Do not purchase Groupon Clone or daily deal scripts that cost upfront (albeit one-time) hundreds to thousands of dollars, especially if you are new to the daily deal industry, or, worse, new to online marketing/selling generally. Doing so does not align the interest of the vendor with the interest of the daily deal website owner (you). Once one-time payment goes through, vendors have very, very little incentive (whether they do so is another question) to support and continually improve the product for their customers, because their revenue depends solely on the acquisition of new customers.

Anyone in the daily deal industry knows that starting a daily deal website from inception all the way to the generation of sustainable revenue takes time and effort. Vendors that collect a large payment upfront have very little interest in ensuring that the daily deal website’s entire business and technical processes are well-supported. Furthermore, there is no escape valve for 1) website owners who eventually realize that creating a daily deal website is hard work, way more than they were ready to invest, or 2) website owners who eventually discover a better/cheaper/more suitable solution out there. Human beings have the tendency to mull over sunk cost (e.g. “I've paid $1,000 for this script, I better use it and make it work.”).

Buying whole scripts and self-hosting it is like buying an 18-wheeler tractor to drive down to the neighborhood grocery store to buy a candy bar; a bicycle or cab ride would have been more than sufficient. Learning the ropes of the business does not need to be expensive.

I believe that people thinking of entering the daily deal industry should know of all alternatives when it comes to setting up a daily deal website. I am writing this article just to bring to your awareness the lesser known alternative of daily deal platforms, like ours, Zuupy CrowdDeals (http://www.zuupy.com), ChompOn, DailyDealWorks, etc. that either 1) charge a flat, low monthly fee, and/or 2) charge a percentage of your revenue, both of which are aligned with your interests. If we do not support your business well, you either 1) cancel your subscription and cut your losses or 2) make no revenue, lose no money, and thus the vendor gets paid nothing as well, respectively. Besides, we are reputed to be much easier to use; everything is already set up or at least easy to set up, and you will never need to worry about hosting and server issues.

I am even willing to promote our direct competitors above for credibility reasons; go ahead and compare us to the rest out there and decide for yourself a solution that is suitable for you. We who maintain daily deal platforms work extremely hard to provide a platform that is reliable, constantly upgraded, and capable of generating sustainable revenue for our customers, primarily because our financial interests are directly aligned with yours. We earn our revenue from our customers in the form of small monthly payments or commissions by delivering value day after day, not sell to you with vague promises until you are finally willing to part with hundreds of dollars, a one-time event.

I just felt the personal urge to share with anyone out there who needs to set up a daily deal website for the first time the possible risks of buying scripts that you may not even be sure works. All daily deal platforms, including ours, let you try out our software for free for 15 to 30 days, no strings attached. If I can say something on behalf of my company and our competitors, it is that we are sincere in building a long-term relationship with you and helping you grow, because our very livelihood depends on it.

Groupon’s extraordinary growth as a daily deal website is truly enviable for any actual or potential competitor. In fact, it would be seriously tempting to copy any externally-observable tactic employed by Groupon to try to replicate just a fraction of its phenomenal success. Interestingly, one may even say that our daily deal platform, Zuupy CrowdDeals, exists solely to service hundreds of individuals and small businesses whose raison d’etre is to clone Groupon itself.

The truth is that Groupon can get away with a lot of things because of its deep pockets and humungous (read: 9-figure) subscriber list. It can afford to experiment and implement a number of different things, including having a gigantic sales force to hard-sell merchants, having less-than-attractive/tired website designs, producing over-enthusiastic copy, and actively running deals across a ridiculous number of cities. Groupon is like the Amazon of the daily deal industry – it might not necessarily be wise to copy their every move given how different their circumstances are.

Just as you would not run a minimart the way Walmart or Tesco runs their hypermart, you should not run your fledgling daily deal website the way the market leader runs it. You can certainly draw inspiration, but it has to be backed by sound justification – and the only sound justification is really your subscribers/customers saying that they want whatever you intend to copy. Copying blindly without any indication or evidence that the demand for whatever you are copying exists is a waste of time, money, and resources. Find out what your subscribers want by talking to them. When you are small, you probably cannot do things autonomously and get away with it (a la the way Facebook frequently changes its layout and breaches its privacy policy); you need to bend over to some extent to the miniscule number of people who miraculously even care about your daily deal website.

The truth is that all Groupon did was validate the business model (and even then, how validated the business model is remains to be seen given the infancy of the industry). Copying the business model itself may be prudent – after all, if it has demonstrated a clear path to profit, it would be not prudent not to copy it – but copying its design, branding, marketing, and even deal inventory may not be effective, because you have a different set of subscribers with different demographics who have different wants and needs. You probably do not control the eventual make-up of your subscriber list (assuming they are opt-in subscribers, which they better be), as much as your positioning hopes to achieve a certain demographic composition. Design, branding, and copywriting follow who your subscribers and customers are, not vice-versa.

If you are going to copy Groupon with no additional innovation whatsoever, you will not succeed, not even marginally – because Groupon will always be a better Groupon than you can hope to be. You need to be better in some aspects, be they pricing, customer service, value-added content, or niche targeting, in order for consumers to even consider patronizing your daily deal website. Would you rather buy from Groupon or BestSuperSavingsDailyDeals? I know that Groupon will be the safe choice, and, unless BestSuperSavingsDailyDeals can offer something Groupon does not have, I would be better off sticking to Groupon. So would millions of others.

Deals and promotions are about price discounts. To consumers, price discounts are about two things: 1) the absolute offer price, and 2) the magnitude of the discount. While the quoted offer price directly affects the bottom line of the selling merchant when manipulated, the usual price or original price does not. Yet changing the advertised usual price has a discernable effect on consumer behavior.

Consider 2 deals: a 75%-off buffet dinner at a discount price of $25 vs. a 20%-off (comparable) buffet dinner at a discount price of $20. It is not unreasonable to expect that the former deal sells better, because there is a perceived free and extra $75 in value for the former deal instead of a mere free and extra $5 in value in the latter deal. In other words, consumers perceive that, for every dollar spent, they get $3 in free value for the former deal but, for every dollar spent, they get only $0.25 in free value for the latter deal. Group buying deals work, because the usual price provides consumers with a benchmark of “how good of a deal” they are getting, though the usual price is usually just there to exploit the irrationality of consumers.

When it was reported that Lashou.com (one of China’s most successful Groupon clones) was involved in price fraud in that they regularly inflated the usual price of deals, it made us wonder if it is a common practice across the industry, not just among group buying platforms. Some regulation through the law is necessary, but we believe that, the more rampant this practice becomes, the more discerning consumers will become as well, defeating the purpose of price manipulation. In other words, the market will become smarter and, in fact, more doubtful.

As a turn-key hosted group buying solution company, we are against price misrepresentation by merchants, because it ultimately turns consumers into cynics. It eventually creates a stigma attached to deals and promotions – that they are scams. Price misrepresentation is bad business sense, and those guilty of it ought to seriously reevaluate the long-term effects of their strategy on themselves and the industry at large.

By now, most of us would have heard about Groupon’s Superbowl ads that somewhat led to an uproar. The most prominent ad, of course, was the one that spoke of Tibet’s political situation and Himalayan fish curry in the same breath. Despite the controversy, we believe that Groupon had a net positive gain from the ad.

Here is why: the ad triggered a knee-jerk reaction from a vocal minority who in most likelihood are not and will never be Groupon’s customers, which inadvertently yet effectively spread the word about Groupon to a much wider group of people who may or may not be offended. We venture to guess that the people who would be genuinely concerned about the political situation in Tibet are by and large not the same group of people as the consumerist, bargain-hunting demographic group that Groupon is targeting. Even if they are, avoiding 50%-off deals that they want because of some personal ethical/political principle is hardly rational. Perhaps we should all strive to create controversy that would only offend a vocal group of people outside of your target audience, in hopes that the offended group would spread your brand via word-of-mouth marketing to your non-offended target audience.

Another tactic that Groupon is allegedly using is to ask retailers to double their “usual price” and run a deal at the real original price, representing the “discount” as a 50% cut. Clearly, this is some form of misrepresentation, and we ourselves have even pointed out that such tactics are possibly already adopted by many retailers. The lesson to be learnt here is obviously that many consumers are irrational, and would rather buy during a sale – farcical or not – than at full price. That means running promotions, deals, contests, etc. with regularity to appear “fresh” and “seasonal” to consumers, regardless of the actual savings or absolute price points.

P.S. For those of you curious to read Andrew Mason’s official response to Groupongate, if you will, see here.

Some small business owners like to wax lyrical about how Groupon is detrimental to their business: it cheapens the brand, it trains consumers to be bargain-hunters, it kills margins, it rarely results in brand loyalty, etc. However, the fact is that we know that consumers have been giving Groupon a lot of money since its inception (about $800 million a year now), so for small business owners to avoid considering Groupon as a tactic within their marketing strategies would be negligent at best.

Here are some reasons to give Groupon a go:

1. Groupon is to small businesses what free samples are to chocolates.
Groupon is a low-risk way for consumers to try out brands that they would have otherwise avoided or even product/service categories that they would not have paid for previously. Some services have high price barriers, making it almost impossible for these businesses to expand their customer bases beyond their regular customers. Like it or not, Groupon has the ability to generate awareness and increase brand visibility by guaranteeing a fixed number of paying customers from the outset (margins are another story, but getting people through the door in itself is no mean feat).

2. Groupon generates leads for the businesses themselves to engage and win over.
By its very nature, Groupon attracts a large group of different consumers, not just bargain hunters. Complaints about customers not returning after the first try or customers behaving unreasonably cannot be piled on Groupon alone; after all, Groupon generates leads in the form of low-margin sales for retailers and small businesses for upselling or to convert into repeat customers. In other words, Groupon is meant to generate the opportunity for small businesses to engage x number of consumers, where x is a large number, but does not purport to generate repeat customers. Responsibility of the latter should fall on the small businesses themselves.

3. Groupon exposes weaknesses in small businesses, which helps diagnosis.
The less-considered impact of Groupon is that it causes small businesses with fundamental problems to blame Groupon when their inherent shortcomings become more visible upon running a Groupon deal. For example, many retailers say that they cannot “make the numbers work” for them, implying that they are basically competing on low margins from the outset, which may be a problem in itself. Also, if a small business needs to provide massive discounts simply to acquire customers (not for any specific purpose like exploring a new market segment), it reflects poorly on the merit of their current offering and customer acquisition plan. The fact that they are unable to convert first-time visitors into repeat customers, despite the large sample size provided by Groupon, may also indicate a problem with their ability to retain customers.

Ultimately, the correct way to assess the potential of Groupon should be to view it in light of its intended purpose: a marketing investment, not an engine to drive short-term profits. If small businesses think of it as an advertisement engine that is capable of generating a large number of guaranteed leads, perhaps small businesses would know better than to use Groupon simply to boost short-term sales.

We have always strongly believed that social media and ecommerce, or social commerce, can be a powerful mix. The phenomenal growth of Groupon is testament to how group/collective commerce can really grow with the connectivity afforded to us by social media platforms and technologies such as Facebook Connect. It was only a matter of time before we decided to pursue an opportunity in this space.

We are announcing the launch of our new product, Zuupy CrowdDeals, that marries group-buying and Facebook in a novel way. We basically help retailers push out deep-discount deals, in exchange for some word-of-mouth marketing effort on the part of consumers. Specifically, we allow retailers to offer deals that are inactive by default and can only be activated by clicking the Facebook Like buttons on them. Once the Like threshold of a deal is reached, the deal is open, but only to its participants.

If this little synopsis has piqued your interest, do check us out at http:// zuupy.com and leave us your feedback.

The value proposition of the group-buying model for the average consumer is clear: to save money. Group deal websites like Groupon and LivingSocial push out deals that get cheaper with each participating shopper. The fact is, however, that the surefire way to save money is not to spend it at all; after all, a dollar saved is a dollar earned. We can live fine without most of what is advertised on Groupon, so what is making consumers buy in drones?

At the risk of stating the obvious, group-buying works because consumers are by and large irrational. Discounts and promotions are pushed as money-saving opportunities when, in actuality, retailers set the original retail price, thus the magnitude of savings can be exaggerated as much as the retailer wants. The only limit is the extent to which consumers would buy (i.e. believe) the discount terms. Yet savings represented in dollar amounts or percentages in deals somehow lead to a strong internal response in consumers, one that makes consumers feel dumb for not participating in the deal.

If that is the case, every retailer can theoretically increase their sales and profits immediately by marking up every single item they sell as much as realistically possible and then publicizing their original prices as discount prices. Perhaps this theory is also the reason that one can rarely find any retail store anymore that does not have some sort of sale going on at any given time.