Consumers are constantly on the prowl for the best price on the top of the line items they are looking for. Sites like Groupon and Living Social offer an opportunity for businesses to connect with thousands of local customers, and possibly gain a new following.

What are Social Buying Sites? Groupon and Living Social are both good examples of social buying sites. They contact local businesses, or local businesses contact them, and provide incredible discounts on sought after services. Restaurants might offer a fifty percent off coupon through one of these sites, or local spas might offer a day of beauty for a fraction of the regular price. But the question remains: does offering these incredible bargains actually help the business?

Coupons are a Risk, but the Math Works! Businesses are often reluctant to offer the deep discounts required by sites like Groupon and Living Social, because they will lose money on those offers. However, both of those sites allow the business to place strict limitations on the number of coupons to be sold, and in many cases they offer the opportunity for a runner-up offer. For example, a person goes to buy the sixty percent off coupon being sold on Groupon, but only five hundred were offered. They are already sold out, so instead the social buying site offers a free or very inexpensive coupon that gives twenty percent off. While the second coupon is not as great a discount as the first, a business can offer more of them without worrying about losing money. The offer also lets small businesses market directly to a local audience for practically free. The startup cost is negligible and the social buying site only takes a percentage of the sales for the coupon.

What Not to Do to Customers that Use Social Buying Coupons The first thing to remember is to never treat them differently from full paying customers. The only way you can show them how great your business truly is, is to treat them like a regular customer. Yes, the business may lose money on the five hundred coupons they sold. However, some of those coupons will never be redeemed, and some of the people that use them may become regular customers. If a business manages to generate repeat business from only five percent of the coupons sold, over time the promotion will pay for itself. Yes, the business experiences a temporary loss, but in the long run it is good for business. It brings a small business to the attention of people that had never tried it before. Stand by your product or service and don’t be afraid to offer it at a loss occasionally.

When you have a solid product, getting people to try it is the hardest part. Once you have the opportunity to show consumers how great you are, repeat business is just around the corner. Don’t offer coupons constantly, but strategic offers designed to bring customers in during an otherwise slow season can be a great way to open new revenue streams and help with cash flow.