Monday, September 27, 2010

How to run a Groupon promotion

Groupon is a local, social, couponing company.  Groupon members join a local email list, then get sent two offers per day, local to them.  The offers can only be bought for 24 hours, and are generally limited to one or two per buyer.  Offers only go live when a certain minimum number of people buy, but in the vast majority of cases they seem to sell very well.  Users are encouraged to share the offers on social sites, to encourage friends to buy as well.  The idea isn't unique to Groupon, as it's been done in China for a few years, but Groupon are making the most headway in the West.

Groupon is one of those companies that have got big pretty quietly.  Groupon now boasts over 13 million members, growing at a million a week, so it's far larger than Foursquare, but with much less publicity.

I joined the London email list when it launched, and since then have bought a couple of the vouchers.

It works very well.  Some merchants say they regret using it (this being the most high profile example) but in far more cases the merchants seem to be delighted.

(The highest profile success was this promotion for Gap - showing that large companies can use it too - which sold 440,000, generating $11m in revenue, split between Gap and Groupon)

Groupon have also used merchants to create tutorial videos to show how to get the best out of the service:

The main bits of advice I'd give to someone doing this would be:

1 - Decide what you want out of it, and be sure you know why you are doing it

2 - Structure the deal to these aims - if you want people to sample what you do, skew the offer towards a sample

3 - Structure the financials to what you can afford to do as a promotion

4 - Set up a measurement framework so that you can count coupon redemptions etc

5 - Limit the level of coupons available, and set an expiry date

6 - Be ready for when people come in to redeem - offer the best customer service, and try to up-sell

7 - Similarly be very clear on ts and cs - don't allow more than one coupon per offer, be very rigid on expiry dates etc

8 - Offer another loyalty offer when people are at your location - e.g. buy 4, get one free

9 - Measure the effect, based on redemption, uptake of other offers, customer response and so on

10 - Go to 1, and repeat.

As a customer there are a few things that they can do to improve - for example I don't want to receive teeth whitening offers - but this is definitely a new media and social media success story.

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