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Coupons are one of the most basic, and oldest marketing tools that we have all taken advantage of at some point in our lives. Coca Cola pioneered the idea in 1887 by giving out over 8 million coupons for free bottles of their then unknown beverage to potential consumers. The result? Millions of people tried, and loved their product. And the rest, as they say, is history. The fact is that consumers love getting deals. It makes us feel good. When we have a coupon in our hand, we almost feel obliged to use it. How could you pass up on that deal? Forget the fact that you probably don’t really need whatever is being promoted in the coupon…but what a deal! Consumers are a funny bunch.

Coca Cola Coupon from 1887


So let’s fast forward 123 years. Yes, coupons are still very much a part of marketing, and the consumer experience in many industries. But like any marketing strategy it has changed and evolved over the years. Introducing Groupon. Groupon is a deal of day website located in major cities across North America and Europe. Every day, the website offers one single “Groupon” in each of it’s markets, usually at 50-90% off. The Groupons can be for anything from dance lessons, to spa getaways to restaurant deals. Groupon works through collective action – meaning that a certain number of people have to sign up for the deal for it to be available to everyone. If the minimum number of people don’t sign up, then the deal isn’t given out. This reduces some of the risk for the retailers who are giving the deals. In order for the minimum number of buyers to be met, Groupon encourages its users to share the deal with their friends and family via Facebook, Twitter and Email. By using Social Media, Groupon can reach a larger audience, and almost always meets the minimum number of buyers.

Learn How Groupon Works! from The Point on Vimeo.

Below is a typical Groupon deal. This deal is offering $20 worth of Pizza from “Pizza Shark” for $10. As you can see at least 20 people signed up for this deal, which was the minimum set by Pizza Shark – and this coupon expires in May 2011. Once purchased, the buyer gets the coupon sent to their email. Then, the buyer must simply print off the coupon and present it upon purchase at Pizza Shark. This coupon gives new customers a reason to try Pizza Shark – it’s a win-win situation!

Groupon for Businesses

So as you can see, Groupon has great benefits for consumers. But what about businesses? Does it effectively generate sales? Branding? Repeat business? One of the main concerns that many business have with Groupon is that it is “risky”. Some brands are weary of selling on Groupon because they are afraid that selling on a discount website will devalue their brand. Well, Groupon isn’t designed for luxury brands – it is designed for local, somewhat unknown businesses that want to gain some exposure in their local market. The idea is that by offering a deal, small businesses can attract new customers. The Groupon deal, coupled with the “collective action” aspect, decreases the risk for both the consumer and the business – that’s what makes Groupon so special. Groupon brings the consumer and the business together – after that, it’s up to the business to provide the customer with an experience valuable and memorable enough for them to come back.

As a consumer, I love Groupon. I recently moved to downtown Ottawa, and am quite unfamiliar with many of the local small businesses. Groupon has given me the opportunity to try out new things and discover some hidden gems in my area.

Have you either bought or sold something on Groupon?