Is Groupon a good idea? For the small business, my answer is NO.
In this economically frustrating time, the small business owner begins to panic, and when the Groupon's of the world start calling, the small business owner can be lured into this new vehicle of promotion. But should they? Here is how I see it. Groupon is great for the coupon seeker and even better for Groupon itself. If I were to join, I would post an $85 facial for half price, or $42.50. THEN, Groupon would take HALF of that, leaving me with $21.25 (and taking up more than an hour of my day). Did my rent decrease because I decided to run this amazing promotion? Um, no. Neither did the cost of goods, or the electric bill, or the water bill, or the phone bill, or the cost of laundry detergent ... you see my point.
And what about Groupon's selling point that they are bringing customers to my door who may have never heard of me before. Well, that's true. However, it's been my experience that people who get a discount - similar to those who receive gift certificates - don't consider the service they are receiving as essential. It's just a good deal to them - a one time good deal. The percentage of customers who use a GC to pay for services and then become monthly clients is very small. BUT, selling the GC is a good source of revenue, so it's a good business idea. Giving away a service to someone who has no intention of returning - not so good. Yes, maybe 1-2% of the "hundreds" of customers will return or possibly tell a more prosperous friend, but are those the odds that keep a business afloat? It's a lot of output for little, if any, return.
Do I think giving discounts is a bad idea? It depends. On the one hand it creates a climate whereby the perception of the value of your services is devalued. However, for the client who has been with me for a long time and might be facing a temporary financial obstacle, as owner of the business, I can, and do, offer her a price that allows her to keep receiving services and keeps her as my client. That is a positive discount. For me, it's much better to take a reduction in income rather than to lose the income altogether.
As much as a business needs to "shake the bushes" from time to time, I don't think you will be seeing my business on Groupon any time soon. The smartest thing to do would be to START a discount business LIKE Groupon and reap the rewards from taking money from the small business community for YOURSELF! ;D