Get to Know Groupon

Have you heard of Groupon yet?

The website offers users in more than 250 markets around the world a daily deal on everything from restaurants and salons to zip-line tours and bowling.

Groupon is one of the fastest-growing start-up companies around, valued at more than $1 billion.

And it's not the only one of its kind. A growing number of group-buying sites like Living Social, Juice in the City, Tippr and BuyWithMe work similarly.

Users sign up through email, Facebook or Twitter to receive daily offers of discounts of 50% or more from local retailers. The deals only apply for a certain time period and are only available if a minimum number of people sign up, encouraging subscribers to share the promotion with others.

As more local businesses use group-buying sites, some pros and cons of the services are becoming clear. We'll explore them here to help you find out if group-buying is right for you.

Pros
• Great deals
For consumers, group-buying is a chance to get a great deal (typically a whopping 50%-90% off) and motivation to try out a new local business you might not have otherwise.

• New customers
For small businesses, these sites can offer a fantastic way to get the word out and quickly bring new people into your doors. Groupon says its own surveys show 95% of its business partners would sign up again.

• Marketing muscle
Harnessing the power of social media and the frenzy of a limited-time deal, group-buying sites create a powerful new marketing vehicle for local merchants.

• Locals win
There's a lot to love in the way these sites mostly focus on local businesses in a particular area, giving mom-and-pop retail a little extra boost against chains and big boxes.

Cons
• Big numbers, less cash
Although the majority of businesses find their group-buying experience positive, it doesn't make money for everyone. Businesses can be overwhelmed by the rush of new customers or find that they picked a deal that isn't profitable for them.

• Customer question marks
Since the deals are so cheap and (ideally) so widespread, it's hard for businesses to know whether users are the customers they want. If the deal pulls in mostly deal-hunters, they likely won't spend as much and are less likely to return. Meanwhile, an influx of new people making it hard to get an appointment or score a table can frustrate your loyal customers.

• Image issues
Big price cuts can hurt some brands' images by making potential customers think you're less valuable than you really are. And once the word gets out, your core customers might want the same kind of deep discounts. This kind of path can train customers to wait for a good deal to give you business, or (even worse) go to a similar service that's cheaper or offering a discount.

To read about some real small businesses' experiences with group-buying sites, check out the tech website Mashable's recent piece, Inside Group Buying: 7 Small Biz Success Stories.