5 Ways You Can Lose Money Using Groupon.com
For those who haven’t come across Groupon.com yet, Groupon is a group buying service that provides deals for volume buying. On the surface, it has great potential for the average household shopper to save money by purchasing as a member of a large group. For the small business owner, it is a new marketing tactic that brings the possibility of building greater brand awareness and generating new customers. There are now multiple sites with this service but Groupon is the most recognizable.
Here’s how it works. A business decides to offer a discount for products or services (from what I see, it’s mostly services). They then advertise with Groupon. The business would set a price and number of purchases required to activate the Groupon.
For the consumer, if you find a deal in Groupon that you want to use, you have to pay the money up front. If the buy threshold is met then your money is sent to the vendor and you receive via email a Groupon coupon (nice rhyme) to print out . If the buy limit is not reached, then your money is refunded.
According to Groupon, the majority of buyers are women wanting to try out things. Since the site is an online service, its success matches with recent research showing that women will shop randomly online for things they don’t need just because of boredom. I would add that we also shop because when we hear the word discount, we’ve been conditioned to drop our guards and prompted to buy. I’ve been there and done that. My garage is full of things that were bought on sale to “save money”.
If Groupon is used judiciously, a shopper can save money by buying as part of a large group while trying out new things. It’s nice to get the bulk rate.
On the other hand, you can also find yourself not saving as much money as you may have thought. Here are five ways where using Groupon actually lose you money.
1) Buying something that you don’t need. I’ve been monitoring Groupon for a month to look at the deals and they are all on non-essentials. Are you taking the Groupon deal because it’s something you always wanted or just because it seems like a good deal and is an impulse buy.
2) Are you really going to use the Groupons. Most of the Groupons were service offers and restaurant discounts. I have a friend who loves Groupons but have yet to use any of the stuff that she has bought so far. Why? Time and the limitations of the offers. Scheduling multiple family members to make one specific day for a coupon was impossible. The money that she has wasted in two months was substantial. Think about how many services that you have prepaid for and never used. I started keeping all my defunct ones to remind me and so far the total is $27,642 over fifteen years.
3) You’re not supposed to use the Groupons. The expectation is that no more than 60% of the buyers will ever use the discounts. All the limitations and conditions are to protect the business from every coupon being used. That’s how the business is able to offer the discount in the first place. If you forget to use it, your money went to fund someone else’s usage. Remember that a savvy and well run business would have thought out how to make money from the promotion. There is no free lunch in life. Somebody will always pay.
4) You didn’t really get a discount. After one month of deals, I came to the conclusion that the value of the offer is highly inflated in many cases so that the “discount” price seems like a good deal. In actuality, the “discount” is the real price. This practice is the worst with the personal services. For example, I saw a promotion that claimed to be worth over $700 and was discounted down to $150. That $150 cost is the same as what regular customers pay for frequent visits with other companies providing the same services.
5) You can get conned big time. Does Groupon check their advertisers? I don’t know. There were several featured businesses that completely screamed scam to me. I was reading one that promoted $49 for their services. So far they had almost 80 people signed up. The limit is 400 people. That’s $20,000 in upfront money. I’m sure there are many legitimate companies on Groupon, and each person’s experience and opinions will vary. I’ll be covering more on the topic of Groupon scams in another post.
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