A week back an article in NYTimes discussed the math's behind Groupon and the parameters you need to be watchful of to make sense of Groupon.

NYT - Doing the Math on a Groupon Deal

Groupon is advertising. If you don’t need or believe in advertising, there is no reason to look at this. It costs money. Instead of writing a check for an ad, you are choosing to lose money on sales. This can wreak havoc on the brain cells of a good retailer who is always watching profit margins. It can feel wrong, especially when the coupon customers don’t spend more than the amount of the coupon.

Eight key calculations:

1. Your incremental cost of sales — that is, the actual cost percentage for a new customer. If you are giving boat tours and have empty seats, your incremental costs for an additional customer are next to nothing. If you are selling clothes, your incremental costs might be 50 percent of the sale price. Food might be 40 percent. In any case, don’t include fixed costs that you would be incurring any way.

2. The amount of the average sale. If the coupon is for $75, will the customers spend more that that? I have seen more than one retailer complain that nobody spends more than the value of the coupon. That’s unlikely but I am sure it can feel that way, and that is my point: Keep track.

3. Redemption percentage. You don’t really know until the end, but from my experience and from what I have heard, 85 percent is a good guess.

4. Percentage of your coupon users who are already your customers. I’m sure this number varies tremendously depending on the size of your city, how long you have been around, and the type of business.

5. How many coupons does each customer buy? (The more they buy, the fewer people are exposed to your product or service.)

6. What percentage of coupon customers will turn into regular customers? Again, it can seem as if they are all bargain shoppers who will never return without a discount, but that’s almost impossible. Is it possible 90 percent won’t return? Sure.

7. What is the advertising value of having your business promoted to 900,000 people — that’s the number on Groupon’s Chicago list — even if they don’t buy a coupon?

8. How much does it normally cost you to acquire a customer through advertising? Everything is relative.

If this is a question you are trying to seek answer to, I suggest head over to Cashier Live’s recently launched interactive microsite “Future of Retail”. New technologies like mobile advertising, in-store augmented reality, and cloud-based software are changing how retailers (big and small) sell to consumers. The microsite presents scenarios for Mobile coupons, Virtual mirrors, Welcome kiosk, Digital signage, Self-checkout, Email receipts, Store management, RFID tags and Purchase orders. For each scenario, there are Proof of Concepts which shows how the retailers are working or thinking about using these new technologies. For e.g. for Welcome Kiosk there is this cool Gap Welcome video from Minority Report.

Unilever is beginning a trial to test a new technology that lets consumers redeem digital coupons by having a supermarket cashier scan their mobile phones. Interest in Mobile coupons is growing day by day and these tests will allow Unilever to understand the use of them.

Unilever to Test Mobile Coupons - WSJ.com

The test, being conducted at a ShopRite store in Hillsborough, N.J., will include discount offers for some of the Anglo-Dutch packaged-goods company's most popular brands, including Breyers ice cream, Dove soap, Hellmann's mayonnaise and Lipton tea. Samplesaint, a Chicago mobile-technology firm, developed the system.

"This has been a Holy Grail thing that people have been trying to figure out," says Marc Shaw, director of integrated marketing at Unilever, the first major marketer to test such a service in the U.S. "I think this is on target for where consumers' heads are at right now."

To get the coupons, customers must visit the Web site Samplesaint.com, from which they can transmit the Unilever discount offers to an Internet-enabled cellphone. At checkout, the cashier scans the bar code on the phone's screen, redeeming the coupon and deleting it from the phone. The test will run for four weeks, and Mr. Shaw says he hopes to see it extended to other stores after that.

Timely Reality Check.

Online Consumers to Spend Less, Use Coupons This Holiday Season

Nearly half of US online adults (45%) plan to spend less money on gifts this holiday season than last because of the state of the economy, and one in five plan to spend significantly less, according to a Harris Interactive survey commissioned by RetailMeNot.com.

Fully 89% of online adults think coupons are a great way to save money, and about a third (35%) of those who will be spending less money on gifts this holiday season will use coupons, the study found.

By reading this TMCnet article, "The Grocery Game helps food shoppers save money", I got introduced to The Grocery Game, a website that claims to save you hundreds of dollars on grocery bill each month. Idea is simple, if you're ready to do a little stockpiling at home, just paying attention to the discount cycles at the major chain supermarkets, can allow you to buy nearly all your food and other household necessities at near-wholesale prices. Match that with manufacturers' coupons and weekly specials, you can save even more than bulk discounters like Sam's club or Costco.

The Grocery Game takes help of "high-low" pricing strategy followed by most chain supermarkets.

In those stores, most items are not on sale at any given time, and on average will be more expensive than at stores like WinCo and Wal-Mart that follow the "Every Day Low Prices" approach, which relies less on short-term discounting, three industry consultants said.
But to lure shoppers into the store, high-low supermarkets always have some items on sale -- and the sale prices generally dip below what's available at the discounters, according to Gault and the industry consultants.

...

High-low pricing was pioneered by department stores in the early 20th century and has been standard in the supermarket business since the 1950s. The quarterly cycles have taken root in the business patterns of both retailers and manufacturers, Lilien said, with managers relying on discounts to meet their quarterly sales volume targets.
Newspaper advertising has been central to the high-low strategy since its inception. While supermarkets now list their discounted items on their Web sites and e-mail coupons to customers, the schedule of the weekly newspaper insert still determines when displays are rearranged and sales begin and end, said Bob Reynolds, a Moraga retail economist and consultant.
"In the culture of the business, even in this day and age, it is that print ad," he said.

The Grocery Store has built a nice payment structure around their service,

For a dollar, first-time members can try Teri's List for four weeks! After that, it's is just $10 every eight weeks for one store. Most areas offer only one store list. But if you happen to be in an area where more than one list is available, for each additional store list you choose, you'll be billed an extra $5 every eight weeks.

Little bit of Retail Insider knowledge can take you a long way. Stay tuned :)