Groupon and other deal sites - not great for business

These survey results confirms my suspicion that this current consumer craze for Groupon and the gazillion similar sites isn't all it's cracked up to be for participating businesses.

I don't argue with their popularity among consumers. I have friends who seemingly plan their entire dining and social calendars around deals obtained through one of the dozen or more daily deal services they subscribe to. Between last year and this year, these services have exploded in popularity.

The first issues is that businesses that participate in these deals immediately devalue their product. Sales in general set a new price anchor for consumers. If a restaurant offers me $50 for $25, their brand is immediately tarnished in my mind, even if subconsciously. Paying full price there won't ever feel comfortable again. Retailers that do annual sales train users to wait for those. I'll never buy a towel at full price from Restoration Hardware because I know once a year they have a bath sale (though they are some nice towels). I'll never pay more than 80% of the listed price at Bed, Bath, and Beyond because they have flooded the market with 20% off coupons.

The second and related issue is that these deals appeal most to price sensitive customers, not the type of loyal customers most businesses are hoping to be set up with.

Restaurants were the most unprofitable category, describing Groupon customers as "entitled," poor tippers, and definitely not repeat customers. Spas, on the other hand, were the most profitable (though their Groupon-using customers were still bad tippers).

...when asked whether they would run a promotion again, almost half (42 percent) said they wouldn't. That number includes one in five of the businesses that ran profitable Groupon promotions.

"There is widespread recognition among many business owners that social promotion users are not the relational customers that they had hoped for or the ones that are necessary for their business’s long-term success," reads the report. "Instead, there is disillusionment with the extreme price sensitive nature and transactional orientation of these consumers among many study respondents. "

Perhaps the worst aspect of these daily deal e-mails for me is the lack of targeting. Most of the deals seem to be targeted towards women. If I receive one more e-mail with an offer for a spa day or pilates or a facial...well, actually, I won't, because I just unsubscribed to most of these.