Online Coupon Mogul Goes Suburban

More than just an online coupon distributor, Groupon is a nation-sweeping consumer trend that is reshaping how businesses, big and small, advertise. With record-breaking deals in Lisle and new suburban members joining every day, the online dealmaker has local businesses lining up.

Groupon works by recruiting ready-made bargain hunters to sign up with an email address on its Web site. Members give the site basic information such as age and ZIP code and then receive a daily email featuring a new coupon from a local business. The deals vary widely, and could be anything from a discount on food and drinks at a local pub to a month of unlimited dance and fitness classes. Whatever the deal may be, Groupon guarantees it’s a good one. The site boasts a membership of more than 38 million subscribers, in 161 cities, who have already purchased more than 42.2 million “Groupons” since it launched in 2008. According to its Web site, Groupon says its coupons have saved their members more than $1.75 billion to date.

“Groupon is the latest tool,” said Donna Biernadski, vice president of marketing for the Morton Arboretum. “It’s an innovative leader—the first and largest group coupon site. We were exploring using them for a while, found the best deal for us and pulled the trigger.”

And the Morton Arboretum hit its mark. Over a three-day period, selling more than 30,000 coupons to online customers, the Arboretum became one of the best-selling Chicago Groupons on record. Total sales for the deal topped $150,000, half of which goes to the Arboretum and the other to Groupon. Biernadski indicated the Arboretum is still analyzing the overall effects of its Groupon experience, but remains hopeful that the initial enthusiasm created by the deal will help expand their repeat customer base.  

“The response we got was overwhelming and exceeded all our expectations,” said Biernadski. “Once they experience the Arboretum and all there is to do here, there will be repeat visits and, hopefully, member sign-ups.”

One of the downsides to Groupon is the kind of discounts they demand on behalf of their business members. Bill Buchelt, owner and operator of Elan Photography and new Groupon customer, says that while his coupon hasn’t attracted quite as much attention as the Arboretum deal, it has already yielded some good results. Elan sold 114 coupons at $150 apiece. The deal included an hour-long photography session and prints of varying sizes, a package valued by Elan at more than $400. Buchelt admits that the deal eliminates the profit for his business, but recognized that making an initial profit from the coupons is not a way to measure success.

“My goal is that out of the 114 customers we keep 25 for life,” said Buchelt. “We have had clients who have been loyal for 15 years. We are looking for new long-term clients that will continue to come in.”

In addition to the 114 new customers who will be walk through Elan’s doors over the next six months, Buchelt also said he could already see the residual benefit of advertising with Groupon. After the chance to buy his coupon expired on April 10, Buchelt fielded a number of calls from potential customers who didn’t purchase the deal but were interested in Elan’s various photographic services.

“It was a win-win for us,” he said. “I had 15 calls over that weekend, not from people who bought the deal, but others who wanted to know about weddings or if we do birthday parties.”

The Groupon advantage, said Kelsey O’Neill, a Groupon spokesperson, is the kind of consumers it is able to connect to businesses.

“Businesses and consumers enjoy this customized targeting,” O’Neill said. “Our demographic is comprised of social people, on and offline, looking to get out, enjoy the city and try new things. Groupon makes this easy with a daily e-mail, an app and a Web site that offers these local experiences with the extra incentive of deep discount.”

Sean Chaudhry, owner of wine shop and bistro Cellar Door in Downers Grove, jumped in on the ground floor with Groupon more than a year ago. Since then he has offered three coupons through the site. The Cellar Door’s latest deal sold more than 1,000 coupons. Those who purchased the Groupon received $30 worth of food and wine at the establishment for half the price.

“It was absolutely a huge success,” said Chaudhry. “After our deal ended it brought in so many people it was almost a record day. That Friday and Saturday we were packed.”

Chaudhry added that while he continued to be impressed with the results his business was able to yield from the Groupon experience, local businesses such as Elan Photography and others should be careful about offering deals that represent a significant loss of revenue to their business.

“I think a small business needs to be very careful about how they do this and not count on more customers without making some money,” Chaudhry said. “The return on the customers might not be as significant as people might think. I am a classic example. I use the deal for one restaurant and then find another deal for another restaurant.” 

Groupon's O’Neill said the kind of exposure and word-of-mouth buzz Groupon generates for its business partners is unparalleled because it guarantees motivated customers walk through the door—something she added—traditional advertising such as Money Mailer, cannot guarantee.

“The Groupon model has proven to be extremely successful for businesses across a large variety of categories—everything from a mom-and-pop diner to huge consumer brands like The Gap,” said O’Neill. “Owners oftentimes end up paying a lot up front for little return with traditional advertising. We certainly understand a business wanting to stick with tradition, but they are definitely missing out on an exciting and proven way to reach new local customers like never before.”

An idea with which Phil Cullen, owner and operator of Balleydoyle Irish Pub & Restaurant in Downers Grove, agrees. Balleydoyle offered a coupon in January.

“It brought it in a lot of new people and brought in some people who hadn’t been in for a while but knew us,” said Cullen. “It is the most effective thing we have done. The next week we had hundreds of new people coming in. We used to run full-page newspaper ads, but they just never brought as many people immediately as the Groupon offer.”

However, some local businesses are intrigued by the new online juggernaut but still believe their traditional advertising is as effective as it used to be. Mark Adams, manager of the Firestone Total Car Care in Lisle, says his shop’s Money Mailer strategy continues to be successful.

“I say it works great. It’s (Money Mailer) one of our best coupons. It brings a lot of people through the door and it is cost-effective,” he said.

Groupon is most popular, according to its own analysis, with young, educated and employed single females—one of the largest and toughest to reach consumer audiences in the U.S. However, the site says it is making more inroads with male audiences and baby boomers as well.

“While Groupon's demographic skews female, we are still highly popular with the male population,” said O’Neill. “In addition to skewing young, we are also growing incredibly fast within the empty-nesters and older demo as well.”

O’Neill and partnering businesses aren’t the only ones recognizing Groupon’s growth potential. Last year, Google tendered a $6 billion offer to the Internet startup but was refused by Groupon CEO and founder Andrew Mason. According to the Chicago Tribune, Mason is considering taking Groupon public sometime this year. In the meantime, Groupon is working on launching its news mobile application Groupon NOW.

“Our new mobile application will deliver location-based, on-demand deals,” said O’Neill. “Chicago will be one of the first markets we go live in, so stay tuned for that.”