SDS may have a mailing list / following of 500,000 people, but are they really your customers? Let's think about it. Who of your friends buy Groupons, etc.? Do they buy a deal, then faithfully follow that company for life - or do they jump to the next deal as soon as it comes along? My experience is that the "deal customer" is one that is looking for a deal, not a relationship. There's nothing wrong with that - to a certain extent I am a coupon shopper too. But I try incredibly hard to resist the urge to buy a Groupon, etc. from a business that I know that I would patronize regularly at full price. If I buy one, it is to try something out. If I like it, I make sure to give them repeat business - at FULL price! (If you don't believe me, here's a study from Rice Univ.)
Did you know that the deal site takes AT LEAST 50% of the deal price, leaving the business with no more than 25% of "retail"? I've even heard stories of some sites taking 100% if the deal is for less than a certain limit. So let's review - can you afford to give away your product or service for 50% of your full price to hundreds of people you will probably never see again?
Ok, it really is a marketing expense. You are trying to get your company name out there so that you will get the repeat business that you are hoping for. Say you were to pay a reputable marketing firm to throw together a quick marketing campaign for you (say something you can email to their mailing list ONCE which is broad and not targeted necessarily to your ideal customer). How much would you pay? What have you budgeted for marketing for the year? That's built into your price, right, into the profit margin? Ok, say you are willing to pay $500. Wow - that seems like a lot for 1 email going out to a bunch of people who may not even like handmade goods (or are too thrifty to pay $50 for a scarf). Now, here comes Groupon. Let's put together a deal for 1/2 price scarves - $25. Great, new business! Hmmm, I get $12.50 after I give Groupon their cut. But, I am willing to put $500 in to see if it works, so if I sell 40 scarves that's great. Oh, I can't put an upper limit on how many to offer unless I sell 300? 300 * $12.50 = $3750 - that's alot of money to put into marketing... but ok, if I get 300 new customers that's great. Hmmm.... if someone buys my scarves at $25 - are they going to turn around and buy another for $50? Hmmm... oh, did I just see a Groupon for a Macy's gift card? Yeah, there went my 300 customers running to Macy's to get 1/2 price scarves there. That was $3250 down the drain (I will write-off the $500 as an expense I was expecting to pay).
I will share a personal experience as far as the stress placed on a business. I patronized a local business that was in the service field, that decided to do a Groupon - say it was a hair salon. They sold hundreds. GREAT! Hundreds of new customers... all wanting appointments... in the same month... I called to get my regular monthly appt. and they were booked... for 3 months out. Hmmm. I can't wait 3 months to get my haircut. I have a show coming up. You can't even squeeze me in? No, because all of the stylists are overbooked with new customers? Really? That's ok, I will go to my friend's salon this time, just to get a quick trim. Guess what? I never went back. I liked the new salon better because they valued repeat customers and the receptionist made sure I was taken care of for my following appts. After a few months of going to the new salon and chatting with the receptionist, I told her why I switched salons. Ends up, their salon had done a Groupon, that also was disastrous to their loyal clientelle, so they learned a valuable lesson. My advise - if you do a Groupon, etc., hire temporary help for a few months to handle the influx of new business. Chances are good that it will die off after a couple of months so you don't have to keep the temps on the payroll. Oh wait - did we work the extra payroll into the cost of the deal?