I may be coming at this late in the game, but a recent article I read online opened my eyes to the whole digital coupon phenomenon. This is the use of the internet to offer deep discounted coupons and vouchers for products and services to a ton of potential customers.
My coming in late to the game had nothing to do with not knowing what digital coupons were; it was more like I tried one of the services, had a bad experience, and moved on — that may have been a mistake.
The back story here is that digital coupons became a thing in 2008 when a company called Groupon first launched in Chicago. Back then, only certain cities in the U.S. had access to it. Today, it is one of the most popular discount and promotion code websites in the U.S., but it’s no longer alone. It faces some stiff competition from mega-giants, like Amazon and Wal-Mart.
In fact, there are many other competitors, including LivingSocial, Yipit, Woot, and Tanga. There are others, but they don’t seem to have sections on home maintenance.
Still, Groupon is the most recognized online discount coupon house. This once-upon-a-time internet startup has annual gross billings of more than $1.3 billion (third quarter, 2017) with around 32.5 million active subscribers in North America.
Groupon’s claim to fame is its focus on billings that are local in nature — deals offered locally to consumers, merchants, and even events. Their competitors offer some of that but mostly operate as national discounters for big chain stores and brands.
Groupon was one of the first to break into “mobile couponing” with an app they call Groupon Now. At the end of 2016, that app accounted for 63 percent of all Groupon sales. That same year, the app was downloaded more than 140 million times.
WHAT WENT WRONG?
In the early days of Groupon in the Greater Cleveland area, I began seeing email solicitations in my inbox. I had no idea what this Groupon thing was, so I began doing a little research and asked friends and family if they’d ever heard of it. Everyone raved about how cool it was and how much money they saved using it. Now I’m not one to skip on an opportunity to save some cash and, as fate would have it, I was in the market for a new landscaping outfit to do my spring yard clean up.
I found a company that was offering a nice deal, so I purchased the Groupon. That is when the trouble began. In short, the company was terrible at returning my calls to set up an appointment, and once I did get through, they said they were no longer honoring Groupons. Can you say, “rip off?”
I was eventually able to get my money refunded, but even that was fraught with trials and tribulations. Needless to say, I was very put off and planned to never even look at digital coupons again.
As time passed, I realized the problem wasn’t with the digital coupon company itself but with the service company selling it. Obviously, right? The customer-facing contractor was the weakest link and, in my mind, gave Groupon a bad name.
The same is true for HVAC companies. Your customer-facing coworkers are the frontline and the key people who make or break your reputation. I wish the landscaping company I dealt with had an idea about customer service, but that is the topic of another article.
Meanwhile, the more I learned about Groupon, the more I could see a great opportunity for HVAC contracting firms looking for a unique way to market and expand their reach into their local communities.
The key is to offer a unique product and service at a great discount and then provide superstar follow-up and performance to wow the customer into coming back.
THE STRENGTH OF GROUPON
From a dollar standpoint, here are some other statistics that could be very motivating. These stats are about two years old, but they are still eye-opening:
- At the time, the average Groupon deal attracted approximately 350 sales and generated more than $8,750 in revenue;
- Groupon deals average a 56 percent discount from retail; and
- The top 50 best-sellers on Groupon are not restaurant or food offerings (this one surprised me).
In other words, your offer to the consumer is slightly more than half price, and that is split between you and Groupon itself. So, for example, if your regular tuneup price is $79, the digital coupon offer might be $44.24, of which you would earn $22.12.
Not a huge money earner, but it is attractive and can draw potential new customers. It gets you in the door. Plus, it gives technicians an opportunity to survey the consumer’s mechanical systems; conduct static pressure testing and diagnosis; and possibly sell a performance enhancing renovation, annual service agreement, or ancillary product.
So, what else does digital discount couponing mean to your business? How about brand building. It is a terrific way to advertise your business and bring your company brand to the attention of consumers who might not have heard of you otherwise.
Several years ago, The NEWS published an article, “Coupons Drive Business, Attract new Customers,” where a wide cross section of contractors talked about their experiences with digital coupons and how it impacted their businesses.
Digital coupons are not only attractive to potential new customers, but they can also pull in existing ones. Everyone likes a deal, right? And with existing customers, they already know your company. They will be more likely to do business with you again.
In an article written in INC. magazine in 2011, professor Utpal Dholakia, the author of a Rice University study on digital discount coupons, said that digital discount coupon offers are often so attractive that new customers will become repeat customers as they come back for other products and services. He also said using digital coupon services as a business owner helps to sell off slow-moving inventory or under-used services.
“A Groupon-type promotion should be something that you do once in a while for a specific, narrow, limited reason,” added Dholakia.
He also said digital coupons can help to build or enhance relationships with new and current customers as well as generate incremental income.
THINGS TO CONSIDER
Like all things, the digital discount coupon is not a panacea or silver bullet. By itself, it won’t solve any growth or retention issues you may be having. So, don’t just jump in and add digital discount coupons to your marketing mix without considering the impact and costs to your budgets, manpower, and messaging.
In the aforementioned INC. article, author, Carolyn Brown, advises using digital discount coupons as one part of your overall promotion and marketing plan, along with how you use social media, like Facebook and Twitter.
“Make a deal as long as it’s the right one for your line of business,” she said.
Also, consider the objective of the discount coupon. As Dominick Guarino, CEO, National Comfort Institute (NCI) Inc. said, “Start with the end in mind, and work backwards from there.”
For example, consider whether your staff can handle a large influx of calls resulting from the discount promotion. If not, the plan can backfire — you could lose customers because their requests for service go unanswered or aren’t handled correctly. You could hurt your online reputation and even lose money.
Brown wrote that instead of using the discount to promote a service, you should consider using it to promote a dollar-off amount. Maybe offer $100 worth of services for $50 or something like that.
“You have to take advantage of an opportunity to cross-sell other products and services,” Dholakia said in the Rice study. “You have to prepare your staff to engage customers. You have to be careful how you structure the promotion.”
Other things to consider
- Deals will attract low-price shoppers;
- Deals can convert your unique brand into a commodity;
- Deals may not convert newbies to repeat customers;
- You will be lucky to break even on these deals. They are loss-leaders; and
- It’s the internet for goodness sake: There are always better deals out there.
Like anything else, offering discounts, such as this, isn’t something you should do weekly or daily. It should be part of your annual plan. You should know what your desired result is, communicate it to your entire team, and ensure everyone is prepared to handle the increase in calls and potential sales.
If done correctly, digital discount coupons can be potentially huge for your business. Be sure to create a good enough deal to attract customers, take advantage of the opportunity to educate them about your company and the “flavor” of your services, and this can be a very effective way to engage new and existing customers at a very low cost.