This is a guest post from Jennifer Ricci.

A lot of people today have become obsessed with checking their daily newsletter from Groupon ^[2] or LivingSocial ^[3] to find a new restaurant or activity to try for cheap. But are you really saving money? Are you really getting a good deal? And what about the stores that offer these group discount deals? Is the deal really worth their time, or are there better ways for these businesses to spend their advertising dollars?

Although Groupon ^[2] has grown exponentially as a company, those merchants and customers who participate and utilize their services need to ask themselves whether or not they are either growing their business as a retailer or saving enough money as a paying customer to continue using such services. Is a Deal Really a Deal?

Everyone loves to get a good deal – or at least to feel like they have! But the real question is, even with the vast popularity of “coupon” sites like  Groupon ^[2] and LivingSocial ^[3], are those who take advantage of these “deals” really getting the discounts that they think they’re getting? In order to find out, there are a few things to consider. Depending on the outcomes of these factors, you may – or may not – be getting the deal of a lifetime.

• How does the “deal” price at the merchant compare to where you normally shop? No matter how much of a discount you are getting from the advertised merchant, if the bottom line price is the same – or worse yet, higher – than what you normally pay at another retailer, you aren’t really getting a deal.
• Do you really need the item or service? While its fun to try new things sometimes, the big question is do you really need to make the purchase in the first place. In some cases, you may be able to try something that you’ve always wanted – but in others, this impulse purchase is no different than any other item that was purchased without much forethought and will likely end up in next year’s yard sale.
• Do you need to spend money for this deal over time, or is it a one shot deal? Impulse purchases are one thing when they are a singularly purchased item. “Continuity” products, however, are another story altogether. These types of offerings come in the form of memberships or other services where you are charged on a monthly or regular basis as versus just one time. Before you know it, that great $9.97 deal can turn into $120 over just one year’s time. The question here is to determine whether or not you were going to spend money on the service anyway. If so, then you may be ok moving forward.
• Can you combine other discounts with the particular offer? Oftentimes, the deal that is stated on the coupon website may not be all that great. However, if the merchant allows you to combine other discounts or money saving techniques on the same offer, you could just end up with the deal of a lifetime – and then some!

What About the Merchants?

Whether or not the deals that are offered on discount sites are good for consumers, another key point go keep in mind is, are they good for merchants? In today’s tough economy ^[4], retailers of all shapes and sizes are certainly looking for ways to bring more customers in the door. So, does placing a coupon equate to more business?

In this case, it is important to look at the advertising benefit that coupons or vouchers can provide. In some cases, especially for new merchants, this can be a great way to announce their existence to thousands of potential customers all at one time. And, should customers purchase the voucher and patronize the retailer, it is likely that they will tell others to do the same – provided, of course, that their experience was good.

Unfortunately, coupons can also work in reverse in that they essentially can discriminate against a merchant’s regular customers. For example, if a regular customer is paying full price for the same item that a new customer with a voucher is paying 50% less for, then this could damage the goodwill that a merchant has with its regular customers – and regular customers are typically the lifeblood of any business.

One way to keep this in check is to ensure that regular customers have the same access to vouchers that everyone else does. And for a merchant, it is also essential before doing so to be sure that they are not undercutting prices so much that they are gaining great customer volume, but losing money on every sale.

Jennifer Ricci writes for blogs concerning the latest happenings in finance and the economy. She also built a student loan consolidation calculator ^[5] for Cedar Education Lending that helps the students she works with find accurate data for their student loan research.

About the author

Ron has written 1080 articles on The Wisdom Journal.

The founder and editor of The Wisdom Journal ^[6] in 2007, Ron has worked in banking, distribution, retail, and upper management for companies ranging in size from small startups to multi-billion dollar corporations. He graduated Suma Cum Laude from a top MBA program and currently is a partner in a national building materials company.

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