Groupon has been in the news recently because of their recent money troubles and I have had a few clients ask me what I thought about using Groupon (or any other daily discount site) to increase business.  The truth is that, unless a business has prepared themselves properly, Groupon can cause more harm than good.

1.  Do the math.  What does it truly cost you to sell your product/service at a 75% discount?  The new customer gets around 50% savings and you and Groupon split the remainiing 50%.  

2.  Can you deliver?  Let's assume you ran a successful restaurant offer and now have thousands of 50% off coupons waiting to be redeemed.  Your business has an overload of traffic that you aren't used to dealing with and your new customers first impression is a chaotic mess.  

3.  Who is your new customer?  Your new customer is someone that has been trained to think that your services are worth 50% of what you think they are worth.  How hard is it going to be to get that person to come in at 100% ticket price?  Unless you structure your deal correctly, the answer is VERY hard.

Groupon CAN be a success however.  If you create a plan to make sure that your new customer sees your business in the best light, you can increase your following and convince them to come in again.  The key is understanding that a daily discount is a one time offer and not a marketing plan.