5 things to consider before you test social coupons

Social coupons — deeply discounted offers without the scissors and ink stained fingers. With the success of LivingSocial and Groupon, social coupon sites are popping up all over.

Primarily a geo-specific opportunity, they appeal to small and medium businesses with excess stock or looking to generate awareness. As a business, you offer a product or service at 50% off or more and pay Groupon up to 50% of the actual sale in commission. The person who purchased your offer has up to a year to redeem.

Things To Consider:

• Deal Hunters
  Though it can provide a spike in new guests, most are only looking for a deal and may not return without another offer. Social
  coupons aren’t known for converting new customers into loyal ones.
• Timing
  Being able to increase traffic during shoulder season could really help with slow sales periods, but with such a long redemption window it’s difficult to predict when the sales will be generated.
• Place Maximum Cap On Number Of Coupons Available
  This is important for two reasons. First you’ll be able to plan ahead for a surge in sales without being overwhelmed with
  coupon redemptions. This helps guarantee deliverance and customer satisfaction. Second, this prevents a bad offer from going very bad. Customers that spend exactly the amount of the offer may generate a loss.
• Be Mindful Of Cashflow
  Most sites pay their advertisers within 60 days of the sale and customers have up to a year to use their coupon. Make sure this lack of cash doesn’t put you in the poor house.
• Shop For Lowest Commission Rate
  Many smaller partners are willing to negotiate in order to gain a portion of the Groupon business, while still providing considerable reach.

A Rice University study of 150 small- to mid-size businesses that offered a social coupon found that 32 percent found it unprofitable and 40 percent wouldn’t do it again. With this in mind, social coupon programs should be considered carefully.