Analysis: Avoiding The Pitfalls Of Online Couponing

Jill Duffy says you need to consider all the costs involved in offering a deal through an online coupon service, and whether participation fits in your business plan.

"I've seen plenty of horror stories from blog posts to articles by other publications about small businesses feeling that they were bamboozled by online coupon companies. Deals from Groupon, Living Social, Tenka, Foursquare Specials, Facebook Deals (shall I go on?) offer users big savings and sometimes even free stuff. In return, the businesses who dish up the deals get some promotion and new customers or clients, who perhaps will turn into repeat customers.

The problem is that these deals can be very expensive for businesses. Small business owners are being lured into online coupon campaigns and special offers without doing their homework regarding what the promotion may cost them. For example, a deal that gives consumers a 50 percent discount may actually come back to the business as a 75 percent discount, after the coupon company takes its cut. If your business doesn't have a 75 percent mark-up, every customer presents a loss, which may still be worthwhile if viewed as an advertising opportunity. However, multiply the loss by literally thousands of people who jump on the deal, and the effect could be ruinous."