Deal-a-day group buying Web 2.0 businesses like Dealon.com and Groupon.com are terrific for consumers and mostly for businesses, but there are a few caveats.
Managers of premium products or services may do well to communicate to would-be patrons that such discounts are uncommon and limited to only certain offerings or less convenient times. To do otherwise may degrade the company’s reputation to the point that it becomes known merely as a hawker of inferior or commoditized stuff (and such consumer perceptions about a brand, once formed, are hard to change).
For high-value product and service providers, social-media enabled group buying websites should be seen as builders of awareness about a company – not as a serious way to build profits. Indeed, popular or well promoted deals can garner swarms of customers in a hurry for business operators. However, after discounting their wares by 50 to 90% and then paying 50% commission (currently) to intermediaries like Groupon, margins are likely slim or even negative on such promotions.
So, group-buying daily deal services are best viewed as awesome ways to jump-start buzz about a company; but companies in luxury segments, should not overdo it.