How to Save Money with a Groupon

It's the greatest thing since coupons for many penny pinchers. And unlike most grocery coupons, which are good only on products, it's a way to get deep discounts on services.

The newest money-saving wave to sweep the U.S. is the groupon. It's based on the premise that merchants will offer big discounts if they're guaranteed a specific number of customers. The Groupon web site is geographically customized as far as available deals.

Groupon is the brain child of Chicagoan Andrew Mason. He was able to talk local merchants into offering discounts provided he guaranteed them a minimum number of customers. Each customer was able to participate by buying a "groupon" for the service offered. Discounts have often topped 50 percent.

Groupons have been set up for consumers in the Chicago, Boston, New York, San Francisco and Washington, DC areas. The concept grew out of a company known as The Point, whose web site was launched in November 2007. It focused of starting a campaign by asking people to give money or participate in an activity as a group. The idea morphed into Groupon in order to focus on the needs of city dwellers. It featured one good service or activity each day.

The mechanics are straightforward. Wannabe consumers register at the Groupon site by using the location pull-down menu to access their area. Each day, the site features a service or activity offered at a big discount. It urges consumers to invite their friends to participate because the discount will only be available if enough people join that day. There are no membership fees. Merchants who participate pay a fee to offer a deal. They're sometimes willing to offer almost shockingly low prices in order to market their services and build a customer base. When picking the deal of the day, Groupon considers its quality as well as the offered price.

Subscribers receive daily email alerts regarding the deal of the day. They can check periodically throughout the day to see how many more takers are needed to reach the minimum. Groupon only charges their credit cards if enough customers sign up for the deal.

What can you buy on Groupon? A recent promotion on the Washington, DC site was $20 for a 30-minute acupuncture treatment that normally cost $40. When Groupon offered Chicago Cubs rooftop tickets, the deal was quickly sold out. Often, only 20 customers need to sign up for the deal to meet the merchant's guarantee.

If you were trying to afford teeth whitening, you could have taken advantage of the service for $185 instead of its normal April price of $600 at one of the locations. And if your budget made you feel guilty about a little pampering, you might have wanted to sign up for $100 of salon services for $50. A $35 meal in a Chinatown restaurant recently went for $15 on the Washington, DC site.