Last month, I actually had a client ask/ tell me to turn their company into the next Groupon. Cute. Unfortunately, there was a lot wrong with my client’s request, starting with the fact that my client didn’t even know, or care to find out the following:
- What or how Groupon worked
- Why it has been successful
- What its future might look like
- Whether it was good for business
I’ve long believed that Groupon was basically a Ponzi scheme, enriching itself while acting like a parasite on the businesses it used to deliver its daily deals. I’ve instituted Groupon (and other group-buying deals like Living Social and Yipit) for several clients and although the results weren’t terrible, they hardly lived up to the promises that Groupon does such a good job of marketing.
The thing with Groupon is that they claim to use the power of their lists, marketing and advertising to bring new customers into your business. These customers will be those local to your business (so they claim) who only need a small push to visit and patronize your business. So Groupon offers them a spectacular deal to get those customers in the door. The idea is that out of all these first time participants in your business, you’ll retain lots of new regulars. For a small business like a restaurant, a spa, a dry cleaner, this is the holy grail.
Except it doesn’t really work like that. The truth is that people who use Groupon-type deals are the last kind of customer your business wants. They are coupon chasers, running around their respective cities with no loyalties and no long-term business value. They rarely return to YOUR business. They just go after the next best deal. And why shouldn’t they? Groupon offers them a staggering discount on almost anything.
Every business owner likes to think that they’re business does things right, their product is superior, and given the right exposure, they’ll be awash in new customers and sales as well as that precious word of mouth essential to the long term health and sustainability of any small business. Very few businesses are that great.
A Better Groupon
As you can tell from above, I am not the biggest fan of these group buying deals. I think they are bad for business and it is disappointing to see how bubbly the valuations for a company like Groupon have become. It seems that Groupon is the worst kind of business to be representative of the social media world, especially as it gains mainstream traction. Those superbowl ads were obviously terrible, except for the fact that a month later people (like ME!) are still talking about them. So I guess they worked.
Here is how I think services like Groupon could improve and actually fulfill their destiny, while at the same time having a positive influence on the companies they are supposedly serving.
Allow users the ability to structure our own deals. Give us the option to personalize the sales and special discounts we want, and then have business bid on who gets to fulfill those deals. This is what group or social buying should be.
As it stands now there is nothing inherently “social” about Groupon and like-minded services, except for that fact that people can Tweet, Facebook and otherwise share upcoming deals with their friends and family. Great! But that’s not really social. The fact is that Groupon’s power derives from its email list. Big whoop!
A truly social buying service would be one where I could structure a deal that my friends and I wanted anyhow…then Groupon, or whoever, could take that deal and use their database of business owners to see who would fulfill it. Obviously they’d need a platform in place and perhaps even a exchange market to see what deals were out there, what other business owners were bidding on. Because it was “my deal,” one that I created, I would be much more likely to send around to friends and family, write blog posts about, evangelize and generally market the crap out of it, it has that much more of a chance of being successful. And it would be what I wanted, not what business owners and Groupon THINK I want.
To me this would be much more fair, and much more useful, than the way Groupon currently works.
What are your thoughts on this? Could Groupon improve the “social” aspect of its business? Would an “exchange” like the one I proposed work any better that what is currently in place? Do you use Groupon?
{ 52 comments… read them below or add one }
I agree that social buying deals should be personalized, as well as location based sites like Foursquare. (as we have discussed). However, Groupon sucks (for me, as least) because clients must prepay for deals they may never redeem. Hard earned cash gone! I would be more inclined to develop an App that incorporates social-buying and location without prepaying. “Check into” a business and redeem the deal with your smartphone on the spot. Foursquare has done this but not with any specificity. Allow users the ability to structure their own deals, eliminate the prepaid annoyance and you got yourself an App!
Try trubates. Buy what you want when you need it, at discounts comparable to groupon.
Have a look at Spreezio
http://spreezio.com/index.zml
They just released an iPhone app. They are attempting to do EXACTLY what you state, that is, be a deals app where you can structure your own deals and send them to local merchants via a deals exchange of sorts.
I highly recommend any business deciding to use Groupon or one of the daily deal websites to use one of the Groupon Calculators out there to work out what impact it’ll have on their business/cashflow.
I think that’s one of the main issues, I’ve heard of some horror stories of merchants then cutting corners (due to loss of revenue) & not delivering fully on the Groupon. Due to the nature of the online community this will then result in negative reviews & a potential reputation disaster!
Stuart
this is a great point, thanks for chiming in. Does Groupon offer that ROI calculator as a service or are we talking some kind of derivative option?
Any business doing this should of course run the numbers and make assumptions as to what kind of long term engagement they might see from any new customer. Of course, at this point, Groupon and the others are so well known that many businesses are just signing on without a thought.
Zac
You would need to put some real thought in to how both business owners and individuals would interact with your product, and whether or not it would truly solve a need. I think a resource planning tool like mob manager http://www.mobmanager.com/ is probably more useful for protecting business’ interests, and customers are likely happy with the simplicity and ease of use of existing systems.
That said, if you decide to start an exchange, check out the link in my sig.
Chris
Thanks for reading and commenting. Im a simple critic, i dont build or do anything of any value obv!
I think i’ll do a follow up post going into the details of the exchange i had in mind.
Zac
The problem with the whole system with these type of coupons is that the businesses they serve don’t know how to do business. For some businesses with large margins, Groupon and its ilk are great for getting new customers into the business. NOT all the customers are only bargin shoppers but there will be enough if the business can afford a 25% payment for their product or service. Restaurants are great for this type since their margin is typically 200%. As a long time salesman, I’ve disdained selling at a discount because I don’t want discount customers/clients but for certain businesses it makes sense. Therefore you cannot discount (pardon the pun) these types of marketing.
Alvin
I think thats a great point and one that I cannot refute. I was certainly painting with a broader brush and I have no doubt that there are businesses for which groupon makes sense. And I do agree with you that many small businesses just aren’t that great at what they do.
Zac
I think you are wrong. True that restaurant margins are more than 200%, but in America, most every individual/ local business has margins much higher than 100%-150%. Giving 50% off to consumers and another 20-25% cut to Groupon, still makes them enough dough to take home.
Businesses are still making enough money even after the Groupon discounts. Of course not as much as they would if the customer had not used Groupon.
On another note – it’s not just about getting repeat customers, businesses also think of the attention they are getting of potential customers (even if 80% of them don’t end up buying the deal). Most interested consumers will still visit the website, read reviews, catch up with the ratings of the business.
That is enough to justify the Groupon costs/ loss of margin. You never sell at loss anyway. You got incremental sales and revenue at a much reduced margin, which would still help offset some fixed costs.
Hey JAY, you’re obviously a government worker or a union worker, with no idea how business works. You can’t have a “margin” higher than 100%, maybe you mean markup.
And yes, almost every groupon business does indeed LOSE money on the groupon deal, they swallow that pill by believing the Koolaid that groupon is a marketing expense.
“you never sell at a loss anyway”. Yeah right, very few businesses have 75% margins, that will allow them to break even with a groupon deal.
Go back to your theoretical existence with no grasp of real business.
Where did you get that 200% margin for restaurants. More like 5 to 7% pre-tax
http://rrgconsulting.com/ten_restaurant_financial_red_flags.htm
Charly – you might want to take a look at ScoutMob. I think they’ve got a really interesting model. Unlike Groupon there is no prepayment for deals. You use their app to see a list of nearby places offering 50% off. The coupon is redeemed directly on the phone at the time of purchase, and businesses must only pay Scoutmob when a coupon is redeemed. It’s not exactly what you are describing but it does combine social-buying and location without prepaying.
ZAC: Your alternate Groupon idea is intriguing, but it seems to require more “team” coordination than I bet most people are willing to invest (especially the older they get). From a business perspective it sounds appealing because it means the consumer is coming to you vs the Groupon model, which plays on the desperation of small businesses for new consumers. Whichever model reigns in the long run, it’s up to the businesses themselves to use the opportunity to capture loyal patrons. The coupon model doesn’t lead to loyalty, unless a business seizes the opportunity to give that consumer something worth coming back for: a follow up email or phone call to check satisfaction, sending them home with some manner of helpful tips, extra-good customer service, whatever makes sense for your business. That’s called value. If all you’re offering is a one-time cut rate product, you’re just cheap.
Dori I agree
Most people may not be willing to do the work that I have apportioned them in my scenario. Heck, I don’t know if I would be willing to. And I think that Groupon and like minded services would have to get creative to make that process smooth sailing and pretty easy so that anyone could do.
But it does not follow that just because Groupon is easy that it is good for business. Groupon is good for Groupon, that’s it.
And you are absolutely right that most businesses are awful at converting leads into sales. Every day I work with businesses and before I even get into building their businesses, I first show them how much business they already have that they aren’t closing on.
My work is much easier after that!
Zac
I completely agree with your proposition on making it REALLY social.
By personalizing and allowing buyers to create a deal or sales pitch – did you mean let the users select the price (and discoutn also)? This could be tricky…
Raj
I think users could potentially pick what they are willing to pay. I have ten people coming over for dinner and I need a pizza place to feed us for ten bucks each. Area pizza places would bid on it.
Get it?
Zac
Don’t steal my idea! (Starts working furiously again on the implementation!)
Why not think of this as another advertising model. Businesses will figure out after a while what would be their customer conversion rate. The biggest bang that Groupon offers is localized selling but the discount is humongous so margin is low. So I assume that when my business is signing up for it, I am really committing for those customer’s visit work for me. While going on Google and praying for someone to click and buy, I feel I am getting more focused advertising. And their user base and their expectation of great deal, I may be beneficiary of introduction to find some loyal. I would not sell though at loss on Groupon.
I agree with everything in your post except for one thing: allowing internet users to create their own deals and allow business owners to place bids on the offer most requested. Your solution does not neutralize the problem: Groupon needing to sufficiently increase the Customer Lifetime Value of local businesses;but what it does is simply make Groupon more “socially-based”.
Now, what is Groupon good for? Attracting an instant buzz for new businesses.
What is Groupon bad for? Increasing the CLV for all local business.
Making Groupon more “social” doesn’t really solve the problem. Local business owners must be smarter in their use of Groupon like platforms and must make the most sound decisions based on their financial situations.
I have long since felt the same way you do. People just want deals on the stuff they want to buy. If you structure the interaction correctly, a little deal can close a sale and everyone can be happy (incremental revenue capture for the seller and deal satisfaction on what you wanted to buy from the buyer)
You should check out what we’re doing. It’s like priceline for apparel.
No it won’t work.
People don’t want to be proposing their own deals.
The fact that they want discounts is not the same thing as wanting to propose them.
Zac,
Having run these types of deals with my wife’s restaurant, I agree that the majority of customers coming in a typical 50% off deal aren’t particularly good. I think we had a much better crowd with a 33% range discount on Blackboard Eats… not only were sales profitable, but it was a much more focused network of foodies. Needless to say, I think the model will change quite a bit over time, with a substantial reduction in net discount + fees going to the couponeers.
I think the network dynamic is going to be important value creator over time, but no one’s talking about this now. As you mentioned, Groupon seems to be attracting a horde of consumer-locusts…who wants them descending on your business? Wrote about it here following the super bowl disaster: http://www.goelinsights.com/groupon-isnt-branding-and-ad-copy-what-theyre-supposed-to-be-good-at/
Where we benefited was the self-service promotional coupons from a service called Woobox. This was just as viral as groupon, but with a monthly fee and distribution through our own customers (positive word of mouth/ recommendation vs. typical Groupon gobbledygook). Check them out: http://woobox.com/
I’d feel rotten about walking into a local business and using a Groupon that I know the business is losing money on…and do that every day with a different daily deal.
A better Groupon could be a platform that provides businesses a way to make their own deals with Groupon taking a small piece of the transaction.
I’m totally with you there Shyam. As a business owner I understand what it takes to stay afloat, and I everyone I do business with is worthy of a fair profit. When I first learned of Groupon I thought it would be a great marketing tool; until I learned of how I have no choice other than to offer no less that 50% off AND they will take 50% of everything we take in. So after paying for the merchandise (online retail), paying rent, utilities, fuel, shipping (we offer free shipping for domestic orders) and whatever else, we end up with a substantial loss while Groupon would end up with a pile of cash for having done so little in comparison.
If I could have offered a 30% discount and Groupon took 20%, I may have considered it. But at the rate they want, its not going to happen. I did the math.
There is a brand new company called Buckaroo at http://buckaroo.com/ which does exactly that. It it built for businesses so that they can create their own “Deal” or coupon and the business owner keeps 100% of the revenue. It has some bells and whistles on the software as well. Interesting concept but the business owner still needs to have an email database. I guess that is why Groupon does so well. In the end… It’s always about the database! Groupon knows this, that is why they spend over 50 million a month in generating new names for their gorilla-like database. Check out Buckaroo though, and give me your thoughts, I was going to buy their software but would like a second opinion. Thanks!! -Mike
Excellent post as usual.
When I first tried out Groupon I couldn’t help feeling that the service didn’t appeal to me as a consumer. Why? 95% of the deals are completely irrelevant for me and getting such offers in daily emails is close to the very definition of spam (with the difference that I’ve opted in). The only criteria used to personalize the offer is the city (Stockholm) I live in, as 1 million other habitants. What about adding an interest category layer (travel, beauty, food, etc.) to make offers more relevant?
The exchange idea is interesting, reminds me of letsbuyit.com during the dotcom bubble (amazing how timing can be such an important business model success factor).
Another way to pivot the Groupon idea is to think not in terms of the city where you live but rather the city to which you are travelling (and the period in time). Hence, local business can make offers to “tourists” that don’t cannibalize on the local market (and avoid fostering a deal behavior in their customer base).
I’m sure you can pivot the Groupon idea into many shapes by rethinking needs within different industries and consumer segments.
Wow. Everything you’ve just said is exactly what we are doing right now. We literally soft launched our website (CrowdSauce) last week that allows people to band together to request a group deal from the business that they all love, not some random business theyve never heard of. This way, it promotes loyalty & word of mouth, not just blatant cash grabbing. Personally, if I get one more group deal for leg waxing I’m going to go mental! I love this article, it’s confirmation that we’re on the right track.
Sorry, but this is a lazy and over done angle. Groupon doesn’t suck. Everyone thinks it does because it does a single thing, and does it extremely well. It’s a hater effect. Everyone thinks they can build a Groupon because it only does deals and how hard is that?
“The truth is that people who use Groupon-type deals are the last kind of customer your business wants. They are coupon chasers, running around their respective cities with no loyalties and no long-term business value. They rarely return to YOUR business. They just go after the next best deal. And why shouldn’t they? Groupon offers them a staggering discount on almost anything”
Sorry but this is a lazy angle I quoted. Have you purchased a Groupon or Living Social (LS) before? I have. What’s great is sometimes the deals entice me to purchase products I never would have bought before, like during Xmas when I bought my brother & dad a Nascar Race Experience. But, you know what happened? I gave them the gift, they loved it, I was thrilled, and best of all, they are so pumped, I am buying myself an experience to join them at full price. Now we get to share an experience and bond and have that memory for the rest of our lives. I’d say that’s a successful sale from LS.
Or, how about the few restaurant certificates I have bought from Groupon. They were a great deal, but you know what I have done? Nothing. They have sat in my email because I haven’t had time to use them. That happens often, which is free money for the business.
Groupon is not doing anything different, they just do it better than anyone else, which brings out jealousy. Ever been to a happy hour before? Thought so. Ever been to Taco Tuesday at the local bar? How about Wing Tuesday at BW3s? Yeah, thought so.
Restaurants have always run specials and discounts to attract customers. Groupon helps them do it on a larger and more public scale.
Hell, Restaurant.com sells $25 gift certificates for $2 a piece sometimes to local places. No uproar there.
i have purchased Groupon, Living Social, Yelp and Yipit deals before, not because I was so compelled by the offer, more to just try it out. Nothing social about it.
“Or, how about the few restaurant certificates I have bought from Groupon. They were a great deal, but you know what I have done? Nothing. They have sat in my email because I haven’t had time to use them. That happens often, which is free money for the business. ”
Actually groupon doesn’t pay the business any money from groupons not redeemed.
Check out Matchpin (www.matchpin.com)
While we dont have a Priceline like name your own price system what we are attempting to do is provide drop dead simple tools for merchants to push offers in real time and we distribute those using our app to users based on their location and proximity to the business. Users who opt-in also receives push notification and/or email when businesses create new offers. Users then simply walk into the store to redeem – no prepay, no credit cards, no printing.
Businesses like the flexibility to control offer terms and not give away discounts they cannot afford to or want to OR give any discount during busy hours.
great points parthiv, thanks for reading and posting
Great post Zac. We have just launched a new app today called http://www.crowdsauce.com (search for ‘crowdsauce’ on the app store). CrowdSauce allows users to search for businesses and then request a deal from that business using the ‘Reward Me’ button on the website or Location Aware iPhone application. Once a user requests a deal they have the option of setting up a virtual ‘Flash Mob’ to invite friends to also ask for a deal from that business, thus building the crowd around popular businesses.
As the crowd for businesses grow, those businesses will have the option of promoting deals to their crowd and active users in the CrowdSauce network will also be rewarded with additional incentives and benefits. Deal-of-the-day sites send you a deal they want to sell you, our approach is to source deals for you based on the businesses you request. We are working on gameplay and social media engagement strategies seen in check-in apps and combining this with relevant deals to a businesses loyal customers.
sounds fantastic Slade, gonna download and give it a try!
Thanks Zac, welcome any feedback or questions. “REWARD ME!”
I call them “One-Trick” Phony companies.
They actually think that by dropping their prices so much…that this will buy the consumer?…not a chance…this people are chasing deals and moving on…”No Customer Service”
—————————
As a Restaurant owner…they asked me to drop my meal to half?…$10.00 down to $5.00 then they keep half …after my wages, rent, utilities, etc…I be making around $1.00 on the deal.
I rather advertise honestly and create a great customer service environment…treat them well, good food, good prices… this keep my doors open.
Cecile, thanks for the comment. You are exactly right. Well done for not capitulating!
Zac
Groupon will do nothing but hurt your business. I had a sales woman in Perth, Jess, try to push it all on me. My business partner and I agreed to run a low number (limit) of coupons just because we thought we could increase our client base.
The deal was we offer 50% off our fees, and of that we split it 50/50 with groupon. That means we are giving our service for only 25% of our normal rates. They came back and declined our initial offer, and Jess suggested we do something to make it more attractive for her superiors, then they will say yes. I told her I didn’t like it and that I was of the position that it was going to really hurt my small business as it was, but I would speak to my business partner to see what he thought.
The next day she called back and I told her that both myself and my business partner are going to have to decline her offer, then she came back with a counter offer. She would make our cut 60% and groupon would take 40%, as well as pay us an initial 20% upfront when the coupons sold. The deal was now better for us than the original one they had declined.
I did some simple maths with her to show her that we would be making a loss of over $3000. with this money I could do my own marketing for a much better return on investment. That’s when she told us that our only competition has approached her, and that she was hoping to get us up and running before they got in. I asked them what they were called and she gave us the nickname that my business partner and I had called them.
The thing is, our only competition is corporate based, and would never even dream of offering such a discount, their services cost you your first born, and they’re busy as hell. My point is, groupon will hurt you, and their sales staff are manipulative little fucks that don’t care how much you are set to lose, because they can only gain from your missery.
I’m sure somewhere, someone has had a good experience with groupon, but for the most part, it can only appeal to business’ that are struggling. The sales staff will tell you it has never hurt a business, but do a quick google search and you’ll find the truth.
Sorry if this is too long, but Jess in Perth really pissed me off with her sales tactics, she even told us we were crazy the way we pay our employees (commission based), because apparently a saleswoman (commission based job) knows more about running a business than a couple guys with business degrees.
I have worked with Groupon, Eversave, and Angie’s List Big Deal. They are all a scam. They want to take the lion’s share with 25-50% commission (they all shot for 50% then Groupon will nickle & dime you for credit card processing fees on top of that – which I am certain is against their contract with their CC processor to pass on those fees on to the customer). They, for the most part, want you to make a offer that really is no great offer and then publish that it at 50% off. They do try to make is sound above board but it is secondary as they just want the commission. When dealing with these folks remember that they have a coupon mentality so they will nickle and dime to no end with the expectation that the business will not make any money on the deal. My experience with coupon customer is that there is no loyalty and little prospect of returned business as they are only interested in the deal, instant satisfaction and sometimes endup overpaying to get a “deal” (read Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions by Dan Ariely).
The Groupon business model is awesome. I wish I had thought of it, probably just like everyone else on here complaining about them. The concept is the same with all retailers. The more a retailer buys from a manufacturer, the less the retailer pays for a product. Lets look at Walmart. Why are Walmart prices so low? Because they purchase in bulk, huge shipments, so, they can sell at a discount. Why are the mom and pop businesses prices not as low. Because they can’t buy in bulk like the Walmarts of the world. You can’t look at the price each person pays and say they’re buying cheap, that price is only available to them when the item is bought in bulk through the collective buying process (Group Buy). Stop hating on Groupon. If you can build a better mouse trap than their model, build it and beat them.
Groupon SUCKS. First, they bother you SO MUCH to get your business to offer it, so I gave in. After a year of harassing me, I said ok, how bad can it be?? BAD. They allow people to get refunds and they don’t tell you when that happens, so then you have 4-5 people who booked together and then they all don’t show up and you’re screwed b/c your employees are sitting around on a busy day with NO ONE. THEY ARE TERRIBLE!!!!! Small businesses DON’T DO IT>
Groupon is about to put us out of business – they put up a deal that we can’t fill (boat rentals) for double the price but we are trying to honor the customers (150 of them!) and will probably lose our business if we do that. For a boat rental we are only making $35 per 2 hour rental – won’t even cover the fuel.
Not sure how we should proceed… they could easily bankrupt us. Not sure what our rights are…….any ideas? Can we just refuse to honor these groupons?
I’ve done business with Groupon twice as a merchant. Both experiences were terrible and I’ll tell you why.
1. They are highly disorganized and disinterested in the relationship they have with the business owners. They dictate all rules, do not listen, and become grandiose during “negotiations”.
2. They screw over small businesses. I also know this is an inside philosophy-I know several Groupon employees. Their goal is to make THE most money possible. They convince businesses to offer something that will bring Groupon max revenue without considering the businesses ability to handle everything on the back end. They also do not consider how the business actually does their daily business. Groupon wants the company to handle Groupon holders however is easiest for Groupon. Often once the Groupon ends there is no support from Groupon’s end to handle the overload of complaints for questions.
3. They are getting too complicated. Too many side deals take away from the feature deal. People are confused. It is scattered. Now they have Groupon Live and Groupon Now. They are spreading so fast they can’t keep track. They are not desirable anymore. Bye bye Groupon.
I agree with the fact that Groupon is very limiting for both consumer and business… 100 percent. There has to be a way that businesses can offer deals more than 4 times a year. There also has to be a way to protect businesses from giving such RIDICULOUS deals over and over again, but to give special discounts to repeat customers. Groupon does not allow businesses to create their own deals.. and the businesses have to wait in line.. to offer another deal that is probably too big for their bottom line.
Thanks for the post..
I totally agree with your views on these group deal schemes. I’ve been contacted by them all including Facebook and Google who are eager to jump on to the bandwagon. These schemes do nothing to build quality into your business. For a single-person business like mine it is like burning the furniture to keep warm. While you deal with a short term surge and work 10 times harder to achieve the same revenue, the real customers you are ignoring are drifting away. OK, I can see if you have a bus going to a destination you may as well fill the empty seats at a discount, but for a small personal service business, group discounts do nothing to help your business and merely train your market to expect a deal or they won’t buy. Never buy customers by being cheap. It doesn’t work.
I bought a few deals through Groupon a while back. Since then, they are bringing deals from irreputable biz. with heavy concentration in laser and waxing. I am cancelling my account and looking forward to shorting their stock when they become public.
I agree that some of the merchants may be feeling the pinch for these kind of Deals by the Deal companies where the merchants end up getting 25% of the value of their service/products. But one need to understand that some merchants desperately need more traffic for the business and this marketing technique is definitely the most effective one and has an edge over any other marketing technique. As per one of the survey, 40% people come back to the same business where they have availed the discount and that make lot of sense for those merchants. Some merchants run these advertisements periodically and that proves their need for these kind of marketing.
I just signed up for a merchant account and called to see how long it would take to authorize my account. I was told 2-4 weeks.
If someone signs up and wants to post deals on Groupon they don’t want to wait 2-4 weeks for them to verify that you are a legit company. What a joke!! I hope another company comes out and competes against them. I am very surprise by their lack of support for new merchants.
Mike
Groupon is the worst business decision I have ever made. I was fully aware that there would be no profit from the actual sale of the certificates. I had to discount a regular priced service 50% then groupon takes half of that. Oh yes and Groupon makes me pay for the credit card processing too. Oh yes, They also lowered the price and increased the discount to about 67% when they ran the offer without my permission.
So I still had faith and tried to make this Groupon experience work. I understand that with paying my staff and for product I would be in the red on each service but it would be worth it if the clients came back. If the clients purchaced additional services or even tipped the staff like regular paying customers do, it would be ok.
This did not happen. The majority of the Groupon clients are regular clients of GROUPON and go where the next deal is. Tipping is rare and they don’t care if you get upset as they have no intention of returning anyways. Some even stated that they NEVER pay full price for spa services. They have become professional Groupon buyers. What Groupon was and what it is now may have changed. We have this huge Groupon, Livingsocial ect mass of consumers who regularly purchase these deals for food, entertainment and beauty services. This is how they live, save money and get what they want. The problem is that businesses like mine are seeking return clients and profit. These professional spa hoppers are not looking to become loyal customers of us. They are loyal customers of Groupon.
So now that our Groupon deal has calmed and we can’t wait for those certificates to expire, I see how badly this deal harmed my business. No one wants a Groupon on their books. Groupon clients are avoided by staff. The Groupon client is not treated as well as a regular client. Even if we offer our own 50% off discount, the clients we get prove better returns. Staff now views Groupon people as a waste of time.
I had really hoped it would be a good deal. Oh and another on of my great ideas….. Don’t ever run a Groupon that included Brazilian waxing. Wow that was good thinking on my part wasn’t it?
Stuart
this is a great point, thanks for chiming in. Does Groupon offer that ROI calculator as a service or are we talking some kind of derivative option?
Any business doing this should of course run the numbers and make assumptions as to what kind of long term engagement they might see from any new customer. Of course, at this point, Groupon and the others are so well known that many businesses are just signing on without a thought.
Zac
Deal brokers such as: Groupon, Wagjag, Cardswap, etc.
Their customers will not return to your business, unless you offer another deal. Period!
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