Sunday, December 19, 2010

Do Groupon-Type Offers De-Value Your Services?

No one can argue with the success of Groupon, the entrepreneurial coupon-based tech firm that started from a Northwestern University dorm room a few years ago. Its success has spawned numerous imitators. From a business startup standpoint, the business model earns an A+.
With all that said, here's a question: For those businesses participating in these types of deals, what are these companies really saying about their products and services? I mean, if you are willing to provide your products and services for 1/2 (sometimes even 2/3) of its price, what are you saying about the value of your products and services? Aren't you turning your product/service into a commodity that can be devalued (sometimes by 1/2 price). And, if your profit margins can afford a 50% decrease, maybe your overcharging customers in the first place.
Six months after the coupons stop running, are your customers going to be excited about paying twice the price for the same meal they paid 50% less for a few months ago? Or, will they just go to the next business down the street that offers another 50% off deal.
The big question is: How will customers see your product/service in the long run? Will it be seen as just another product/service, or will it be seen as something that is unique and has value to it?
Business owners should all be striving to create unique value in their offerings. Once you start slashing prices, your product/service begins to lose that value.
--Ron Ameln, SBM

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