How to use Groupon and other discount sites

By now most people have heard of Groupon, the daily deal site that offers heavily discounted coupons for a variety of goods and services. Its rapid growth Ė management recently turned down a $6 billion offer from Google to buy the company Ė has spawned a host of competitors, such as Living Social and Dealmap, and given a much-needed shot in the arm to hundreds of local retailers.

This is how Groupon and other daily deal sites work: A small business Ė typically a neighborhood restaurant, a spa, or a local theater Ė agrees to discount the cost of its goods of services by 50 percent or more. Groupon, or one of its competitors, then markets that discounted offer to its subscriber base in the form of an online coupon. Subscribers pay Groupon via Paypal or credit card and then take the coupon to the local business to cash in their discounted deal.

Most deals are presented on a regional basis and run for just one day, although they can be extended. Once a subscriber signs-up, they get notified of a new local deal every day, usually by e-mail or text. Supposedly everybody wins: Groupon makes a hefty commission, the local business gets a rush of new customers, and the consumer gets a great deal.

However, despite the apparent win-win, there are a few things that the consumer should look out for:

  • Make sure that itís something you really need. There is no doubt that discounted online coupons make consumers spend more. Some offers seem such a bargain, e.g. $25 off $50 worth of spa treatments, that they are hard to resist. The key is to ask yourself whether you would have ever spent the original $50. If the answer is yes, then you will have genuinely saved $25. But if the answer is no, then you are actually out $25.
    If your plan is to treat yourself or your family, then thatís great, but you havenít saved money. Instead, youíve been persuaded to part with money that could have been put toward something else.
  • Carefully monitor the expiration date of the offer. Many offers run for six months but others have a much shorter duration. Make sure you redeem your purchase within the specified period. Businesses that participate in these programs are still obligated to honor the coupon price after the promotion is over, but you wonít get the additional discounted value.
  • Make sure that itís a genuine deal. Groupon recently suffered some bad press from a Valentineís Day offer than didnít appear to be the bargain that was advertised. Make sure the discounted deal is genuine, e.g. in a restaurant, you are ordering from the regular menu.
  • Subscribe to multiple discount services. Donít just subscribe to Groupon or Living Social. Try to find as many group discounters as you can in your area. That way you can compare prices and have more chance of finding the deal thatís right for you.

Comment by Sarah, posted 9/16/2011, 6:38 PM:

I'll just say, where's the love for Portland, Groupon? We are just as connected as Seattle, and much more community focused than any city on your list (hello, Dallas?!), and should be a strong market for any locally-focused web service. <a href="">dealevents</a>
Comment by Elle, posted 2/19/2011, 5:55 PM:

Very succinct post. I once considered signing up with Groupon, but I didn't when I realized I would end up spending more than I needed too for the deal. If you use these services you must have a plan in mine.
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