One of the newer aspects of social media that is gaining traction is social shopping with sites like Groupon. These group deal websites offer discount coupons for goods or services to businesses in medium to large metro areas across the United States. In some cases, these offers have been extremely popular with customers and helped drive a lot of traffic to local businesses, but in other cases local businesses have lost thousands of dollars, and suffered negative social media side effects.

The way Groupon works is to offer a discount on a product or service for a specific metropolitan area. These offers are usually substantially discounted, but do come with some heavy restrictions that vary by offer. Some merchants will allow an unlimited amount of coupons to be purchased, some merchants will cap the number number of coupons that could be sold.

There isn’t any cost to use the service, however, depending on the deal you negotiate, Groupon may keep some or all of the money from the Groupons sold. If your margins are small or you have high expenses fulfilling the Groupons, this could work out to be a fairly expensive advertising option.

There have been many stories about Groupon bringing hundreds of new customers into businesses. Groupon claims that over 97% of their customers want to get featured again. One of the favorite stories Groupon likes to share is about a bagel store owner in Chicago who had over 10,000 bagel Groupons redeemed.

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However, in some cases, the merchants underestimated the response or weren’t prepared for the “Groupon Effect”, which started a domino effect of bad press. For example, Posies Cafe in Denver offered $13 of food for $6 and ended up losing $8,000 dollars due to labor and materials costs. Crystal Nail Salon ended with so many Groupon customers and long wait times, it led to their Yelp ratings taking a nose dive. Groupon addressed many of these complaints and situations on their blog.

If you are merchant considering Groupon, look at the financial end of the offer very carefully, and make sure you negotiate the best terms you can, so you don’t put yourself in precarious monetary position. Also think very strongly about about capping the number Groupons you are willing to redeem, it’s better to have 300 very happy customers, as opposed to 1,000 angry ones. Make sure you have the time and resources to devote to other social media channels when your Groupon is running. Facebook, Twitter, and Yelp can be powerful tools and these are key times to leverage them.

Opinions expressed in the article are those of the guest author and not necessarily Search Engine Land.

Related Topics: Channel: Social | Groupon | Search & Social

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About The Author: has over 10 years experience in website development and internet marketing. He has helped companies with internal search engine optimization strategies for both ecommerce and informational websites. He publishes controversial industry thoughts and observations on his blog at www.wolf-howl.com

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