The “group buying” business model really took off in 2010 with sites like Groupon and LivingSocial hitting the scene. Local businesses saw a fantastic opportunity to reach a new audience and attract new customers that may not have otherwise paid them a visit. However, the associated costs can be quite high.

Let’s say that you run a modest restaurant in the heart of the city and you’re offering a Groupon for half-priced menu items. When you remember that Groupon can take up to 50% of the net price of the deal, you’ll find that you are only getting 25% (or less) of the value you are providing. That $50 Groupon for $25 is really only putting $12.50 in your pocket. Is that $37.50 really worth having a new customer through the door?

One strategy to recoup these enormous costs is the art of the upsell or suggestive sell. This is particularly effective in the restaurant environment, because the person coming in with a $50 Groupon is likely to spend more than $50. If the final bill ends up being $100, you’ve netted $67.50 (before other expenses are considered) and you have had the opportunity to gain a new loyal customer.

You have to be careful with this strategy, though. Some time back, a boot store was offering a $100 value for $50, but no boot on their website was less than $300. For potential customers who did that pre-research, this can severely mar the image of the business and can have the exact opposite effect of what you had originally hoped. Group buying sites are here to stay, but you have to mindful of how you choose to use them.