Groupon, LivingSocial and other daily deals sites are trendy marketing methods right now, but like all strategies, they are are more appropriate for some goods and services than others. Groupon can be a revenue-killer and for many products it just doesn’t make sense.
However, last week I read about a use of Groupon that struck me as particularly brilliant — and unexpected! National Louis University of Chicago offered 60% off tuition for their introductory graduate teaching course, dropping the price from $2,232 to $950.
I thought this was a great way to get people who are thinking of going into teaching to take the first step! And don’t worry about revenues — the students will have to take another 33 credits to graduate, so the school will make around $30,000 for those who buy the deal and continue on in the program. Plus, the school is getting lots of national attention since offering the deal.
I have a few questions I like to ask when clients are considering Groupon or the like. I’ve found these questions to be helpful in deciding whether offering the discounts is likely to be profitable. NLU passes this test with flying colors!
- Are new customers who are attracted by the Groupon (or other voucher) likely to return after using the deal? If not, you’re really not accomplishing much by advertising deep discounts on Groupon. But in the case of National Louis University, the answer is yes. This deal does a good job of qualifying buyers. You can be fairly certain that if someone buys this deal, they are genuinely interested in pursuing education in teaching since they have to spend nearly $1,000. Plus, customers who spend that $1,00o and the time required to take the first course are likely to feel committed enough at that point that they are compelled to take more courses. Many will probably even finish, making the university tens of thousands of dollars.
- Is the deal likely to be bought up by many long-time customers wanting to get discounts on products or services they already use? If so, think carefully before offering extreme discounts. NLU doesn’t have to worry about this, because they are offering discounts of an Introductory course. Current students of the program have no use for the offer.
- Are the Groupon demographics you’re targeting very different from your usual customer demographics? According to Ben Edelman of the Harvard Business School, his research “shows that merchants will find discount vouchers most profitable when the population claiming vouchers differs greatly from the merchant’s typical clientele.” So the Groupon audience should be different from the advertiser’s usual audience, probably to avoid targeting those who would buy the products anyway at the normal price. For National Louis University, the “usual demographic” would be students. So, once again, they are a great candidate to be profitable on Groupon because, most Groupon subscribers work and only 12% are students. (See chart for more detailed percentages).
4. Does the product you’re offering have low marginal costs? If your answer is no, then no Groupon for you. In most cases it makes no sense to offer a deep discount on something with low margins. Not knowing the margins of NLU, I’m going to guess that the perceived value of education allows them to raise tuition as needed to keep their margins solid.
As with any campaign, it is important to measure the results of your Groupon effort. I sure hope to be able to get my hands on the results of NLU’s offer!