Groupon Social Coupons Unprofitable for a Third of Marketers

About a third of the merchants extending Groupon discounts say they have lost money on the deals, a study by Rice University’s Jones School of Business found. Which is to say 70 percent of offers did generate a profit for the firms offering the deals.

The study of 150 businesses running Groupon promotions between June 2009 and August 2010 found that those coupon campaigns were unprofitable for 32 percent of the businesses that ran them. And more than 40 percent of the response group said they would not run another social coupon promotion again.

According to Jones School associate professor Utpal Dholakia, the author of the research, the profitability of a coupon promotion can be measured by two main criteria: whether customers redeeming the coupons spent more than the Groupon amount, and what percentage of those customers came back again to shop without a Groupon offer.

Those survey respondents who said the Groupon campaigns had not been profitable for them reported that only about 25 percent of redeemers spent more than the face value of the coupon. They also said that about 13 percent of those coupon holders came back a second time to shop at full price.

One way to look at matters then is that even when an unprofitable promotion has been run, about 13 percent of customers came back to buy again, paying full retail prices. Whether that is worth doing or not depends on the offers being made. But a campaign that provides sales lift of 13 percent does not, on its face, seem a bad investment. It all depends on how the offers are constructed.

Groupon Social Coupons Unprofitable for One-third of Marketers