Inland Northwest business owners say they've had mixed results after using Groupon in an attempt to bring new patrons into their business by offering discounts of 50 percent off or more for specific services or items.

Several business owners who have used the company's online coupon system since it debuted in the Spokane-Coeur d'Alene area about a year ago say they broke even on the sales resulting from the deep discounts, and that the added exposure it brought them was beneficial.

Others expressed concerns that Groupon users are just bouncing between various local businesses that have opted to be featured on the site, and that the core users aren't likely to become repeat customers.

Groupon, a Chicago-based "deal-of-the-day" coupon website that launched in 2008, emails to interested consumers a daily deal from a specific business, typically a business in the market in which the consumer lives. The discounts typically are marketed at 50 percent off or greater. Similar websites include LivingSocial, PriceGrabber, and Spokane-based The Deal Planet.

As an example of how sites work, a restaurant participating in a Groupon could offer $40 worth of food and drink for $20. If Groupon's registered users located nearby decide they want to purchase that day's deal, they pay for it through the site and print out the provided coupon to redeem at the business, typically during a six-month redemption period.

Groupon, for its part, gets half of what each consumer spends on the coupon. In this example, Groupon would get $10 of every $20 deal each consumer buys. The restaurant would get the other $10, plus any amount consumers spend above the $40 value of the coupon.

Aaron Kelly, who owns the LeftBank Wine Bar, located at 108 N. Washington in downtown Spokane, says he sold 950 Groupons last December, and those coupons recently expired.

Based on that experience, Kelly says he won't offer another Groupon.

"The only positive I got out of it was the fact that as a new business, we got more new customers because Groupon is so popular," Kelly says. "But when people came in, a majority just spent exactly what the Groupon was."

Looking back, Kelly says he would have structured the Groupon at a lower price point, such as $5 for $10 worth of wine, rather than $12 for $25 worth of product.

He adds that Groupon's policy—printed on the coupons—is that users should tip based on what their bill's original total is. Kelly says, however, that many of the Groupon customers at LeftBank only tipped based on the actual amount they paid out of pocket after the coupon was taken off their total.

Overall, Kelly says the business probably broke even on its offer, having had about 800 of the coupons redeemed. Still, he says that he felt many of the users took advantage of the offer and that he might never see many of them in his store again.

Billie Gaura, a principal at the Spokane-based marketing firm Rainmaker Creative Inc., says business owners who participate in Groupon stand a chance to capture a large, untapped customer base if they view it as a marketing tool and not as a revenue-boosting strategy.

"A lot of times businesses approach it as making money on the sale, and that's not smart," Gaura contends. "It's really advertising and marketing, and if you look at it from that angle, it's great."

She adds, however, that the particular product or service a business decides to offer via Groupon also can make a big impact on their results. Groupons for smaller price points, such as $5 for $10 worth of products or services, typically have less of an impact on a business because they're not giving up as much in sales, she says.

"If the business is able to cover costs and get exposure, it's a good move, but if they have to pay out of pocket, it's not a good move," Gaura says.

She cites the example of one of her clients, Carrie Magruder, who owns the BrickHouse Massage & Coffee Bar, in Spokane Valley. Gaura says that if Magruder were to offer a Groupon she likely would lose money because her business's services are more expensive and are administered by her employees, who receive the same salary regardless of the the cost of the spa treatment a customer purchases.

Magruder says she won't participate in a Groupon for that reason.

"The margins are so low that it's risky to run an offer like that," Magruder says. "In the short term, it would be a nice boost, but long term, it would be a dangerous hit to cash flow."

Instead, Magruder says she'll stick with the in-store promotions she regularly offers to her clients, such as a customer loyalty program and other seasonal sales.

"I'm trying to differentiate myself in different ways than the Groupon-discount bandwagon," she says.

Scratch Restaurant & Lounge, which has locations in downtown Spokane and Coeur d'Alene, offered a Groupon last January.

Unlike LeftBank's Kelly, Scratch's owners, Jason Rex and Connie Naccarato, say they plan to offer another Groupon in the future.

Jason Rex says more than 1,600 Groupons were purchased that offered $40 of Scratch's dinner menu items for $20, or $20 of lunch items for $10.

The coupons expire in August, he says, adding that since January more than half of them have been redeemed—mostly at the downtown Spokane Scratch, located at 1007 W. First.

So far, Rex says, he's been happy with the results of the Groupon and the number of new patrons it's brought into the establishment.

"I think we're definitely expanding our customer base, and it lets people in Coeur d'Alene know that we have one in Spokane and vice versa," he says. "For a higher-end restaurant like ours, it works well and gives us business that normally we wouldn't have."

Even so, Rex says Scratch has set some rules regarding when and how its Groupon can be redeemed so as not to suffer too deeply from the losses in sales the coupons also have the potential to create.

A whiteboard at the entrance of Scratch in Spokane reads that Groupon users only can use one coupon per person and per table, and that reservations are required. The coupons also can't be used on a holiday, during a holiday weekend, or during Scratch's half-price wine night, among a few others stipulations.

"We have the sign because when you are giving away $30, you have to hold your guns," Rex says.

If Scratch offers another Groupon in the coming year, Rex says the restaurant might only offer $10 worth of lunch for $5, instead of the current offer for twice as much.

Another Spokane business that's so far had success with Groupon is 528 Wellness, after recently selling about 180 coupons in mid-May, says co-owner Sheri Shields.

528 Wellness is located in NorthTown Mall and offers a variety of stress-reduction services that are administered by automated machines, she says. The three-year-old business has four employees in addition to Shields and her business partner, Joseph Shields.

Sheri Shields says 528 Wellness offered $50 worth of wellness services for $24 and has had almost 40 coupons redeemed since being featured on the site. She says all of the Groupon users have been new customers to the business.

Shields says she's also offering an incentive for 528 Wellness's Groupon customers to continue returning to the business, by giving them another discount—substantially less than the Groupon offer—on the purchase of a future service.

Nodland Cellars, a Spokane Valley-based winery, offered a Groupon a few months ago for $30 worth of wine and wine tasting for $14 and had more than 600 coupons purchased, says Tim Nodland, who owns the winery with his wife, Tracy.

He says it's still too early in the redemption period to tell how the business will fare overall, though 100 of the coupons have been redeemed so far.

"You definitely lose money," Nodland says.

Rainmaker's Gaura says the marketing firm offers what's called a break-even analysis to its clients who express interest in participating in Groupon. She says that for that analysis she and the client will go over the various possible outcomes based on the planned coupon's value, what products or services it involves, and the number of offers sold. The analysis also looks at how many people might redeem the coupon and whether or not they would make purchases beyond what they paid for the coupon, she says.

"It's important to do that because some businesses are more focused on the activity it will give them, but that is just part of the equation," Gaura says. "Groupon isn't for everyone, but it definitely can work."

Chad Nason, a Chicago-based spokesman for Groupon, concurs and says business owners who might be considering using the site to attract new customers should plan ahead and make sure they have enough staff and product on hand to accommodate an influx of buyers.

Nason says the company tries to ensure that businesses using its site know this and, "make sure that the new customers have a great experience and want to come again."

Nason says he doesn't see that any one type of business typically is more successful than another with Groupon, but those that have the best results are ones that prepare before the coupon's redemption period and track their sales that come in as a result of the offer.

Like Rainmaker's Gaura, Nason also stresses that potential or current Groupon users should view the company's service solely as a marketing tool.

"That is where some confusion comes in," he says. "Businesses may have a budget that may include local newspaper or TV ads, and Groupon is in that same realm."