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Groupon Works targets small businesses with its ‘secret sauce’

Groupis headquartered Chicago.

Groupon is headquartered in Chicago.

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Updated: September 18, 2012 5:50PM



Mom and pop businesses need technology expertise in a wide variety of ways, from setting up a Facebook page to upgrading their Excel spreadsheets to track their revenues to the penny.

Groupon has run into a challenge figuring out how much hand-holding to do when it shows mom-and-pop Chicago businesses those essential steps of behind-the-scenes information gathering, a Groupon executive said Tuesday.

In one case, Groupon, through its Groupon Works business, has enabled a 30-year-old Chicago mom-and-pop business to see its customers’ age ranges, communities and other key demographic information, said Sanjay Gupta, global merchant marketing vice president at Groupon, during a digital marketing conference at the Hyatt Regency McCormick Place. The conference is sponsored by the BIA/Kelsey market research firm.

“The secret sauce at Groupon is that we’re able to deliver (small merchants) things they cannot get themselves because of their size,””he said.

Those processes also include tracking their Groupon deals, figuring out whether they’re making money off of the deals and deciding how to get customers to return to pay full price.

It may seem surprising that many small businesses don’t track their customers or their revenues in a way that sophisticated marketers think is basic stuff, but that’s the reality of serving a great variety of small businesses, said Gupta, who was hired at Groupon six months ago after serving as a marketing executive at Network Solutions, a Herndon, Va.-based company that provides web solutions to small and medium-sized businesses.

Gupta said small companies are open to learning more about their inner workings, but they insist on value and trust.

“We’re beginning to move (merchants) onto the web so they can manage their customer interactions themselves,” Gupta said.

A survey released Tuesday shows two-thirds of the small businesses polled spend at least $845 a month on software tools to manage their social-media communications with their customers, while the other third have hired outside consultants to aid in their marketing.

Groupon will soon take Groupon Works to its merchant customers outside of North America.

Groupon doesn’t have to be the only provider of such services to businesses, Gupta said, acknowledging that Groupon is competing with plenty of other companies aiming to provide web-based services to local merchants.

He also noted that merchants who use a mobile device to track their Groupons and their internal schedules are more satisfied and are better able to handle the new procedures.

Groupon has a ways to go to satisfy its merchant customers, according to a new survey. Analysts at Raymond James released a survey Monday showing one-third of Groupon’s merchants either unsatisfied or very unsatisfied with the Chicago company’s promotions, known as Groupons, and 39 percent unlikely to run another Groupon deal for the next couple of years. The top complaints were a high commission rate and a low rate of repeat customers, according to the survey report.

The Raymond James survey of 115 Groupon merchant customers revealed that only 4 percent of the merchants said their Groupon promotion was“highly profitable. Thirty-seven percent said it was slightly/modestly profitable; 26 percent said they broke even and 32 percent lost money on the deal.

Merchants ranked Groupon tops in number of incremental customers and increase in brand awareness, but rival LivingSocial got the top ranking for commission, customer quality, payment terms and return on investment.

Shares of Groupon fell 6 cents, or 1.3 percent, to close at $4.69, Tuesday, after the stock price fell 9.9 percent Monday to close at $4.75. The stock debuted at $20 a share last November.



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