How to make more money by giving it away

Move over Penny Saver, coupons have gone viral.

What’s the trick to attracting new store customers and keeping them coming back? A website that sells coupons at significant discounts. The deal is only “on,” however, if enough people buy in, making it worth it for the business offering those discounts. For example, the Charlotte, N.C. Groupon page is offering “$15 for $30 worth of health food, goods, and produce at Healthy Home Market,” as its deal of the day. Only 50 people needed to buy the coupon, but so far 1,087 have. If even half of these coupon collectors have never visited Healthy Home Market, it’ll be a significant increase in customers duringthe next year (the coupon expires in 2011).

The catch? If 1,087 people came into your store today and you were only expecting 100, would you run out of products? Would your checkout lines be extremely long? How about your bathrooms or your parking lot? Could your store handle it? Inc. Magazine reported on the phenomenon, quoting retailers who thought the coupon offer was worth it, but who may not have rolled in the dough because the deal cut into their earnings.

“Many entrepreneurs who have used the service agree, but they also say business owners should carefully calculate the costs involved in offering the discounts.” Inc Magazine reported. “For starters, Groupon typically takes a 50 percent cut of sales. ‘I think every business needs to understand what they're getting into,’ says Florian Pfahler, founder and CEO of Hannah's Bretzel, an organic sandwichmaker with two locations in Chicago.”

In the article, one retailer offered his story of having to redesign his website, order more product and hire an additional person so they could fit the crowds barging through their doors. He, and other retailers, described mainly breaking even on the deals, but explaining how just introducing their store to the public made it valuable.

Either way – it’s an Internet fad that’s worth checking out, whether you start using Groupon as a consumer yourself or offer a deal for your store to get new business.

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