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Are group-buy promotions profitable for businesses?  Well it depends; for 66% of businesses trialling Groupon, the promotion generates profits. But for 32%, the social commerce platform was unprofitable.

That’s the finding of the Rice Report on group-buy by Dr. Utpal M. Dholakia of Rice University.

Other key finding were;

  • Employee engagement with the promotion is the key driver to profitability
  • Ability of the promotion to pull in new customers is key to profitability
  • Up-selling customers is key to profitability
  • Low return rates are key to profitability

American Apparel, that recently ran a Groupon deal – selling 133,000 group-buy Groupons at $25 (worth $50 each), emphasised the value in the ability of the promotion to pull in new customers, and the need to up-sell:

 

“The killer was email address acquisition… We converted approximately 25% of in store redemptions into signing up for our email list… which is on track to generate an additional five to six figures in online revenue.”

American Apparel said customers who purchased the $25 group-buy deal ended up spending an average of $70 once they cashed in the deal.

So here’s the Rice Report (click to download), and a useful infographic on Groupon by the numbers from MyCouponCodes.com


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