At first glance, Groupon looks like a no-brainer for the small business owner. The daily-deal model has become a household name, reaching and luring thousands of potential customers. Groupon offers the consumer a good deal, but what about the small business owner? After running Groupon campaigns, the following two companies had very different stories to tell.

Groupon Helped More Than it Hurt

For Skinsations Spa in Tustin, Calif. its first Groupon was successful enough to warrant a second campaign. “While there were a few issues to contend with, we found that Groupon was more beneficial than not,” said Spa Director Kim Parten. “We experienced a 25% retention rate among the new customers who came in with a Groupon, and that made it well worth it.”

Parten feels that Skinsations had success with Groupon because it was creative and careful and learned from the mistakes of other spas when it came to using daily-deals for increasing business.

“We ran our Groupons differently than some other spas by using and enforcing restrictions,” she said. “We limited the first deal to new clients and then broadened the parameters a bit with the second one, opening it up to individuals who hadn’t visited the spa in the past two years.”

Skinsations did have some public relations maneuvering to do because of the Groupon’s restrictions. “Some of our regular clients were upset about not being able to use the Groupon, but we explained that our specials for loyal customers are actually a better deal,” said Parten. “We’re offering a third Groupon open to anyone who wants to try a brand new type of facial.”

To get the most out of Groupon, Parten suggests that small business owners identify exactly what they want to accomplish. “As a higher-end day spa, we’re interested in increasing new business and branding,” she said. “Keeping our goals in the forefront helped us tailor the Groupon to meet our needs.”

Groupon Hurt More Than it Helped

While their Groupon campaign increased foot traffic over the six months that it was in effect, Michelle McDonald, assistant manager of Subway in Grand Rapids, Mich., doesn’t think they’ll be repeating the experience.

“The Groupon brought in people, but it wasn’t such a good thing,” said McDonald. “We’d hoped to attract new customers, but we found that the Groupon attracted regulars and out-of-town customers, the latter of which caused more trouble than they were worth.”

Problems from customers failing to read the fine print and abiding by the parameters of the coupons dogged the Subway during the deal’s six months.

“The Groupon said you could print a coupon for your friend, but people weren’t doing that,” said McDonald. “They would print two or even more for themselves and expect to use them all, even though it clearly said one coupon per person. When we pointed that out, people would get mad.”

Groupon users also failed to note where the coupons were to be redeemed. “We had people driving from a half hour away with Groupons for other Subways expecting to use them at our restaurant,” said McDonald. “We’d feel bad when we had to tell them that the Groupon wouldn’t work at our store.”

Accounting for all of the coupons redeemed and the resulting meals served presented McDonald with a substantial amount of additional work, especially when business spiked considerably during the beginning and end of the deal. “With Subway, everything has to be accounted for, and it all had to be input in the computer,” she said.

As these two cases illustrate, Groupon works for some small businesses better than others. It’s possible to have success with the daily-deal marketing vehicle if the small business owner has a clear goal in mind and sets enforceable parameters on the Groupon.