In November 2012, Groupon stocks fell to a historic low. Research company "Cloud 9" based in Boulder, Colorado set out to find why this trend occurred. Cloud 9 Living LLC is an industry-leading experience gift provider. They work with more than 500 small businesses in the tourism and hospitality industries across the U.S.
Cloud 9 Living LLC discovered Groupon's problem has to do with a serious negative image issue in the small business community. From this defined problem, Cloud 9 conducted a survey. The survey was directed towards a specific audience of small business owners. The article makes a valid point that Cloud 9's reasoning is directed towards Groupon's tourism deals specifically, and the businesses involved. This is important to recognize because the results of Cloud 9's survey can not be generalized to the entire population of small businesses, but small businesses in the tourism/hospitality sectors specifically.
The survey results reported only 3% of small businesses reported a significant increase in new loyal customers and only 14% saw an increase in revenue 6 months after the promotion. Cloud 9's research shows that although businesses can hold a successful "daily deal" promotion, small businesses owners see them negatively. But, it is important to notice again, this is regarding the tourism/hospitality small businesses. Cloud 9's research does not account for restaurant, beauty or fitness deals that may be regarded highly to small businesses using Groupon.
The research results reported seem to fit the initial problem, however, when one considers the actual statistics it may show something new. When you look at the 14% of businesses increase in revenue, although this seems like a low number, isn't any increase in revenue better than none? Not all small businesses use Groupon for increasing revenue. Some starting businesses use Groupon to inform customers of their new services. Although a large amount of businesses may not be seeing an increase in sales they should be reminded that these are coupon offerings. This is a businesses trade off of selling something for less to get people informed. They can not be expecting huge revenue increases by offering discounted deals. Especially if the discounted deals aren't "low enough" for customers to even consider on Groupon.
I do not believe the prime goal of Groupon deals are to increase a "ton" of revenue, but rather to entice the audience into an offering available. It is informing them of a deal, and the better the deal, the more Groupon sales. If a small business' primary goal is to increase revenue, then coupons for discounted deals are probably not their best option. It seems plausible that the most purchased deals on Groupon have the best discounts. It seems Groupon discounts are provided by businesses not looking to directly increase revenue, but to build buzz and inform Groupon lookers.