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Dholakia says many companies did not know how to get the most out of a Groupon. For example, many failed to sign new customers up to e-mail lists so that they could be encouraged to return to a store. “A vast majority of these businesses do not have a plan in place,” he says. “They just go with the flow.”

Julie Mossler, a spokesperson for Groupon, makes a similar point. “The merchants who have the best Groupon experience follow our suggestions in deal structure and use the tools we provide to adequately prepare their business and staff for their Groupon,” she says.

Peter Zubcsek, an assistant professor in the marketing department at the University of Florida, who researches social networks, says Groupon has shown that social media can spread the word about a deal very efficiently but adds: “For any marketer planning to promote their business with the help of Groupon, it is important to realize the limits to how much loss leader sales they can afford to remain profitable.”

Zubcsek says he wouldn’t be surprised if digital industries, like online games, turned out to be the best venue for social deals, since they’re already prepared for efficient scaling. However, Zubcsek questions whether such companies would need a third party like Groupon to facilitate such promotions.

Dholakia says radical changes may be needed to give businesses a better chance of doing well from social-media-driven promotions. He says that businesses could structure offers to entice customers to return, for example by offering $10 off on each of three visits to a restaurant. Or they could offer discounts for particular products, such as food only, while leaving drinks at full price. For social promotion sites to work in the long-term, Dholakia says, they need to go beyond taking advantage of the marketing value of new customers’ online relationships–they need to encourage those customers to form relationships with the businesses they try out.

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Credit: Groupon

Tagged: Business, Facebook, Twitter, social networking, online advertising, marketing, Groupon, social marketing

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