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Groupon’s Social Sales Promotions. Profitable campaigns depend on satisfied… employees!

I am sure you all read recently of the $6 billion bid from Google to the 'group discount local buying' online community called 'Groupon', as in 'Group', 'Coupon'.

It was rejected.

Here in Australia we have not yet seen the full impact of sites that negotiate local offers from retailers, restaurants, spas etc. that are only good if enough community members take up the offer, to 'tip' it into being activated for customers. These offers are impressive, often involving 70-80% discounts for offers that are only available for acceptance for short periods of time. Facebook and twitter networks fan the communication as people encourage friends and family to sign up so the deal will reach its minimum sign-up requirements.

For small businesses, the flood of new customers may be financial unachievable through mass marketing – and it is mostly small businesses that seem to be signing up for promotions, with Groupon reporting a waiting list of 35,000 in the cities it covers.

But do '80% off if 5,000 sign up' offers make money for the merchant? Especially after splitting whatever revenue does come in with Groupon?

Utpal Dholakia from Rice University surveyed participant retailers to find out, with his findings available here.

I found the results really interesting;

  • 66% of participating retailers made money from the promotion, even after the steep discounts
  • Restaurants are the most likely to not make a profit from the promotion 
  • Grouponer's behaviour; 
    •  50% buy over coupon value 
    • 31% come back a second time to
    • shop

Dholakia looks at all of the variables he can to determine the best predictor of promotion profitability and finds it is… employee satisfaction

"If employees remain satisfied through the promotion, the likelihood of its profitability is significantly higher".

Lots of new customers meeting happy servers, with big discounts in hand, gets the relationship off on the right foot, obviously.

Makes me think that there needs to be a co-ordinated employee component in any bottom-up/transactional Net Promoter Score(R) initiative you may be contemplating to improve your customer experiences (and therefore loyalty and therefore profitability). What do you think?

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