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Groupon is puzzling, frustrating, fabulous and certain times, and seemingly awful most other times.

How can it be all these things at once?

First let me say I am a Groupon customer and observer.  I have actively watched Groupon since it arrived in my current city of Madison (WI).  I have made a select number of purchases, and witnessed my own behavior when using the Groupons at new (for me) retail locations and businesses.

Have you used a Groupon?  Have you tried a new expensive or special occasion restaurant that you are pretty sure you will only try once?  Have you tried a salon that offered a great deal via this one time offer, all the while knowing you will never likely visit there again?

Have you ever redeemed a Groupon offer while making a calculation of the amount of money the retailer actually receives on your transaction? (Which, if the offer is 50% off, is about ¼ the retail value of what you receive, less credit card interchange fees. It’s not much.)

I started to think about these things – a lot – after a few Groupon transactions. And then I started to feel that something wasn’t quite feeling right.  I recognized I would be a “one hit wonder” at many of the Groupon businesses I tried out.  I began feeling guilt when using a Groupon – as I realized that I was getting a lot more out of the transaction than the retailer. 

And as a consumer, that is not a good feeling. I want it to be a win-win for me, and for the business person.  I want to feel a positive vibe when I go shopping in this type of situation.

And the whole concept of price anchoring?  That really seals the deal for me.  I’ve been reading Predictably Irrational by Dan Ariely, and the author explains a great deal about human psychology and consumer behavior and decision making. 

And the bottom line is this, per Ariely: a person is “anchored” to the first price he or she experiences with a product or service. 

This means if you pay $20 for a haircut the first time you visit a salon, you really aren’t going to ever want to pay $40 for that same haircut later on.  If you pay $30 for a nice meal out, you then won’t be ok paying $60 for that exact same meal at a later date.  In most cases (yes, I realize there are exceptions), you just won’t like it or be willing to do it (and Ariely has the data behind this).

Now, I will share that there were 2 Groupons in which I participated that I think were good for me AND the retailer:  (1) Old Navy – I spent much more than the $20 face value of the Groupon, and I will likely go in again soon as I saw the collection of kids clothes they have; and (2) Red Mango – a frozen yogert place that add really fresh yummy fruit and the stuff seems fairly healthy – I’ll be back!

But, looking at the overall concept, it seems there are solid reasons Groupon in many cases won’t work for retailers. It won’t bring them many long-term, loyal customers – instead, it may bring a slew of one-time customers.  And there are observations we can make about our own feelings and actions that can help us decide if it is something we want to continue to partake in. 

I know I’m still thinking.

How have you found using Groupon – a great experience, or not?  Have you become loyal to any businesses you “met” through Groupon?  Post a comment here or join the Facebook discussion!

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Filed under: Emerging medias, General Business, Industry Info, Loyalty, Marketing Campaigns, Social Media on June 28th, 2011