I had a client of mine email this question.
There are some solid lessons in my reply – whether or not you plan on using this type of service – the answer applies for ALL leads.
Question: > What is your opinion on Swarmjam, Groupon, and sites like that? I have been approached by some of them and (competitor #1), (competitor #2), and (competitor #3), have run campaigns with them. Thank you.
My answer…
Hi Ghislaine, I think they are good for one thing only (which is why they will never work for most businesses).
Leads.
You won’t make money (doubtfully anyhow) off the promotion with them.
You may get hundreds of people in the door – but they will usually be at break even or a loss for you.
BUT, if you have a system in place to get them back… then it can work.
Most people assume that buyers from all these Groupon type deals will come back to buy more after the initial discount deal.
But Groupon type buyers typically go on looking for the next great deal.
And they never hear back from the last company they bought from anyhow… so time to move on to the next 80% off deal.
But if you have a system in place to get them back at a smaller discount the next time.
Then a system in place to get them buying again – at regular price. THEN you can make money.
But you know as well as I do – most businesses have ZERO system in place for this.
If you have yours in place – then you will be ok (as long as you get in front of them regularly to get them back).
You can make money with these – but only when you get them back to buy more and more often, without the huge discount you gave them in the first place).
My thoughts anyhow.
Troy
So, the questions for you are…
…what are you you willing to PAY for a lead (this type of lead generation is usually at break even or a loss).
…what SYSTEMS do you have in place to guarantee a certain percentage comes back to buy more from you?
If you don’t know those, don’t bother with Groupon and the clones. You WILL lose money and never get it back.
In my own opinion, Troy
PS: Don’t believe me?
Lets say typical purchase if $50 at list price. $25 is margin.
Groupon and clones want you to discount by at LEAST 50%.
Now you are at break even.
BUT, you still haven’t PAID Groupon and clones – they will want at LEAST 10% of sales.
So you sell 1,000 ‘deals’
$25,000 revenues – alright!
Minus $2,500 to Groupon clones.
Leftover = $22,500
BUT it cost you $25,000 to create the products you are selling.
It cost you $2,500 to bring in 1,000 new potential repeat buyers. Which is $2.50 per ‘lead’ – which is actually quite reasonable IF you know how to get them back to buy more, at higher margins next time.
Make sense?
So what is your system to get them back to buy more, at higher margins?





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