February 25, 2011 / 1:14 PM / 8 years ago

Management Tip of the Day: Should your business Groupon?

BOSTON (Reuters Life!) - Hundreds of websites like Groupon and LivingSocial sell discount vouchers for services ranging from restaurant meals to skydiving. Harvard Business Review wonders if your company should join the fray.

The Management Tip of the Day offers quick, practical management tips and ideas from Harvard Business Review and HBR.org (www.hbr.org). Any opinions expressed are not endorsed by Reuters.

“Coupon offers are becoming increasingly popular with merchants and consumers alike. But does providing such steep discounts (often 50 percent or more) pay off?

Before you decide to use one of these discounts, know who they are most successful with:

1. The price sensitive. Discount vouchers allow you to offer price breaks to customers who value your products less than ordinary customers do. Once in the door, their valuation may increase and they may return and pay full price.

2. The unfamiliar. Vouchers can create ‘buzz’ by announcing your company’s existence to thousands of consumers en masse.

If you decide to make the leap into the discount voucher world, be sure to measure the effects and analyze whether you reached who you wanted to.”

-Today’s management tip was adapted from “To Groupon or Not To Groupon: New Research on Voucher Profitability” by Benjamin G. Edelman, Sonia Jaffe, and Scott Duke Kominers.

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