Why Groupon hurts businesses and you should be careful

I know this post will be controversial, but I stand by it nonetheless. I think that Groupon and its ilk hurt businesses more than it helps them by devaluing the product or service they are trying to sell. It emphasizes price (aka huge savings) as the determining factor in choosing to make a purchase. Rather than win over customers because you have a superior product or service that is worth the regular price, the Groupon coupon shows to customers how much margin you have to work with and will anchor their future purchases off that initial discounted price.

What this means is that customers, especially new customers, will forever know that the stated price is not the "real" price, but a much lower amount even if it is in reality a loss for your business. For example, if a service is normally priced at $50, and you now offer it at $25, your customers, even the ones who don't go for the deal, will now think the "true" price is closer to the lower price than the previous price.

They will resist buying unless the price is adjusted downward even if in actually you never intended for the price to go that low. Moreover, these deals bring out those customers who prefer deep discounts and have weak loyalties to any one business that isn't giving them bargains.

While Groupon is a startup success, its long-tern proposition is questionable because it may hurt businesses over the long term even if it provides some short term gains.