Halloween Special: How Groupon Kills Most Small Businesses

 

Groupon can make or break a small business.

As well as every testimonial on Groupon there are thousands of horror stories of small businesses losing significant amounts of money and in some instances, bankruptcy.

So, what is it that separates businesses who are successful and those who are less so?

Client Lifetime Value

In many Groupon horror stories a company will approach Groupon who will develop an advert for their email list and mail it to them. The business will then sit back and wait for the new “customers”. The business will fulfill their obligation to the Groupon voucher and the “customer” will consume the offer and leave.

And while this may work for a handful of businesses, very few actually capitalise fully with the Groupon offer.

A business philosophy of mine is this:

Customers are valuable, Clients are invaluable

The difference between a Groupon customer and a Groupon client is their lifetime value to your business.

A Groupon customer will be a one-off purchase and consumption of your service or product.

A Groupon client will be introduced to your business and will be led through a process where they can achieve the outcome they want.

To illustrate this with an example:

A hairdressing studio offers a cut and blow dry at a discounted rate through Groupon at £47.

A Groupon customer will come in for the cut and blow dry, use the voucher and leave having spent £47.  They are not contacted or marketed to again by the hairdressing studio.

A Groupon client will come in for the cut and blow dry. Their experience is increased through time spent discussing the cut, colouring, styling, products etc. The client is given an outstanding experience and their contact details are taken for further consultations. The client pays £47 and an additional £19 for hair products. THEN the Groupon client relationship is developed. They receive a follow-up email from the stylist with some suggestions on how to keep the style looking professional for longer. Over the course of several weeks they receive useful information on their hair, styling and colouring to maintain the professional look for longer. Then once trust has been developed a follow-up appointment is recommended to the client and agreed upon.

It is then possible to understand what the full lifetime value of your Groupon Client is rather than just thinking of them as customers who purchase once.

 

Profit Builders: Do You Have Customers Or Clients?

It’s interesting how we position our selves, products and services often without realising the impact of what is happening and the subsequent effect to our business.

To use one example:

Around your office or business, do you use the word customer or client?

Although this sounds like a very small difference the effect on your relationship with them is dictated by this.

To understand this we can use the Webster Dictionary

Definition of “Customer“: one that purchases a commodity

Definition of “Client“: one that is under the protection of another, a person who engages the professional advice or services of another

Consider what the impact of this really is.

If you have customers, the position that you are adopting is that they are purchasing commodities. Commodities are abundant, replicable and replaceable. If your business perspective is based on this, how do those customers then view you offerings?

It becomes very difficult to differentiate yourself, charge a premium, develop loyalty to you if that is also their perception of you – a commodity provider.

Conversely, by using the word client in its place your whole perspective changes. You are now a trusted advisor to them. You have their best interest at heart – above your own.

And what happens to you in the eyes of the client? You become trusted, they show you loyalty, you are irreplaceable, you are needed.  Your purpose is to give your clients the best short term and long term results and benefits.

That may not sound like much of a strategy for increasing profit but look at it from the other side.

You will never let they buy less than they should, or at least you won’t be shy about offering and recommending, if appropriate, that they buy more because you have their best interests at heart.

Imagine that you were a doctor. You have a duty of care to your clients (patients). If someone who was sick came to see you and at the end of the consultation they ask which medicine of the two you recommend. It is your duty to recommend the medicine that you believe will give the most benefits and fewest side effects. Or would you let them take the “cheaper” that may have more side effects with fewer benefits?

Customers will see you as a commodity provider.

Clients will see you as trusted advisors.