The World of SOCIAL COUPONING – A Trip to the Bank or Bankruptcy?


There’s a good, a bad and an ugly to the world of social couponing. The best way to avoid seeing your marketing investment flounder is to understand the intricacies of the strategy and investment before handing over your business’s marketing budget. A solid knowledge base and commitment to the program can result in a hefty trip to the bank, whereas a lackadaisical and “make a quick buck” attitude can lead you straight towards bankruptcy.


Who Is the Audience and How Do You Convert Them?

Social couponing networks such as Groupon, Living Social and BuyWithMe are increasing in popularity every day, and businesses are jumping on the bandwagon to see fast results and increase their customer base. Capitalizing on the growing audiences of these networks can be a great investment, but it is important to acknowledge that it is that particular network’s audience and not necessarily your target customer base. Members of these sites are coupon- clippers, and this calls into question the ability to convert them into true, loyal customers. But don’t be discouraged, because other notable traits of these sites’ members are that they are curious, exploratory and spontaneous. Social couponing members have a great willingness to try new things, and if successful, will not only come back but tell their friends.

Getting potential customers in the door is half the battle, and that’s exactly what these networks promise and deliver. What they don’t promise (and where you must take the reins) is how you convert these couponers to regular customers. The most important thing about conversion is capturing your customers’ information. Remember, they are social couponers — they like deals, they check their e-mails and social spaces for what’s new; and you should be reaching them here for repeat business with engaging content and other deals. If they aren’t apt to give you their info, the next best thing is handing them a coupon for their next visit.

Preparedness for Increased Volumes & the Customer Experience

Converting a customer goes well beyond getting their information – their first experience has to be memorable. One of the most troubling predicaments that businesses who utilize these networks experience is not being able to handle the resulting volume of customers. Businesses that aren’t prepared to be inundated with traffic can go into panic mode, which can result in cut corners, poor presentation of goods, low-quality service and an overall bad experience for the consumer. Prepare your business before initiating the campaign by stocking up on the products you plan to serve. Your social couponing network can be a resource for estimates on what to expect based on historical data.

While this should always be the case, also make sure the product is at its best. One complaint about social couponing as a whole is that it devalues the proper price of the food. To avoid this, you have to show prospects that, even at full price, the cost of your product is worth every penny. First impressions in the food business are imperative — no one goes to the same bad restaurant twice. If it’s not the food, generally it’s the service.

To ensure proper service, staff up during the campaign’s run. You can also initiate an on-call solution so you can maintain normal staff members based on your usual volume, and call in for reinforcements when needed. And since providing an exceptional customer experience is the goal, be sure to train your staff and let them know how important it is to convert customers during this time. The investment has to be made internally as much as it’s made externally.

Return on Your Investment

The first and last thing to understand about social networking is the investment and the return. Social couponing networks are in business to make money, and to put it bluntly, they don’t really care about your margins. Generally speaking, the deals offered to their customers are around 50% off. For example, the purchaser gets $25 worth of food for $12.50. Then the social network gets 50% of that revenue, leaving you with $6.25 of profits (25%). But if your food costs are 20%, in reality you have only made a mere 5% profit, if that. The margins and deals offered by these networks vary, and you should be aware when negotiating your promotion; but don’t panic as there are few ways to justify this.

The first is to look at social couponing as a marketing expense and not a goods sale. You are reaching the masses, communicating to them and getting them in the door. Depending on your annual marketing budget and how that affects the bottom line, it may justify the cost. Another thought is to look at this as a long-term investment. In the short run, it will cost you; but depending on how many you convert to customers, you will see profits grow subsequently with each visit. Perhaps the most calming factor of the investment is that social couponers tend to spend beyond the given amount of the coupon, which can help raise sales and profits.

Measurability is the key for success, and that goes full circle back to the audience and converting them to customers. Collecting information and monitoring how many customers resulted from the promotion allow you to analyze the return on the investment over time. From using a standard sign-up sheet and excel file to fancy POS and customer conversion programs, access to your customers and their information is a MUST. To properly analyze the data, you need to answer the basic questions: How much did you spend? How much did you get in return? and What qualitative data can you conclude? Reviewing these details will not only help you understand the return, but also reveal if it’s something to consider again in the future. Don’t get too riled up about profit; as mentioned earlier, sometimes it’s the long-term effect that will tell the story and not the immediate result.

Getting involved in social couponing doesn’t have to be bad or ugly. A good experience can and will ensue with the proper knowledge, preparedness and follow-through. Social couponing has worked for many businesses; maybe it’s your turn to be the spotlighted deal of the day!