First of all, let me state for the record, I am not a coupon person.  Even when I was poor, I did not take the time to look for, cut, paste and redeem coupons.  If I go to the mall and find out there is a giant sale, I go home.

This is ironic, considering I launched one of the most successful loyalty programs in the country with Kroger, one of the largest grocery store chain.  But it’s really not, because Kroger understood something most brands forget – you never make money with coupons, and all incentives should be created to increase basket size – per customer segment.

Very few experts would argue against the concept that customer segmentation is key to the success of any marketing program. However, if this is the case, how can Groupon really work in the first place?

Even with a PPC campaign, you can get targeted to the right keyword/adword groups.  But the Groupon offers I’ve been presented with, you can randomly share the offer with their friends to “unlock” it…sounds cool right?

Wrong.  How do you know their friends are your friends?  You don’t. Not really.

More importantly, any great marketer will tell you how you acquire a customer can determine your projections on life time value of that “lead”.  So how are projections and budgets being set for Groupon strategies?  My hunch is they aren’t.  Which is why brands are being left so disappointed, unable to put these new buyers into the proper sales funnel is leaving most brands in the dark.

And last but not least, when you use coupons or discounts as your main acquisition strategy you are moving far away from want-based marketing.  Think about it, do you ever really see Louis Vitton, Prada, even Coach on sale? Rarely.  Why?  Because people want their products, they don’t need them.  As soon as you become a need, you become a “fixed” line item in the house hold budget, making you a “commodity”.  Price becomes everything when the buyer believes they need you.

This is how Groupon works: It sends you an email telling you that you can buy, say, a picture of your kids printed on a canvas for US $35 instead of US $70.50, so long as you buy the Groupon…er…coupon today. So you plop down your US $35, get a promotional code, go the providers website and a few clicks later, your toothy-grinned offspring are being printed, packed and shipped to your home. Overall, it is a great way to introduce your offering to new customers and a great way for consumers to save a boatload of money. But, for a business, it is a pretty poor way to build a brand.

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