Businesses need to find ways to offer discounts to budget conscious customers while minimizing cannibalization of full-price purchases. Every company should offer “backdoor” discounts aimed at attracting customers who are interested in their products but refrain from purchasing because the price is too high. Do you want to use these promotions to sell products and services to price sensitive customers? Or do you hope Groupons will be a loss leader that allows you to sell other higher-margin products? Or are you betting that that once consumers try your product, they’ll pay full price in the future?įor many firms, the first strategy can make some sense. The answer depends on your ultimate goal. īut for the businesses that are using this service-and ultimately, for Google, which is betting big that Groupon can continue to grow profitably-there’s a big unanswered question: are these highly-discounted promotions really good for your company? As a pricing strategy consultant, I’m hearing this question constantly as small businesses struggle to figure out whether the strategy that’s driven Groupon’s growth to date really makes sense for them.

When Groupon offered $15 worth of barbecue for $7, more than 16,000 people bought the deal-–meaning the chain sold $250,000 worth of barbecue in less than 24 hours. Forbes anointed Groupon “ the fastest growing company… ever,” and there are stories aplenty about businesses that are besieged by new customers when they enlist Groupon to offer huge discounts to customers who sign up for the daily email blast.Ĭonsider the suburban Boston barbecue chain Blue Ribbon BBQ.

Even before Google bid $6 billion to buy Groupon, the online coupon startup, earlier this week, the media and businesses alike were trying to make sense of this innovative new promotional tool.

Google pay groupon