Rice University’s Jones School of Business recently studied 150 businesses that offered a coupon promotion through Groupon. Here’s what they found:
- 66% reported that their promotion was profitable.
- For those that reported the promotion was profitable, 50% of redeemers spent more than the face value of the promotion, and 31% returned to the businesses at non-discounted prices.
- For the 34% of promotions that were not profitable, only 25% of redeemers spent more than face value of the coupon and 13% returned a second time.
It is useful to note that although 66% of the promotions were profitable, 40% of the businesses studied would not use a social coupon approach again. The primary reason is that the offers attracted primarily price shoppers, rather than relational (repeat) customers.
It seems that food service establishments and salon/spa/tanning services have the most success with these types of promotions, receiving the greatest amount of traffic from the offer.
So, the verdict on social couponing is a giant “it depends.” These promotions only become profitable if the redeemers either spend more than the face value of the coupon, or return and make a purchase for non-discounted services. Any organization considering such a promotion should consider how they will make these things happens to ensure a successful promotion.