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Tried a Groupon Campaign Yet? Don't.

If you're planning to run a Groupon.com promotion, read this first.

Groupon is perhaps the most literate online couponing concept ever, and it's won plaudits from consumers and reporters for its often-eyecatching bargains as well as the quirky humor of its ad copy. But now a new study confirms what an increasing number of small businesses have been reporting: Groupon campaigns can be more trouble than they're worth.

Rice University marketing professor Utpal Dholakia surveyed 150 businesses in 19 U.S. cities and 13 product categories about the Groupon promotions they ran between June 2009 and August 2010. His conclusion: Forty percent said they'd never do it again.

One of Dholakia's conclusions diverged from the reports from small businesses who lacked the capacity to handle the rush of business. Instead of reporting overwhelming sales, his respondents reported dissatisfied employees. Basically, employees didn't like having to work harder to handle the response. That was especially true if the workers relied heavily on gratuities for their compensation -- and customers didn't tip on their non-discounted tabs.

Otherwise, he said Groupon promotions dissatisfied businesses that found shoppers didn't buy non-discounted items and didn't come back for another visit. Restaurants did the worst among services businesses, he found, while salons and spas did the best with Groupon.

If you still want to try Groupon, here are Dholakia's suggestions:
Parcel out the discounts with an eye to building a relationship rather than encouraging a single visit. That is, instead of a $30 coupon, give three $10 coupons and allow only one per visit. Also, avoid discounting the entire bill and instead give price cuts for specific items or services. And discount your less popular items rather than offerings that you're selling anyway.

Image courtesy flicker user striatic, CC2.0

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