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I think you're right that it will be hard for businesses to evaluate the ROI of Groupon marketing. But there are essentially no marketing methods for real-world businesses that offer the concrete ROI analysis that is possible in online marketing; the latter is an aberration in the history of advertising and marketing.

And even experience over time is challenging, as there are so many other variables changing; repeatability is a mirage in the real world.

http://boss.blogs.nytimes.com/2010/11/23/doing-the-math-on-a-groupon-deal/ is the best article I've seen from the perspective of a business owner evaluating Groupon.

The bottom line is, I think, that uncertainty is huge in businesses like this, and the only way to be safe is to have an operating margin larger than your uncertainty. Such businesses are hard to come by, and frequently lose when matched against competitors who are willing to roll the dice with lower margins.

Like so many other things, it's likely that the surviving & thriving businesses we see are the lucky ones, not necessarily the smartest ones.


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That is an awesome explanation on what is Groupon is all about. A lot of people does not know this and they are fixed into believing that Groupon is all about deals.


Totally agree. I think businesses are actually using Groupon as a "short-term loan". The promise of instant cash up front is too much to pass up. They get the needed cash, even though it is 25% of what they would usually charge, then they are paying it back for months to come. Seems like a pretty expensive loan to me.


I'm intrigued by these setups where part of a business sacrifices so that another part can prosper. It is like in casinos, where the bar gives free drinks and the restaurant serves cheap meals to keep people gambling--how do they evaluate that the deal is working and correlate the numbers from the two sides? How do you set a price when the goal is not profit but to help another operation?

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