Groupon

[KingsandQueens]

Hi,

I'm interested in hearing what people’s thoughts or experiences are of "the words fastest growing company"....

As far as I can tell Groupon can generate a lot of footfall for the retail industry but how can it be profitable (for the retailer) with such heavy discounting.

Obviously it’s just another channel in the marketing mix of drumming up interest and would be advantages for clearing stock, but for winning new customers in the long run I'm not too sure.

Interested in your thoughts.

 

[Merchant UK]

They've been on BBc's watchdog and not rated very well by some of their customers :|

promising vouchers and stuff they can deliver? Lets a lot of people down

 

[tommy]

I think its a great idea and think it can be very profitable especially as the majority I see are beauty places so they keep you coming back for more treatments and paying the other 60% or so discount you got originally on the groupon purchase.

I have to say also I've got a few bargains from there too like hotels, which do say you can only use at certain times (mainly quiet period) so they fill the rooms up.

Tom

 

[totsongs]

I am not part of the Groupon network, but do know somebody who is. It is not really any different to businesses offering products at below cost price as 'loss leaders' to encourage further spending. When you take your turn as the Groupon bargain offer, you will take a big hit on your margins, but the gamble is that you can attract people back for repeat business at your normal rates. If you only see people when you are at Groupon discounted rates, you will quickly get into trouble.

 

[KingsandQueens]

I guess that the crux, calculating the gamble of using their services as a lossleader. Nice model for groupon half the upfront profits non of the risk!

 

[KateCB]

I can't seem to sign out of their service, they send me loads of rubbish everyday, most offers are ridiculous, too far away (they haven't got my city, so they send me anything they consider 'near') and I delete every one......

They have as others have said got a poor reputation for overselling what the companies actually offer, leaving many unhappy customers for the offers and unhappy companies who can't supply what they offered in the quantities that have been erroneously offered!

 

[dubOnline]

Groupon is great for acquiring new customers.

The true value we have had from now running several campaigns is mainly down to building our database/email marketing list with real people that we can sell to again and again.

 

[KingsandQueens]

Groupon is great for acquiring new customers.

The true value we have had from now running several campaigns is mainly down to building our database/email marketing list with real people that we can sell to again and again.

Am I right in understanding that you get the email list of all the customers who applied for the offer?

 

[dubOnline]

100% yes, you just then import them as a csv file to your email marketing database

 

[marketingquotes]

As a user, I think it is a good idea, but never used it as not seen the right deal at the right time.

Spoken to a few restaurants that use it and they hate it (as the industry is not in great shape anyway and mega discounting brings up visitor numbers but not profit).

Can't argue that they are profitable - which is what it is all about really.

Regards,

Marketing Quotes Support

 

[LicensedToTrade]

The same rules apply to groupon as they do to discounting in general and that rule is an oldie but a goodie.

"Customers who come to you on price will leave you on price"

Put simply, if a customer comes to you because you are the cheapest at any given time then they are less inclined to be loyal, long-term, repeat customers when your price go back up.

If you sell on price alone then the customer is the only winner.

Nevertheless, groupon does offer an additional benefit than typical DIY discounting. Due to the hype around it at the moment you aren't just offering discounts for nothing, you are paying for advertising with your lost profits. It's local advertising too in most cases. A newly opened restaurant in a particular town would be daft not to give away 100 lots of meals for a tenner.

The problems occur when the restaurant either allows over subscription whereby they have given out more meals for a tenner than they can possibly accomodate OR most commonly Groupon totally ignores the requests of the restaurant to limit the offer to 100 lots and ends up selling 608 lots.

The result is around 500 unhappy customers who paid £10 for what was meant to be a bargain and they ended up with a real headache trying to book a table. They won't be using the restaurant again, but they might use groupon again.

 

[Paul Norman]

Groupon has, as its attraction for customers, heavy discount.

As a retailer, the levels of discount that Groupon insist on would mean selling at a loss, which would be financially very unwise. However, if you are selling a service, and can afford to give, say 65% discount in return for volume, I think it could work.

A local hair dresser offered 70% of a fairly pricey treatmean, and sold almost 300 of them. I do not know enough about their business to assess how good a situation that is!

Before embarking on a high discount, high volume offer, you must do the sums. What happens if you sell 300 of your product at 70% discount? Can you afford to provide the service? How will the cash flow work?

I have no personal experience of them, but like all these things, the deal is not unmixed. Do not enter into an offer on Groupon until you FULLY understand the impact of the outcome on your business.

 

[SillyJokes]

A colleague of mine has said it's a great way to shift a load of stock very quickly that you need to be rid of but it needs to be something like last years design of BBQ or something like that.

 

[LicensedToTrade]

A colleague of mine has said it's a great way to shift a load of stock very quickly that you need to be rid of but it needs to be something like last years design of BBQ or something like that.

Yeh do you remember those 2010 BBQ's, they were so old-fashioned compared to 2011's modern BBQ's. Don't even get me start on those ancient 2009 BBQ's

 

[Mags@Ariotek]

Ive only heard good reviews about Groupon, never used them myself but been tempted.

From a business point of view, would you buy Discounted Web Hosting from them?

 

[LicensedToTrade]

From a business point of view, would you buy Discounted Web Hosting from them?

I'm not convinced that is the kind of deal that Groupon would go for. Afterall they are a generalist hand-shaker that offers deals to all members of the public in any given local population. Web hosting might be seen as too specialist and not relevant to the bulk of their customers.

Remember that they don't feature lots of different deals at once, just a select few. When given the choice of a local restaurant/hairdresser and a web hosting company they might be inclined to go for the former to increase conversions.

 

[Mags@Ariotek]

Anyone heard of "Huddlebuy" similar concept but for Small Businesses

 

[Click2Post.co.uk]

I think Posies cafe in the States is an excellent example of why Groupon isn't right for every business:

http://posiescafe.com/wp/?p=316

After three months of Groupons coming through the door, I started to see the results really hurting us financially. There came a time when we literally could not make payroll because at that point in time we had lost nearly $8,000 with our Groupon campaign

 

[Goalseeker]

Am I right in understanding that you get the email list of all the customers who applied for the offer?

No you do not get a list of client details other than their voucher number. I am amazed at the number of retailers who take part in a Groupon or Living Social promotion and do nothing else apart from accept the voucher in return for deeply discounted products. The whole idea is marketing and I use a very simple way of maintaining contact with all of my Groupon clients which has had a tremendous effect on my sales and profits.

In my past career I was taught to never throw a prospects name away even when they have said no 70*7 and it has proven to hold me in good stead both in my past career and this one.

 

[Bambooshoot]

I have recently started using it too and *touch wood* everything has been ok so far. I think when problems occur it's the company who has offered its services who's at fault, not Groupon itself. I guess the company doesn't think that 4000 people are going to buy their new massage or camera or whatever. That's just my two cents, lol!

 

[psoutinho]

Hi
I use Groupon as a consumer and think it's great as I love a bargain!!

With my marketing head on I can see the benefits to companies as it raises awareness and generates leads.

I've also read an interesting article about Groupon on the Real Business website and it said Groupon aim to have 1.6 million subscribers by end of March 2011!!!

Kind regards
Paula

 

[Nord20]

For us it worked really well, but there are some things you need to be aware of as a business:

1. Make sure you get your price point right. For us, we sell an introductory offer (we are service based) at £29.99, which gets you 15 days access. This is open to all new customers once. After that one of our offerings is 10 classes for £125. For our groupon promotion we offered the 10 classes for £28, of which we get a little over £14. This effectively means we get 50% less for a new customer's introductory offer - not a huge loss, as it's designed to get people into the studio in the first place, but it looks like a massive saving (£28 instead of £125).

2. You do NOT get the names or contact details of people who buy the voucher - only when they come in to redeem it. We sold 350 voucher, but only 210 people came in - Groupon keep 100% of the sale if the customer doe snot redeem the voucher (this is really how they make their money).

3. Groupon INSIST upon using their own wording to sell you product. They describe is as quirky, I call it illiterate. In ours they used the sentence "Elasticity is an important quality for the principles of physics, the functioning of engines across the world and getting creative with the stationary cupboard." You can imagine how unimpressed I was, especially given that I don't drive a Noddy car that runs on elastic.

4. Groupons customer service is quite simply appalling - they put our promotion out a day early, without warning us, so we were unexpectedly inundated with calls and emails which we were prepared for (I had even got the staff to all agree to come in on the same day to deal with this, but of course, they weren't there as it went out early!).

Despite all of the above, we got 210 new customers through the door, which was a quick win of several thousand pounds. As we sell a service rather than a product, there was no direct hit to the bottom line and we got a nearly 20% retention from those 210, so all in all, it's a pain, Groupon are an absolutely nightmare to deal with, but you can't argue with results.

 

[Merchant UK]

Groupon in the papers today

People cannot exchange their vouchers or get the bookings, Oversubcription is the main factor where the company overing the deal simply can't cope with the influx of customers wanting their goods or services all at once, This has put a lot of people off.

 

[hcrafts]

There is a beauty salon local to me that closed down on the back of the effect of Groupon (although I am sure there must have been other issues too). They offered some kind of massive discount on a new 3 week manicure. I heard that they had 500 appointments from Groupon. Anyway, the manicure did not last 3 weeks due to poor product/application as they must have been rushing to get everyone in. People were ringing to complain and then they couldn't rebook to get it fixed (free of charge!) because the salon was packed out with Groupon clients. All their staff had to be taken off other treatments to get through these clients. In the beauty industry you are selling your time which usually amounts to £1 per minute. They must have been losing a great deal more than that as they were having to re-do all of those '80% off' manicure deals.
They are closed now, but on the upside, my sister who owns a salon a few doors up was able to pick up lots of dissatisfied clients who are now 'hers'.

 

[Nord20]

Yeah, this is another thing Groupon are bad at - I've heard companies agreeing a maximum sale limit with groupon, which is then completely ignored and they simply sell as many as they can.

 

[Rockley]

I think you should read this:
techcrunch.com/2011/06/09/groupon-single-worst-decision/

Bottom line: do the math. Otherwise you will loose money with every new customer comming from groupon.

 

[Merchant UK]

I think you should read this:
techcrunch.com/2011/06/09/groupon-single-worst-decision/

Bottom line: do the math. Otherwise you will loose money with every new customer comming from groupon.

http://posiescafe.com/wp/?p=316http://posiescafe.com/wp/?p=316http://posiescafe.com/wp/?p=316/

 

[MASSEY]

http://posiescafe.com/wp/?p=316/

Haha that was quite funny. Interesting read.

 

[alexduduta]

Groupon is acceptable now, but I am not looking high at this future.
For the start, the company or merchant can do groupon discounting as the promoting fee. But after long time, as all the people know that you are a groupon store now. Where is the profit from. Can you discount all your products?

 

[mikey 5662]

Bearing in mind groupon take 50% of the cost of the voucher (correct me if i am wrong) they are the only real winners, In the restaurant trade (which is labour intensive) margins are already cut with the ever increasing costs to operate in this bargain frenzy orientated culture.To state that you will gain customers in the long term just isn't true - They just move on to the next offer.

 

[Merchant UK]

So am i right in thinking this is how it works???

You normall sell a product for £50, Your profit on that is £25.

You advertise on Groupon and offer your product for £35 and Groupon take £8 and you keep £2 ???

So basically say you sell 100 products like this that would normall retail for £5000, all you'd make profit would be £200 :|

if any groupon buyers don't redeem their coupon, then Groupon keep the full amount themselves (£35) whilst you get the bad press and reputation??

Whilst its nice having Hundreds of extra sales its not worth losing your business over.

 

[Rockley]

Especially in an industry where the margins are tight, it comes down to an assesment of a target-group evaluation, when the bet is on making money with follow-up business.
The customers attracted by such an offering are probably very price sensitive and might choose your cheaper competition over your regular prices in the future. Therefore you have to be sure that you have a superior or "sticky" product to offer.

 

[sitandstay]

So am i right in thinking this is how it works???

You normall sell a product for £50, Your profit on that is £25.

You advertise on Groupon and offer your product for £35 and Groupon take £8 and you keep £2 ???

So basically say you sell 100 products like this that would normall retail for £5000, all you'd make profit would be £200 :|

if any groupon buyers don't redeem their coupon, then Groupon keep the full amount themselves (£35) whilst you get the bad press and reputation??

Whilst its nice having Hundreds of extra sales its not worth losing your business over.

From what I have heard Groupon takes 50% per sale so if it was up for £100 you would only get £50....

 

[kevin555]

Groupon don't want you to advertise a product that normally 'retails' at £50 for £35.

They want a massive discount - 50%, 60% 70%. So your £50 product is sold at £25 or less.

Straight away you are making a loss if you are a classic retailer selling a standard product available elsewhere. Add on the costs of online shipping etc or offline staffing etc and it's a big loss. The key is to break even no matter how many or few sales you do, which is tricky.

Where the Groupon model can work is in the service industry where 'products' can be priced very differently or re-packaged, i.e. 5 course of treatments, instead of usual 10 course, so that they can then be sold as a new item and are not comparable to an existing item. 'Original' prices are then hiked before the discount is applied making it seem as though a massive discount is offered, when really the discount is not as large as it appears.

 

[proofpositive]

HI,

I found this forum because I was searching for information regarding Groupon. I have used Groupon loads as a consumer. and have been considering it as a business tool and wondered if I could get some advice?

I am currently doing a course in Clinical Hypnotherapy, and am due to be qualified in the middle of Dec this year. I would like my business to hit the ground running, and it seems that one of the best ways to get referrals is to see lots of clients for stop smoking therapy. The reason is that they have a one off session for about £130 as opposed to 8 -12 £55 sessions for anxiety, depression etc., and of course when it works, they are proud of what they have done and are more likely to refer friends to you (than if they have some sort of socially less acceptable problem such as depression).

I wondered if doing a Groupon promotion might be worthwhile? I was thinking that December /January is the time when people are thinking about giving up smoking, and a Groupon deal could be a good way to get people through the door. As it is a service, I would have no extra outlay (other than for consulting rooms), but of course would have to work for a lower fees. But in my mind this may be better than no patients at all!

It does worry me though that Groupon are not reliable about when they put out the deals and also the number that they sell (as I have seen on this thread).

I have not run a business before, so was wondering if anybody would mind telling me their honest opinion or offer me any advice, as you all seem to be very experienced business people.

Thanks,

 

[kevin555]

Given that you'll be new to business make sure you read the smallprint very carefully and don't get rushed into making a decision that they want you to make - make sure it's your choice, i.e. if you think Groupon et al will work for a particular treatment then do that, but don't get drawn into offering it as a general voucher as this could backfire.

Reading on client experiences it seems to work better when you're trying to fill empty seats that won't have an adverse affect on the performance of the activity.

Example with minimal impact on customer experience:
Cinema is only 20% full for Tuesday and Wednesday evenings - fill up those empty seats. Same film, same cinema, no extra staffing than would be needed for Saturday night etc. You can sell extra popcorn to offset the lost seat price so it appears to be a winner.

Example with maximum impact on customer experience:
Boutique restaurant gets crammed full on a normally quiet midweek day - normal customers can be put out, they are paying full-price for a poor experience. If the Groupon customers come back and pay full-price next time then that is a cost you might bear, but if you lose both sets of customers you have problems (Posie's Cafe). You will also have to have extra staff and will likely lose money on the night.

Stop Smoking 'clinic' - does it matter if 30 people come to the group session as opposed to 5 or 10. If not, then go ahead. But if you offer individual treatments at reduced cost, can you afford the time to actually see the appointments through. I would expect not.

As you see, Groupon and others like it can work for a business. But can it work for your business? And can you pinpoint the most effective product where the Groupon customer has a good experience but one which doesn't impact on your current customers?

 

[Nord20]

Hi proofpositive,

you will have several things to consider:

1. Numbers - Groupon are notoriously bad at agreeing and then sticking to maximum sale numbers - it is not in their interest to limit the number of sales, as they get 100% of the sale price if the buyer never redeems their voucher, and of course, whatever their agreed percentage is on the ones that do get redeemed. For your promotion to work you MUST ensure you have a strict limit on the number of vouchers sold, otherwise you will be working from dawn till dusk for a long time, for very little money indeed.

2. Price - As a rule, if you sell the single session normally for £130, they would expect you to offer it for at least a 60-70% discount (note AT LEAST), so you'd be looking at selling the voucher for around £40. Of this, you would get between 40 and 50%, so your take home for each of these vouchers would be in the region of £20.

As you can see, this is a massive hit for you. To be perfectly honest, I never know why businesses do a groupon promotion for any other reason than as a loss leader.

In our business it worked well, but then we have an 'introductory offer' - 15 days access for £29.99. Everyone is entitled to this and it gets people into the business, and we then work to retain them. We do class based offerings, so individuals do not hit the bottom line directly. One of our offerings after that is 10 sessions for £125. So, for our groupon, we offered the ten sessions (essentially instead of the introductory offer) for £28. This looks like a huge discount - £28 instead of £125, but actually is instead of the £29.99 introductory offer. We still only took home just over £14 per person, so we were losing 50% of our intro offer take, but we got a lot of people through the door, had a pretty good retention rate on those and it proved more than worthwhile.

How likely are people who take your stop smoking session (and from whom you get £20) ever to come back to you? Do you rely on repeat custom from the same people or are you more likely to need a steady stream of new clients? If it is the former, consider it, if the latter then I strongly suggest you don't use groupon, as all it will achieve is minimising your take!

In a nutshell, groupon is *almost* a 'try before you buy' advert. If people don't need to buy after trying (i.e. it's a one-shot product/service) then there is little point to it for you.

 

[kevin555]

If people don't need to buy after trying (i.e. it's a one-shot product/service) then there is little point to it for you.

Nord20 - that's an excellent point. So perhaps not so good for a Stop Smoking Course - perhaps an angle on health improvement would bring in a wider customer base and be something you could sustain.

 

[kevin555]

Ok, I've been thinking about this a bit more as today I received a call from KGB Deals regarding their deal of the day concept.

Their take is lower and costs appear lower which might mean each sale would make a profit (even if only a tiny profit). So it may be something we would again consider.

However, I have 2 questions:

1) What if the customer decides they don't want the coupon anymore? Can they return it for a full refund. Does this cost the client anything?

2) What happens if a customer returns a product? If they wanted a refund how much would you be obliged to give them? Would it be the cost to you, or the cost to you and groupon's (or other) cut?

 

[Evesoffspring]

Speaking as a consumer I wont buy from groupon anymore.
My first purchase was for a meal which was great, booked a table suitable to me. My second purchase for a Sunday lunch resulted in a 3 hour disapointing lunch delivered by harrassed waiters. I've had a couple of other meals which were ok but you feel as soon as you say groupon your treat like a second class person.
Hairdressing is the same you have to be prepaired to take appointments that you'd probably get standby prices for i.e Tuesday morning .
The one purchase I was really happy with was the ebookers £70 voucher for £10

I forgot to mention, I few weeks ago I was interested in buying an item for my garden. I checked out the companies website which was really good but was a little concearned that they had used suppliers photographs and not their own, so I googled their postcode and found they were based in a housing estate. Now don't get me wrong I work from home but I cant see how a company selling high value items can operate out of a small house.