what you’re saying re spam. But there’s got to be a compromise position where the local business can capture the email address. Many of these customers will want to be later contacted by these businesses.

    Ultimately I suppose it’s up to the business to capture the addresses itself; however Groupon can facilitate that practice in one or more ways that involve consent.

    • James Moran Says:

      Some deals are structured such that the consumer provides contact info to the SMB during the process of consuming the deal itself. For example, the consumer may be provided a “coupon code” that they then have to redeem on the vendor’s website. Others require online scheduling of appointments.

      I think some of the most interesting deals are in the form of special events held by a businesses (food festivals, wine tastings, parties, etc). These even encourage the SMB to market the deal to their existing base (it’s not cannibalizing their normal prices). These can also require registration on an event platform controlled by the SMB.

      I see these as workable compromises, as long as transparency is provided to the user in advance of purchase.

    • PhoenixLocal.Biz Says:


      You said it best [quote]”Ultimately I suppose it’s up to the business to capture the addresses itself; however Groupon can facilitate that practice in one or more ways that involve consent.”[/quote]

      Yes, Daily Deal sites are a MARKETING TOOL. They have to be used, PROPERLY in order to provide the results you want. If you don’t know how to use these tools that are at your disposal I would suggest you contact somebody that can guide you, or can do the work for you.

      I operate http://PhoenixLocal.Biz, a local marketing consulting company. We assist SMB’s with their local marketing and Daily Deal Site (read Groupon) campaigns. We help with retention, referrals, upsells, etc. We help make your campaign a success.

      To learn more, stop by our site at http://PhoenixLocal.Biz (which is being revamped right now and is still under construction) or email us at info@PhoenixLocal.Biz.

  4. RPG-D Skindex » Blog Archive » Spy School Says:

    […] The Dark Side of Groupon Sites « Screenwerk […]

  5. Jerry Says:

    I am running a website where small business owners, particularly those in the restaurant industry can post promotional events on social media to attract customers. It’s similar to meetup, but the events are organized by business owners. For more information, check out It’s a good alternative to Groupon. And the service is free!

  6. Jess Says:

    Interesting…as a Groupon consumer I’ve always wondered how it affected SMB’s bottom line.

    I agree with Brittney that in today’s world you need permission to keep everyone happy (and abide by email best practices).

    Groupon could allow consumers to opt-in with a checkbox during the purchase process. But at the end of the day, I think this is a marketing issue for the small businesses.

    SMBs can get savvy and collect emails when the Groupon consumers come in the door…run their own contest, win a free dinner, etc. If I have a good experience at the business, I’m almost always willing to join their email list.

  7. Kevin Says:

    I have two friends whose companies have used Groupon. They don’t look at a new Groupon customer for “margin” but view the money spent with Groupon as part of their marketing investment. If you are offering a 50% discount to a customer (plus paying Groupon some of the money you DO get) then obviously you don’t have margin for profit. What you are buying is new customers.

    One friend thought to try and collect email addresses from all of the people who used the Groupon. He sent them a followup email thanking them for their patronage and sent them a followup 10% incentive to return. So far he says that about 40% of them have returned with the additional incentive (and he says he recognizes others who didn’t give meail addresses but have returned).

    My other friend doesn’t collect email addresses. Oops.

    As to becoming a call-center … well, let’s see … your friend used Groupon, they delivered customers at exactly the price point promised and your friend’s business rang off the hook and his website got lots more hits. Sounds to me like your friend got exactly the return he was looking for – he could almost be a case study for Groupon! But he complained? And you’ve labeled this the “dark side of Groupon”? Seriously?

    • PhoenixLocal.Biz Says:

      Your one friend seems to be on the right track. There is MUCH more that he could do though to make money up front (think upsells, downsells, cross sells). He’s doing great with the repeat business end though.

      Your other friend should follow suit and get some of his previous customers back in the door. Oh, wait. How would he do that if he has no way to contact them…

      I agree with your criticism regarding this post, and it’s title.

  8. Bryson Meunier Says:

    Hi Greg,

    Full disclosure, Groupon is a client of ours, but I think the conclusion that you’ve come to is based on too small of a sample size. Groupon did a similar poll of random businesses and found that 96% were satisfied with their Groupon experience, 97% would use Groupon again, and 96% recommend Groupon to other businesses ( Doesn’t seem like these businesses are seeing the same side of Groupon as the SMBs you polled.

    • PhoenixLocal.Biz Says:

      That poll was one-sided and only polled businesses that had actually been successful using Groupon. The satisfaction rates for Groupon, or any other Daily Deals site are MUCH lower, if you poll across ALL merchants that have used the service.

  9. Greg Sterling Says:

    Thanks Bryson. Would love to explore your findings.

  10. Geoff Says:

    The size of Groupon’s customer base has become a liability for smaller businesses that can’t handle HUNDREDS of new customers. The non-Groupon deal sites – Living Social, SocialBuy, Townhog, what have you – usually take a smaller margin and attract some new customers without overwhelming a business (also I bet they’d let you set a cap). Small businesses should look beyond Groupon if numbers is an issue.

  11. Greg Sterling Says:


    This kind of information isn’t readily available, however.

  12. sfmitch Says:

    Kevin’s comment seems right on the money.

    The only legitimate complaint that I see mentioned is the lack of a cap on the deal.

    I can’t see how this can be seen as anything other than a marketing expense for the businesses that participate. If they are delivering an exceptional product or service then it seems wise to invest in the business with this type of marketing.

    • PhoenixLocal.Biz Says:

      The cap isn’t a legitimate complaint either. All merchants can set a cap. Granted, the reps don’t OFFER this info, but if asked directly they will tell you that you CAN. They generally try to discourage you from doing so as that cuts into their commission, and there is high turnover at these places for “under-performing”.

      I had a gung ho rep at another site that was aggressively pushing my clients offers, and making a ton of money, but he was giving me a 70/30 split, and I had caps set on most deals. (mostly goods with limited quantities) One day my NEW rep contacted me, and told me that my old rep was gone. My new rep is impossible to contact, and is lackadaisical at best when it comes to pushing things through.

      I opened a whole new market with my old, gung ho rep, but didn’t get my clients product pushed up fast enough (in between gung ho rep and lazy rep), and 3 vendors stole our spot after working for weeks with legal, etc. It left a sour taste in my mouth, but I’ve since adapted and overcame that issue.

      Daily deal sites aren’t a slam dunk, but they can work for most businesses, IF they know what they are doing.

  13. Groupon Pours More Gas on the Fire « Screenwerk Says:

    […] and then selling them to local businesses for considerably more. I wrote a recent post, “The Dark Side of Grouponing,” based on an interview with a restaurant owner who said that the system “worked” […]

  14. Jim W. Says:

    Interesting point of this model would be retention. Seems like the group discount phenomenon is based upon reaching out to young hipsters who probably facebook, twitter, blog, etc. That demographic probably also Yelps for every single restaurant or experience they have (and it can be in hundreds if not thousands). What I’m getting at is they may be less brand loyal because the excitement of a new deal (and there’s lots of them) is more enticing than visiting a past experience. Also, they appear to be price-sensitive, so much so that they aren’t revisiting that same business again until they see another offer of some sort. Every day, as it pertains to dining, they could be going out to a new restaurant since they could literally be loaded up with coupons at a deep discount.

    I guess that’s my fear with signing up my group of restaurant businesses.

  15. Greg Sterling Says:


    This whole phenomenon is definitely not yet mainstream. As it evolves and more consumers become aware of these sites we’ll have to see what the demographics are. Could be a lot of “mom’s” that wind up participating as well.

  16. LivingSocial Raises More, Goes ‘Hyperlocal’ « Screenwerk Says:

    […] walked O’Shaughnessy through my “Dark Side” post and we discussed the various issues raised. In particular he said that LivingSocial does allow […]

  17. Tom Davidson Says:

    Side note, Greg: I’ve been monitoring Groupon offers in D.C., Northern Virginia and the Norfolk area for the past several months. In at least some cases, Groupon does appear to be capping offers.

    Very occasionally, a note “limited amount remaining” will appear on an offer; even less occasionally, the words “sold out!” will pop up.

    Totally concur, however, that SMBs must carefully think through the offer they’re making and the long-term customer value and short-term buzz they’re getting.

    It harkens back to a rule of thumb in the print-coupon business: You want the offer to be good enough that if you get 10 responses, you’ve happy – and if you get 100, you’re ecstatic. Too often, deals are structured so that if you get 10, you’re happy … but if you get 100, you’re out of business.

    • Joel Conley Says:

      Couponing in general should be to restrict redemption in order to avoid the opportunity cost of a full-price sale. Forgetting that is what causes problems.

    • PhoenixLocal.Biz Says:

      All sites that we work with at PhoenixLocal.Biz do allow a cap. It isn’t offered to businesses in the normal sales pitch, but if asked about it they will tell you. It restricts your reps earning potential (they work on commission), so they won’t offer that up willingly.

  18. Greg Sterling Says:

    Tom: interesting, thanks

  19. kevin Says:

    I started a “Groupoff” Facebook page after a recent Groupon totally destroyed my favorite sushi place.

  20. joe somerville Says:

    We give the restaurant $1 for $1 in advertising for every one of our 50% off Dining Perks they take in – we help them stay in business – we give them – tv – radio – web – email and twitter marketing and rather than them paying us in cash – they pay in food – thus saving 2/3 and we sell the food trade at 50% off on —- 20 years in Atlanta –

    We have the highest restaurant success rate in the State of Ga — very few of our restaurants fail. I bet groupon has some issues with restaurant owners just like Rewards Network did —

  21. Access Preferred Pricing at Premier Restaurants « VillageVines Says:

    […] the remaining empty tables of its restaurant partners instead of targeting venues looking for one time influxes of thousands of coupon-wielding […]

  22. Lost Remote | Groupon CEO: We doubled a local business in four hours Says:

    […] effect if a threshold of purchases is met, so you want your friends to buy, too. (Although as some have explained, there can be a dark side to the Groupon […]

  23. Becky Thompson Says:

    As a dental office we did a Groupon with a $69 New Patient offer(exam, xrays, cleaning) knowing that we would not make any $$ on the initial visit but hoped to keep them in the practice for future cleanings or restorative work. We also had a cap on the offer of 200. 3 months after the offer we have seen 46 of the 97 sold and had additional production of $2416. We are tracking it and we have email addresses for future contact. We also had an ugly online Hate campaign(Google, Yahoo, Yelp) by one of the Groupon recipients that had some perio needs and didn’t read the fine print of the Groupon. His groupon has be refunded and hopefully the hate is over. Won’t know the true ROI until we see how many come in for another “full price” dental cleaning. Most of the new patients didn’t want to hear that they needed any additional work and were just in it for the deal. I have talked to at least 5 other Groupon business and None of them would do it again even though it brought in a lot of traffic. Perhaps the reason why Groupon’s % of businesses that would do it again is so high is because they ask you to fill out the survey just days after your campaign when the excitement is high. I also had several problems with the Groupon method of business before my campaign started and after it had happened. They can’t tell you when your campaign is going to run even after you gave the final ok 30 days prior and they responded in a forum to the Hate campaign dude saying I had just contacted them…. even though I contacted Groupon as soon as I realized the Hate campaign was going on which was several weeks prior. Hate campaign dude didn’t return any of my phone calls so he obviously didn’t want to resolve the issue. So, as a business and as a dentist, I would not use Groupon again.

    • JD Says:

      I fully agree with Becky. GROUPON is bad for a business, and I speak from experience. As a business owner who has run offers with Groupon, my own reaction now is keep away.
      The promise of lots of customers is very enticing, and the sales pitch from Groupon is aggressive. Imagine hundreds of new customers flooding through your doors. Sounds enticing, doesn’t it?
      For business owners, however, you should stay away from Groupon unless you can make a worthwhile profit from each customer at the first visit.
      The customers you get from a Groupon offer are almost invariably ‘bargain hunters’. They do not become repeat business or purchasers who will add value to your company. Sadly, they can be more unpleasant or difficult to deal with than typical higher-price paying clients.
      Unless your marginal cost is very low (e.g. a zoo offering evening tickets when the zoo is normally quiet – costs nothing to add more people walking around, and sales from refreshments will be profitable) and you can make money without counting on repeat business, avoid Groupon.

    • PhoenixLocal.Biz Says:


      Would you change your mind if you had a consultant doing all of the heavy lifting for you, and was only paid for performance?

      If you ever reconsider your stance, please feel FREE to contact us at info@PhoenixLocal.Biz.

  24. Greg Sterling Says:


    Thanks for your feedback on the experience. Very interesting. So Groupon did give you the buyers’ email addresses then?

    • PhoenixLocal.Biz Says:

      Groupon doesn’t just give these out. You would need a legitimate reason to get these, and there are very few “legitimate” reasons in Groupons eyes. I have never had a client receive these directly from Groupon to date. They probably collected these on the patient form upon arrival and redemption of their voucher.

  25. MikeS Says:

    The main reason groupon will not put an option to allow users to have their emails shared with the businesses that are giving them deals is not for security purposes.
    It is because if a business has direct access to its future customer, there is no need for groupon. As any good businesses model, helping your clients take your customers is a bad one.

    The main problem with companies like groupon is the same as with the health insurance industry. These types of parasitic middle man companies are forcing their way in between normal transaction. Although it may seem nice at first to get a “deal”, the actions have a grim ripple effect that will hurt businesses all around.

    • Joel Conley Says:

      This is correct but even if for some reason Groupon wanted to share e-mail addresses, they would still be blocked by the privacy issue. So they hide behind it and benefit from it.

  26. Mac Musick Says:

    So what comes first the email list or the success stories. How does Groupon go into a city and generate enough buzz to obtain sufficient permission based emails to start the process? Would anyone other than the person who works for Groupon and posted above know?

    In write ups there is talk of viral marketing through email forwards and social media but that doesn’t happen without priming the pump.

    I don’t buy the story that “urgency” among friends drives these deals. Certainly not the very first or fist dozen deals in a city.

    So I am suspicious that Groupons initial email blasts are spam. Comments, or knowledge? I can purchase an email list a supposed “white” list but still that is not permission based. It is what it smells like, Spam, right? I am not saying that is what Groupon does but I am curious to learn.

    • PhoenixLocal.Biz Says:

      “How does Groupon “go into a city””? What does that even mean? Groupon is opt-in only, and always has been. It wasn’t a multi-million dollar operation overnight, or even over a months time. The “product” (deals of AT LEAST 50% off (initially)) sold itself, and word spread, and so did their reach.

  27. Becky Thompson Says:

    Just to clarify. The reason that we have the person’s email address is not because Groupon gave us the email but because that is one of the pieces of information we ask for when a new patient calls and it’s also on the new patient questionnaire.

  28. kiwi Says:

    There are a few similar service in Singapore now. Had checked with one to see how much they charge for commission so that I could work out the cost to me, bt they are tight-lipped about it.

    Wonder how those small businesses can take such deep discount?

  29. kairo Says:

    I think what’s funny is that this restaurant/business “turned out fine.” And of course, Groupon won’t give out emails, it’s a matter of privacy. Businesses get in trouble for disclosing emails, unless the user all agree for their emails to be shared. I think what’s wrong with the Groupon model isn’t the actual model itself, but the businesses that use them. They need to understand that this model is not a quick way to get customers into their doors. They need to be able to prove to the customers that they are an incredible business so that customers would return EVEN WITHOUT a discount. Businesses go into this thinking that customers automatically will return, but why would they return if the food is terrible or the service they received was horrible? If you can perform well, they will return and more will come.
    Common Sense 101

    • Jim W. Says:

      I believe that experience has to be phenomenal for a guest to return. They must see that the quality of product and service is truly of value because once you have a 50%+ discount, it is difficult to fathom that a guest will return in the next month or two. Again, I feel a huge percentage of users who purchase these group deals are in it for the “hunt of the deal”. It’s sort of a game to collect a set of discounts, especially restaurant deals that make up 1/2 the Groupon offerings, so you can practically eat out all the time for 1/2 off and try a new experience.

      I’d love for business that has used Groupon to put together a detailed pro and con list to see what side is weighted more.

  30. Mac Musick Says:

    I have been in the junk mail business since 1993. I have published coupon magazines in 5 states and 14 cities. The idea of a 50% discount or a BOGO is nothing new. What is new is the scale of distribution via the internet.

    Whether or not any particular ad is pushed by social marketing remains to be proved or demonstrated as the information regarding the database of Groupon or Living Social is kept quite secret. I have read that in the Chicago market more than 300,000 emails go out for a single blast. There is no evidence that this is based on permission or opt in.

    The Entertainment Book that has been around for years offers a collection of merchants and services in one book that is purchased by the end user for around $25 or so and is a far better bargain than a Groupon each of which is purchased individually. As an advertising salesperson I have heard many many times that the users of The Entertainment Book are “mooches”. Restaurant owners and employees complain that the customers use the “two-fer” offer, order to drink and tip only on the paid for items. Furthermore the “mooches” determine where they will dine based on what next “two-fer” they wish to use.

    I have no evidence that Groupon or Screaming Deals or any of the many online coupon programs have customers spend more than the value of the coupon or tip more than the cash portion of their bills or drink more than water.

    When I sell a buy one get one restaurant coupon I encourage the SMB to add the required purchase of two beverages. Yes this does cut back response measurably but response can be measured in terms of quality of customers as well. What business needs “mooches”?

  31. O outro lado dos sites de Compras Coletivas/Clubes de Desconto | IFDBlog Says:

    […] Google achei muita coisa, mas muita mesmo e uma delas foi um post em um blog gringo com o título The Dark Side of Groupon Sites, achei a abordagem bem interessante, porque tudo que leio só vejo o povo estusiasmado com este […]

  32. Treb Says:

    The phones were ringing off the hook with people asking about the restaurant, and he saw that as a problem?

  33. bls Says:

    Sucks to try and surf the web these days. Groupon is everywhere, and is a parasite on my eyeballs.

  34. Mac Musick Says:

    This article claims that more than 30% of business using Groupon find it unprofitible and won’t do so again.

  35. Joel Conley Says:

    I used groupon as an SMB and was allowed a cap as the nature of the business requires it. I was provided with a names list sans e-mail addresses. I don’t think it’s unreasonable to withold that information. It’s not just beneficial to do so from Groupon’s perspective but as a customer, I wouldn’t want my e-mail address going out to every single business I purchase a groupon for. So I’m sure Groupon promises this to their members.

  36. De ce vine Groupon in Romania « qteck Says:

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  37. knxion Says:

    I completely agree with Mac Musick’s post above.

    This model of coupon for free-advertising is not something new in many local markets. The major difference here is that Groupon is done on a massive scale via the Internet and their network of members. I don’t doubt that Groupon is highly successful in what it does, that their members love it, their investors are drooling all over themselves, and copycats are ready to pounce. But I am certain that most SMBs who have tried Groupon will soon realize that this model yields little to no long -term benefits, while providing tremendous benefits for Groupon and its users. And I don’t believe the spin “you’re not charged until enough coupons are sold” is going to do anything to help the SMBs.

    I owned a deli back in 2006 in the Las Vegas market. As a struggling business owner I thought I would give 2 similar coupon for free-advertising programs a try: 1) the Restaurant Guide, and 2) the Radio Shopping Show. On it’s face, this advertising model seems very reasonable and attractive, especially for a small business owner. First it doesn’t require upfront cash to run the campaigns. Second, you’re paying for the campaigns with your products or services, which is at cost; i.e., you get more value out of your marketing dollars. The downfall to this advertising model is as Mac stated. 99% of the users to showed up at my deli to redeem their coupons were basically “moochers”. They were there simply for the deal. For the ardent coupon users, this is a lifestyle. They come in groups, usually a family or a group of friends. They redeem their coupons, then move on to the next business on their hit list. I often didn’t see them again until they make their next rounds. I even experienced some cases of users printing duplicates of their coupons. Businesses are supposed to call in to check that the coupon hasn’t already been redeemed. Unfortunately, we didn’t have the time to do this in the middle of a lunch rush. These hardcore moochers paid $10 for a coupon worth $20 of products and redeemed it twice.

    Presumably, this same mooching behavior is happening via the Groupon network of users (the system is built this way, it is this exact behavior that makes Groupon successful). They swarm a business for the tremendous deal, then look for the next deal. There is really no incentive for them to visit the business again when there are other deals to be had. Let’s say you’re able to retain their contact info, what deal can you give them that’s greater than what they can get from Groupon? Most of the time Groupon would want the SMBs to be aggressive in their discount offerings to drive up response. Let’s say you give their users a 50% discount. If you want to steal these moochers from Groupon, then you better be offering much steeper discounts. The notion that a SMB can woe substantial amount of these customers back with superior products and services is a myth. Most of the press about the success of Groupon is around their user response rate. Unfortunate it’s most likely the wrong type of responders.

    I am about to embark on another business venture. My partners and I will give Groupon a try to see if concrete data proves the contrary to my previous experience with other coupon for free-advertising program. I will definitely be pushing for not having such steep discounted offerings, as I believe this does more harm than good. The basics of marketing says that you focus on your core consumers, develop good insights into what they value. Then deliver your products and services in alignment with their value at the right price. Steep discounting only serves to bring in non-core consumers who are there mainly for the discount.

  38. Group buying and building business » PR to Go Says:

    […] Greg Stirling and The Dark Side of Groupon Sites. […]

  39. nancy parklane Says:

    With any advertising promotion or vehicle; you have to weigh your options. The fact is, consumers love to bargain shop in this financial climate. Understanding your sales cycle is the key. But if you are looking to see what deals are out there – you can find all the daily deals at . This business model is successful.

  40. michael Says:

    I spoke w/ a small produce store by where I live, and they tried groupon as well and stopped. They told me they would not use groupon again ever, because groupon attracted the ‘hunters’ (the exact term the owner used), and not regular shoppers.

  41. bkink Says:

    It seems to me that shortsightedness and greed on behalf of the merchant are what actually caused their “issues” with Groupon.

    • michael Says:

      “greed” of the merchants? As in “greed” of wall st? As in “greed” of any businesses? Some may call it “optimizing profit” which is what any enterprising business should and still do. At the end of the day, it is all about one’s skills in getting money out of another person’s pocket in a legal manner. Whether there’s value- add in that process is in the eye of the beholder.

      • Mac Musick Says:

        Hello Michael,

        Other posters suggest that the small business owner crunch the numbers before they sign on to Groupon. I have never worked for Groupon but after many years in the coupon magazine direct mail business I fully understand the advertising sales side of the equation. Number 1, you don’t give the business owner time to crunch any numbers. You use a very cleverly written sales pitch that appeals to the greed of the merchant. If they don’t bite you move on to the next. Many do bite. By accepting the terms of Groupon they are agreeing to sell their product or service below cost. You can’t make it up in volume. The more you sell below cost the more you minimize profit. As a general rule there is no blue sky in targeting mooches. Groupon is certainly “optimizing profit” for themself, except when they put a foolish ad on during the Super Bowl.

      • michael Says:

        Hi Mac,

        I agree with you, but I think almost all sales, not just in advertising, are done that way – i.e. making you decide with your heart and not with your head, hence no chance to think logically or with numbers.

    • PhoenixLocal.Biz Says:

      I agree @bkink and @michael. Any sales professional will tell you the same thing. You put pressure on the prospect to make a quick buying decision. It’s not that you’re trying to “dupe” them into making a bad decision. It’s a known fact among sales professionals that the longer a buying decision is put off, the lower the chances of completing the transaction. Always be closing.

      @Mac Musick – You have posted quite bit on here in regards to Groupon, but you consistently state that you have not worked for or with Groupon. You’re providing experience from a completely different arena, and it’s just not helpful. Direct Marketing, which is what you do, is NOT the same type of marketing that the Daily Deal Sites do. THIS is a completely different ballgame, played on a different field, with different field positions, and a different score card. These sites have turned marketing on its head.

      Groupon, and all other Daily Deal Sites can be optimized to be profitable and bring in new, as well as repeat business, long after the campaign has run. It just takes a skilled marketer to help implement these processes, and guide a business owner towards success.

      That’s what we do at http://PhoenixLocal.Biz. We help SMB’s optimize their Daily Deal Site campaign so they receive a good ROI on their “investment”.

      Most business owners call, or receive a call, from one of these Daily Deal Sites and jump right on the opportunity. Rarely do you hear about the business owner that jumped right into paying for a yellow pages ad at $1,000/mo just because the sales person said that it would increase traffic.

      No, when a business owner receives this call, if they don’t hang up immediately, they tend to do a bit of research, and crunch the numbers. SMB’s need to realize that these Daily Deal sites are a marketing tool, just like a yellow pages ad, or a billboard, or a radio or TV spot are. All require you do do your due diligence. It doesn’t matter if there’s no UPFRONT cost to you. There IS STILL a cost to the SMB. There isn’t an upfront cost for PPC campaigns either, but most SMB’s will research this avenue of marketing…

      Not every person purchasing items at a discount is a “moocher” either. I actually take offense to this as my wife and I have had many great experiences using Groupons. If we have a great time we might return and pay full price. If we didn’t like it we won’t be back. In most of the cases in which we didn’t return, it was due to a lack of service.

      The biggest determining factor on whether or not you have returning customers is the service they received. If you have a chip on your shoulder because somebody is using a voucher the customer feels this, and has a less than stellar experience. This is how you lose customers, or have unsuccessful deal campaigns. You have to have a positive mindset about these customers. Would it be “mooching” if you put a flyer in the local Sunday paper with a 50% off coupon, and the customer used THIS coupon? No, you probably don’t think THAT is mooching.

      What’s the difference between these two coupons? They are both 50% off. The ONLY difference in the coupons is the fact that the SMB will receive 50% of the value of their services instead of 25% when using a voucher from a deal site.

  42. Mac Musick Says:

    Hi bkink,

    I have sold advertising since 1987. ( Recently I retired.) As an ad salesman I counted on business owners being “shortsighted” and “greedy”. I was selling ads for direct mail coupon magazines. When a well trained sales person from Groupon appoaches a small business owner with a “free advertising opportunity”, “No upfront cost”, a lot of business owners will see $$$ and fall for the pitch. Most business owners are motivated by greed. Nothing wrong with that except that it can blind them to the reality that some forms of advertising might do them more harm than good. Due diligence is the only defense against a sweet sounding sales pitch.

  43. AtlRestOwner Says:

    I’ve done both GroupOn and ScoutMob. I agree that it largely attracts moochers who are hard to turn into regular customers. You can try and capture email addresses, but most reflexively reject that, even if they are raving about the experience. ScoutMob attracted over 4x the number of diners, but it is not a one day offer, so if your regulars find out about it, it cannibalizes your existing business. Also, since we are already operating at full capacity at peak times of the week, offering discounts at that time did nothing but crowd out regular paying customers. I wanted to tailor the deals to offer discounts only during non-peak times, but neither service allowed that.

    I basically knew most of the pros and cons going in and after watching them pan out, I’m still on the fence. It’s basically a wash. We didn’t lose or make money and won’t turn most of these moochers into diners.

    The real problem that I see is that the economy is driving restaurants to discount down to the bottom. It’s really a form of deflation, which can be deadly to an economy or business. I may not love the GroupOn customer, but what happens when everyone is a GroupOn customer? With 10 of these discounters popping up, each doing a daily deal, effectively what you have is market wide deflation. If I don’t offer these deals, half the customers in the city will go over to the guy who is offering it (which is all but the top 10% of the business models). We are bidding each other down below profitability. My friends tell me that they used to spend $200-300 per week dining out, now it’s $50. The revenue sucked out by the marketers themselves will only accelerate the industry wide revenue fall.

    On the flip side, when the economy picks up, the restaurants that remain will shun discounters and they won’t be able to find daily deals anymore except among sub-prime businesses. Then it will be time for some of the discounters themselves to shutter.

    What happens when Google enters the discount game???

    • GMR Says:

      AtlRestOwner says it best. We were able to see the fault with groupon and the 20 or so others that have approached us since the markets crashed. We did however participate in one called Blackboard Eats. They make themselves stand out because you don’t pay them any percentage of the deal; you simply offer their subscribers a deal for a limited time. Tracking is done, etc. Bottom line, NOT ONE repeat customer. Bargain hunters whose MO is to move on to the next deal, not find a new regular restaurant (or nail salon, or dentist). These people (I know a lot of young people doing it) simply get a thrill out of getting as many discounts as they can.

      I think this is a dangerous trend for the economy and small businesses as Alt says, it causes deflation. If as a business you can survive by retaining your regulars and occasionally offering discounts and special offers to them, do that. Forget all the group buying stuff. If we businesses can all boycott these companies maybe they will go away.

  44. Todd Turner Says:

    I never used Groupon nor would I. I am a business owner who also acknowledges that the success of my business is largely tied to the success of other businesses in town. And these types of discounts do not reach your target audience. I was approached about being a salesman or at least helping a company that is a copycat of Groupon in my town. I kept pretty silent in the first meeting because I never heard of Groupon. When the meeting was over, I did my own research and due diligence. I found that these types of discounters are community killing, job killing leaches on society. Nobody understands the dollars of a business better than the owner. Pressure sales coupled with aggressive marketing (Super Bowl) does not mean smart business growth. It means lining there own pockets. Whether your around next year or not means little to them because someone else will be. If you can afford to discount up to 90% of what your selling then let me know what business brings in those types of margins. Groupon and the other discount sites will be replaced with better types of aggressive marketing once word gets out.

  45. فيديو يوتيوب Says:

    you get more value out of your marketing dollars. The downfall to this advertising model is as Mac stated. 99% of the users to showed up at my deli to redeem their coupons were basically “moochers”. They were there simply for the deal. For the ardent coupon users, this is a lifestyle. They come in groups, usually a family or a group of friends. They redeem their coupons, then move on to the next business on their hit list. I often didn’t see them again until they make their next rounds. I even experienced some cases of users printing duplicates of their coupons. Businesses are supposed to call in to check that the coupon hasn’t already been redeemed. Unfortunately, we didn’t have the time to do this in the middle of a lunch rush. These hardcore moochers paid $10 for a coupon worth $20 of products and redeemed it twice.

  46. Mac Musick Says:

    Hey I have an idea. Why not just stand in front of your place of business and hand out 2-4-1 coupons. Think of the good will that would generate. Another thing to consider with regard to Groupon is that unless your business in located in Chicago that 50% plus that Groupon keeps are $$$ that will not be circulating in your community.

    One term we use in the coupon business is “detour behavior”. The idea is that a coupon user will go out of their way to use the coupon. They most likely won’t go out of their way if they don’t have a coupon.

  47. Chris A Says:

    Wow your friend is unbelievable.
    as a new business, the greatest thing that can happen is a lot of people taking interest at once. He didn’t have the money to invest into marketing, so he instead ‘took a loan’ and paid the marketing cost with groupon discounts.
    You are making it sound like groupon and all the customers that came through groupon robbed him. If it weren’t for groupon, most people wouldn’t even have tried the restaurant in the first place. If it is good, people will return even at full price. If no one came back, then I think the restaurant had some problems to begin with.
    If you don’t like the bargain hunters, who are actually potential customers and people who never would’ve come otherwise, invest the money and do marketing yourself.
    If you are gonna use groupon, whether you choose to or because you don’t have other options, you are gonna have to deal with the consequences – good and bad.
    As for the email addresses, let’s look at it this way. All of us that have spent more than 5 minutes on the internet know how plaguing and annoying spam emails can be. We get more junk emails than we ever wished for. Now, if groupon were to start giving out my email address whenever I made purchase, think about how much junk and advertising crap that would end up on my inbox.
    Instead of groupon auto forwarding the list of hundreds, if not thousands of email addresses, the business should do what some suggested above – offer to mail 10% off coupon with email address provided or something … so that the customers are voluntarily giving their email address, rather than having their private informations cc’d to random locals

    • Barbara Saunders Says:

      Actually what Groupon is doing is preying on the business owner’s “scarcity mindset.” Excuse the new age term! A restaurant has only a certain capacity. Ditto a massage practice with four therapists and a couple of rooms. There are more potential customers than there is capacity. It doesn’t feel like that when the slots and tables are empty, so the idea of a “flood” of new customers seems attractive.

    • PhoenixLocal.Biz Says:

      I love the analogy. “took a loan”. That’s essentially what pay for performance is. Most SMB’s don’t see it this way.

      You said it best with: “If it weren’t for groupon, most people wouldn’t even have tried the restaurant in the first place. If it is good, people will return even at full price. If no one came back, then I think the restaurant had some problems to begin with.” The key part of that quote being: “If no one came back, then I think the restaurant had some problems to begin with.”.

      Don’t treat Grouponers any different than you would a regular. Sure, you can place restrictions on the use of the voucher, but don’t cut back on service, professionalism, or caring for your customers simply because you don’t know how to optimize your campaign and continue to engage these clients long after their used their voucher. Some WILL return if they are treated right.

  48. Ravi Matcha Says:

    Hello Greg.. Nice post. I’m doing some research on group buying and want to speak to you about your experience. Would you be interested to have a conversation on this matter? appreciate your response.

  49. blah Fool Says:

    wayyy better tham goupon and you get paid cash to help them promote groupon sucks this is the best groupon alternative i could find

  50. As good as it’s going to get for group buying? « sponge-ist Says:

    […] people who were delivered would likely have a high propensity for return business. Groupon etc, as many have noted, likely deliver a lot more people, but they tend to be habitual bargain-hunters rather than likely […]

  51. Dan Says:

    This is a pretty good story and to be honest, I have been interviewing many business owners in the past month that have told a similar story.

    At the end of the day, the small business owner needs to know what they are signing up for and if it is right for their business.

    There is no excuse for not crunching the numbers and weighing the pros and cons.

    We have created a site for everyone to share their Groupon experiences, i.e. what they put in, what they got out, and whether they would do it again.. This database will help people make a decision of whether their business is a fit for the Groupon model. Thanks for taking the time to share your experience.

  52. Mac Musick Says:

    What do you do when a door to door salesman comes to your door? How do you handle a telephone solicitation? (From Groupon?) If you are smart you will not buy on impulse. If you are a smart business owner you will tell the salesman who shows up without and appointment to turn around and leave. You will tell the salesperson on the phone that you don’t want what they have for sale regardless of what it is. Do most business owners do this? No, but they should. A smart business owner should buy advertising like they would buy the goods they sell. They should shop to find the best use of their marketing budget. Advertising might be a complete waste of money for most restaurants. Coupon advertising might even cost a lot more that just wasted marketing dollars.

    What should a restaurant owner do? Put the money they would spend on advertising into quality products and services. Earn a reputation that attracts the best customers who will tell their friends and all them come back again because the food and service is so good.

  53. david Says:

    The deal sites are lacking an efficient platform for businesses to have long term success with their deal. Our concept – MobManager gives merchants tools to manage their deal and convert deal customers into long-term customers. Deals work when managed properly.

  54. Big Man on Campus: Groupon | 406 Strategies: Internet Marketing for Small & Local Business Says:

    […] a business from Screenwerk, the outstanding Internet localization blog from Greg Sterling – “The Dark Side of Groupon Sites”. This one was #2 on the Google SERP after a search using the keywords “Groupon success […]

  55. Small Business Guide to Online Couponing | 406 Strategies: Internet Marketing for Small & Local Business Says:

    […] “The Dark Side of Groupon Sites” […]

  56. Online Couponing Links | 406 Strategies: Internet Marketing for Small & Local Business Says:

    […] “The Dark Side of Groupon Sites” […]

  57. Philly Says:

    I despise these groupon type deals. As a restaurant operator we are lucky to see between 5-10% profit annually. To basically give away 75% of our required sale price for a one time visit from a low budget coupon cutting guest is a joke. the more that small business partakes in this then thew more they will cut their own throats. The people who use these deals will NOT be willing to pay DOUBLE what they paid last time they were in. Get real! You have to know that this is true. Would you be willing to pay double the price for anything after being able to get it for less the first time? Boycott these promotions and use your marketing dollars on grass route campaigns. The more that we refuse to give into this type of ridiculous marketing then the sooner it stops. Anyway, how the hell can these groupon type companies justify receiving half of the sale price? they simply post it online! We have to take the reservation, serve the guest, deal with their complaints (coupon cutters always complain, thats what they are on earth for), etc. Again, its simple, boycott all groupon type deals!!!

    • PhoenixLocal.Biz Says:

      I think one of the replies below said it best. It’s probably YOUR attitude towards these customers that made your campaign unsuccessful.

      You can’t look at these customers as cheapskates. Who wouldn’t want to try a new restaurant for 1/2 price? I do it all of the time. I have many friends with VERY large bank accounts that use these sites to try new things. They have no problem dropping $150 on a plate at a nice restaurant, but still like to save money when trying new things.

      If the food and service were on par, I’ll return. If the servers and management appear to have a chip on their shoulder because they don’t understand how to properly utilize this great tool, and think I’m a leech for using THEIR offer, I won’t return, and may even go so far as to leave a bad review of the business. Hey, I didn’t FORCE them to offer me anything for half price. That was THEIR idea.

      You can’t be mad at people for accepting an offer you place in front of them, when they take it. What you CAN do though is provide a phenomenal experience for them so that they will come back, with all of their friends, and pay full price. It’s a MARKETING tool, and it’s quite effective if used PROPERLY.

  58. JG Says:

    I am curious about when small businesses get paid. Do they get paid when someone buys a Groupon? Or when someone uses a Groupon and they request reimbursement from Groupon?

    This would make a huge difference. There are probably a ton of people who never use their Groupon at all. Who keeps that profit? The business? Or Groupon?

    Anyone know?

    • Jean Says:

      I’m not sure about Groupon, but other daily deal sites pay the business up front whether the coupon is redeemed or not. Stats show that traditionally 30% of people don’t redeem the coupons they buy.

    • michael Says:

      From what I hear from a small business, getting paid before the coupon is used is one of the selling point.

    • PhoenixLocal.Biz Says:

      Redemption rates vary, but there are typically 30-40% unredeemed vouchers. The business still received payment for these, but didn’t incur any expenses (didn’t have to provide food or service, or whatever, to the voucher holder).

      Yes, that is one of the selling points, but a minor one. In reality, it should not be. An unredeemed voucher is a lost customer. Now you cannot market to this person, AND they cannot/willnot provide referrals either. The higher the redemption rate the better for the business, AS LONG as they utilize the daily deal properly. Yes, if you’re just signing up for a quick cash infusion and don’t care about the long term, a lower redemption rate would appeal to you since you are getting paid for services NOT rendered.

      The way the process works (which is different across different sites, and is subject to change) is that you get paid in installments. The first typically is paid to you 7-14 days after your deal has stopped running. The next payment could be 14 – 30 days later. Sometimes this is the final payment, other times it is the second 1/3. If this was the final payment, all refunds, etc. will be taken out of this payment prior to it being issued. If you have payments of 1/3, you should receive your last payment in 30-90 days. This can be adjusted in your agreement, but generally it remains unchanged. The Daily Deal sites don’t want to be left holding the bag for returns/refunds.

  59. greg Says:

    The business gets paid “up front,” whether or not the deal is ultimately redeemed by the consumer-buyer.

  60. bluetaxi Says:

    you should offer a more balanced review and update this post to reflect current Groupon terms and conditions

  61. d h disinger Says:

    If a business uses a marketing service that cuts their initial margin of profit to zero, and does this without a plan to capture any member data that purchased the related discount, through service surveys, give-a-ways, email client lists that provide a discount for local customers, (this isn’t difficult) any type of plan that results in patrons personal data, email, address, or at least some part of the demographics that drove the purchase to begin with, with in that market base, then they (the business) did not manage the marketing event, and YOU GET WHAT YOU PLAN, which in this case is negative ROI. Marketing plans, events, and campaigns are smart business if ROI is the prevalent KEY, and the delta that determines is obviously captured at the time of the event and post event that allows for continued evaluation of the initial PLAN and related results. Any business owner or manager that does not plan for successful results in the execution of expenditures that they make for whatever reason is a fool. The point is the retail marketing service gives the general populous a deal for services, and it is that service in which provides the opportunity to the business, and it is the businesses responsibility to use the service as smartly as possible (that they paid for) to receive the best ROI of cost for service, and if they cannot then they shouldn’t consider the service, not blame the service on how it effects their business’s ROI.

    The Bottom Line; if a business owner/manager is not creative and/or intelligent enough to use a type of service, marketing concept, or strategy to their own advantage that results in improved ROI, then it is not the service, marketing concept, or strategy that is at fault… nor is it dissension of a customer base, (as some have posted above) but the actual business decision that started the process… a very simple concept… what COST produces the best EFFECT and/or RESULT…

    • PhoenixLocal.Biz Says:

      Here Here. I agree fully. When this most recent recession hit, Marketing positions were cut by the thousands. The people that were most in touch with your (the small business) client base were the first to be sent packing. This created chaos among companies that no longer knew how to find, or communicate with their clients. They had let go of the people that were in the front lines, interacting with and persuading the clients to come in and work with your business. This is almost akin to a General firing everybody in the infantry, and then realizing he doesn’t have anybody to handle the front lines. You would quickly be overrun.

      Many small businesses don’t see marketing as a necessity. These SAME businesses though, will then contact Groupon, or another Daily Deal Site, and set up a “marketing plan”, but not even know that is what they are doing. Then they don’t fully utilize this tool, and it “fails” miserably. They immediately point their finger at the site, which was actually doing a service for them, and blast bad reviews all over the internet.

      Just like any other business function/operation/task, if you don’t know how to do it/use it/optimize it, hire a professional to do it for you. My company, PhoenixLocal.Biz does just that. We help businesses create and manage their Daily Deal campaign. We are paid for performance too, so there is little up front cost to the business, if any.

      For more information, please visit our site at, OR email us at

  62. glassbycassandra Says:

    After spending lots of money, and referring lots of friends and after buying a trip (Cambria) Which I’ve already made huge travel plans around. I get this nondescript e-mail from Groupon today.


    Re: Hello, We are writing to inform you that the Groupon account associated with this email ad… (ticket #4972493)


    We are writing to inform you that the Groupon account associated with this email address has been deactivated due to a violation of our Terms of Service. Unfortunately, we will not be able to provide you with any of the Groupons you purchased while using it, and the credits that were issued to it cannot be transferred to any other account. Your Cambria Suites Groupons have now been canceled and are no longer valid.

    Please discontinue use of our website and our services immediately and note that we are preserving all rights to pursue further action — should it be necessary — to preserve the integrity of our program and the best interests of our company.

    • PhoenixLocal.Biz Says:

      Being that these sites are EXTREMELY liberal with their customers (Think along the lines of Amazon, they side with the BUYER 9 out of 10 times), you have to have some seriously fraudulent activities going on on your account in order to get shut down. Do you have a high refund request rate? Are you purchasing Groupons from outside your country? Are you suing other peoples payment data?

      Daily Deal Sites want to keep as many POTENTIAL buyers on their list as they can. To remove an account from their mailing list means you have violated some serious terms.

  63. Ewa Says:

    Does anyone have a full terms and conditions with all attachments if there are any. Is the written agreement that merchant gets is the same as on the groupon website. Many companies give their customers or users the short version of their terms and conditions. But when the issues arise than they pull out the full version. Many banks use such methods and it is really hard to get the full version of the agreements.

    • PhoenixLocal.Biz Says:

      You cannot agree to one agreement (the “short version), and be required to uphold a different agreement (the “full” agreement). That is illegal. Can you sign papers on a 3,000 sq. ft. home in Phoenix, then move into a home in Tucson that’s only 1,000 sq ft.? The document you sign is the one you agree to.

      All of the Daily Deal Site “contracts” are fully negotiable. EVERYTHING in the Daily Deal Site contracts is open to negotiation. You can set up the offer how YOU, the business owner, wants it. If Groupon taking 50% is to much, negotiate 60/40, or 70/30. There are MANY variables to consider when creating these deals.

      There are many ways to structure your deal. If you don’t have the time to market on other avenues, why pound out a quick deal that only benefits the daily deal site? If you don’t have time to research and learn about your other marketing alternatives then you don’t have the time to learn how to PROPERLY utilize the Daily Deal Sites.

      Consult a professional if you don’t know what you’re doing. You wouldn’t manage your own tax preparation, would you? If your transmission went out on your bakery delivery van, would you toss it up on your own lift and swap it out yourself? Probably not. Don’t risk shutting down your business by trying to perform tasks you may be unfamiliar with. Hire a professional.

      There are companies out there like mine, PhoenixLocal.Biz, that will manage every step of your Daily Deal Site campaign. We will make sure that your agreement with the site is what you expected, and we will make sure that the deal is PROFITABLE for you. We will help you bring customers back, and bring in new ones outside of the Deal Sites. Check us out at, or email us at

  64. Hyperlocal Marketing Executive: ‘Groupon Is Like Giving A 3-Year-Old A Gun’ | My Blog Says:

    […] is not a new issue, but it is an increasingly relevant one. Vendors need to be careful when the sign up with Groupon, […]

  65. BusinessClassBirdie Says:

    Response to: “Philly” I despise these groupon type deals. As a restaurant operator we are lucky to see between 5-10% profit annually. To basically give away 75% of our required sale price for a one time visit from a low budget coupon cutting guest is a joke.”

    I use groupon and similar sites frequently but refuse to purchase a deal for the food industry. I have heard horror stories from friends and colleagues (who dine out regularly and tip generously) who have used groupon for dining out and have received very poor service. In most cases, the owners/servers assume that coupon users = moochers = poor tippers.

    YOUR attitude is the reason why customers never go back.

    • michael Says:

      Perhaps this is why requires a minimum 18% tip on their coupons to mitigate this situation. Bottom line is that the risky bet on going with someone like GroupOn is whether you get a repeat customer out of the ‘advertising dollars’ (i.e. discounts) spent on GroupOn, or that the word-of-mouth from that customer makes the ‘advertising dollars’ worth while.

      • PhoenixLocal.Biz Says:

        If you give the customer a good experience then they WILL come back, AND they will refer friends! These sites have to be used for what they are, and that’s a marketing tool.

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  99. Mike Says:

    Never again . As many of you have seen Groupon only appeals to those people who simply seeks a deal today a deal tomorrow and so on. You get very few repeat business as they search the offers for the next sucker (business ) that signs up with groupon.
    My groupon sale the first day was great with the assumption my expiration date would be 3 months down the road, wrong. The first sale expired 5 months later very deceptive
    After my sale date ended I start seeing “now deals” what the hell is that hummm more ways to sell sell sell more discounted meals to literally give away. I am in Florida I had customers from Indiana Michigan Russia France and In as much as we can’t control who buys groupon the illusion of repeat business does no exist . All that happen is we create a set of customers that simply looks for the next deal why come back and pay full price when there is another 55% discount meal waiting to be purchased.
    We were told customer could buy one groupon for themselves and one other for a gift. Sure I printed the customer list and several had 2 or more many had 3 , when asked how was that possible I was told they had no way of controlling the numbers. How can you control something when you really don’t intend to control. I had names like M, Martha Stewart, you get the idea.
    Simply put I wouldn’t recommend this marketing to any small business and I would never do this again.

    • PhoenixLocal.Biz Says:

      Hello Mike,

      I’m sorry to hear that your Groupon Campaign didn’t meet your expectations. The Daily Deal sites can be difficult to work with. There is little education available for the businesses that utilize these platforms and lots of pressure to sign up.

      Most businesses that sign up for Groupon are in some sort of financial trouble. They generally use these sites for a quick infusion of cash. That is entirely the wrong way to use these sites. They are a MARKETING tool, not a loan company or bank.

      Here are a few benefits to using Groupon:
      1. This is a pay for performance model. If Groupon doesn’t sell any vouchers they don’t make any money (and neither do you). There are very few marketing platforms out there that only receive compensation once they provide you with a sale. Sure, there’s pay per click or pay per call, but these are not definite, completed sales.
      2. Groupon has a mailing list far bigger than anything any small business owner could build. It would take a small business many years to build a list like Groupons, and it probably wouldn’t be utilized as efficiently either.
      3. If used properly you CAN have repeat customers, at full price, AND they will bring in additional NEW customers as well.

      The thing is, most business owners are actually “technicians” (the task “doers”) in a business that they created. They aren’t marketing experts, or expert bookkeepers. They are experts at whatever the business does, whether that is changing oil, baking cakes, or providing goods. As a small business owner, do you handle your accounting or tax preparation on your own? No, you probably hire a professional to do this for you. Many business owners do this, but what they don’t do is hire a professional to conduct their marketing for them. Everybody thinks that just about anybody can be a marketer, and that’s just not the case.

      I run a Local Marketing company called PhoenixLocal.Biz that assists businesses with their Daily Deal site campaigns as well as their other local marketing efforts. We manage the entire process for you so you can do the things that you know how to do, like operate your business. We also only get paid for performance, so there is little risk to the business, our client. This creates a strong incentive for us to put together a high performance campaign for our clients, so we can get paid as well.

      Look us up at PhoenixLocal.Biz, or send a text or call 480-389-4462. You can also email us at We would be happy to help anybody that is seeking assistance with their Groupon campaign.

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