Groupon How do they get paid?

Discussion in 'General Business Forum' started by Merchant UK, Oct 23, 2011.

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  1. Merchant UK

    Merchant UK Verified Business ✔️

    2,419 593
    Just been talking about this at home, say a company has a deal and offers 50% off a product or service, how do groupon get paid or what do they charge??

    does anyone know,

    Secondly, has any members here had any experiance with groupon, did it work for your business or not. I've heard some right horror stories where more than the alocated offers were sold and companies nearly going bust as a result.

    But i'm still interested how groupon make their money, any ideas :|
    Posted: Oct 23, 2011 By: Merchant UK Member since: Aug 15, 2010
  2. MediYeah

    MediYeah UKBF Newcomer

    59 8
    They take a commission on the sale price - usually a pretty high % as well.

    For example, a business has a service with RRP of £100. They feature it on Groupon for £40, so a 60% discount.

    Of that £40, Groupon will usually take 50%, so £20 of that. The business itself actually gets very little compared to what the RRP is.

    Generally the feedback I have seen from my clients has been pretty negative. You make a loss on the customers that come in and very very few are repeat customers - most are generally just after a cheap price - so although it usually seems like a good idea, unless you have your deal structured properly, it's probably very wise to avoid it.

    If you did go down the Groupon route, best thing I would recommend is offering a heavy discount on a voucher. So for example, a £50 voucher or gift card for £20 or something like that. You would only get £10 from it, but if your RRP is £100 - you would still make a load more that way than you would from offering that actual service at a discount.

    That sounded a bit muddled but I hope it made sense!
    Posted: Oct 23, 2011 By: MediYeah Member since: Jun 6, 2011
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  3. Merchant UK

    Merchant UK Verified Business ✔️

    2,419 593
    I was just thinking along those lines, Perhaps a more fairer method of payment and making a better deal for the business may work out betterI was thinking about usining a percentage like 10% of all deals, so if they sold a deal worth £40 then they would pay us £4. If they sold 50 deals then its £200 which seems to be a lot fairer than 50% :eek:

    I was looking at starting up in my local town and expand from there what do you think :|
    Posted: Oct 23, 2011 By: Merchant UK Member since: Aug 15, 2010
  4. MediYeah

    MediYeah UKBF Newcomer

    59 8
    Groupon can justify that % by the volume of customers they can provide to a business.

    I have worked with a couple of daily deal sites and they got in early enough to grow fairly substantially quickly by going down the route of working in specific niches.

    Daily deal sites for the mass market I personally would say is pretty much saturated and the bubble isnt far from bursting, and if you are going to start one, it would be very wise to go down the route of choosing one fairly narrow niche. When that grows a bit, then go and target another niche.

    My concerns with your idea would be:

    1) Size of market - is your local town big enough to justify a daily deal site? And will the businesses see value in it?

    2) Even if profit isn't your primary aim, will you be able to make enough money at a 10% commission to make it worth your while? Not doubting you, just making sure you have fully thought through the time and financial investment you'll need to make.
    Posted: Oct 23, 2011 By: MediYeah Member since: Jun 6, 2011
  5. open sesame

    open sesame Contributor

    226 39
    If its a deal that is offline its 50% comm and if its a deal online its 30% comm.
    Posted: Oct 24, 2011 By: open sesame Member since: Sep 9, 2011
  6. Phil Richardson

    Phil Richardson Contributor

    200 48
    For many company's they come at Groupon from the wrong angle.

    It is one of the few ways of marketing that guarantee results, you only pay for a client that buys from you, if you spent £1000 on advertising you have no idea how much business you get. You may not make much profit but think of that as the marketing cost.

    I have used a number of Groupon deals and the service by the supplier has been very poor.

    E.g. I get my car valeted every 2 weeks and have used the same company for a few months. I bought a deal from Groupon from a new supplier, when I tried to book in they said as it was Groupon then there were only a few times that I could choose, this wasn't explained in the deal.

    When I did get the valet done then it was quite poor and very rushed. Talking to the guys that do the valeting they are told to spend less time on the Groupon deals as they are paying a lot less.

    They had the opportunity to demonstrate how good they were and potentially win a new customer for the long term. Unfortunately they used Groupon to maximise profits as opposed to thinking of it as a marketing campaign.
    Posted: Oct 24, 2011 By: Phil Richardson Member since: Mar 10, 2011
  7. amy9

    amy9 UKBF Newcomer

    83 5
    Few businesses can really benefit from Groupon.

    If you have limited overheads in order to supply your service then it can work; so long as you set a limit on the number of people that can buy the deal (many companies have become overwhelmed with demand and the whole deal has backfired).

    Restaurants are on shaky ground however, when considering the total cost of supplying a meal.

    The other problem with Groupon is the type of people you're targeting. Groupon lovers are lovers of deals.

    Rarely will they return to the same place twice and pay full price. And therein lies the problem. You're marketing to bargain hunters rather that potential repeat customers.

    I wrote an article that looks into this a bit more:
    Posted: Oct 24, 2011 By: amy9 Member since: Sep 12, 2011
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  8. davezzr

    davezzr Contributor

    609 75
    I was looking into daily deals (gumtree) and had a long chat with a guy explaining the ins and outs. After a it of soul seaching i decided against this as not suitable to my product.
    Gumtree specifically: require the seller to offer 50% off or more for a daily deal. gumtree charge 50% commission on the offer price inclusive of vat.
    they email your daily deal to gumtree members (signed up to recieve daily deals). The buyer then buys your deal and pays gumtree who take their cut and then pay you.
    So for every £100 worth of product or service you will see only £25.
    In my case i sell a basic product for £140 and make £50 which is ok.
    If i were to use gumtree i would have to up my product price to £350 less 50% discount for the daily deal £175 which leaves £175 of which gumtree take £87.50 and leave me with £87.50,and i would still be out of pocket by £2.50 just to cover the initial product cost.
    As it is im competative with similar products offered elswhere at £140 so you can see trying to sell a daily deal more expensive than the average would be an uphill struggle let alone upping my website prices just to comply with gumtree requirements to offer a boni fide deal.
    As the guy tried to explain it does leave the door open to upsell a product and in my case i can sell the installation service on top. But being a wireless product the installation side is a minimal part of the business.
    Im sure it could work for some service providers such as window cleaners car veleters to increase the client base with little loss of time or materials. Perhaps even a handyman could offer a lower hourly rate and pull in shed loads of work.
    Last edited: Oct 24, 2011
    Posted: Oct 24, 2011 By: davezzr Member since: Jan 24, 2007
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  9. GreenLea

    GreenLea UKBF Newcomer

    28 3
    My first Groupon experience as a customer is not great. I got sent the wrong coupon now its took me a week to get them to refund now I have to wait another 5 days for my money back cant say I am that impressed however just bought another coupon for 70% off photobox (I am a regular customer of theirs) so FC that will be ok : S
    Posted: Oct 24, 2011 By: GreenLea Member since: Oct 10, 2011
  10. vvaannmmaann

    vvaannmmaann Contributor

    13,099 3,369
    Posted: Oct 24, 2011 By: vvaannmmaann Member since: Nov 6, 2007
  11. SamStones

    SamStones Contributor

    1,054 134
    There's a lot of the national "deals" on groupon which if bought would mean you pay more for the product through groupon than you would if you searched online and bought it from there. The service works out a lot slower as well, but people still appear to buy them... I just don't get it!
    Posted: Oct 24, 2011 By: SamStones Member since: Mar 1, 2010
  12. amy9

    amy9 UKBF Newcomer

    83 5
    Definitely; there are some terrible 'deals' to be found if you actually investigate the price.

    Once I had an email for an 'all you can eat' Jamaican buffet, yet in the small print it said maximum of two plates! Since when is that 'all you can eat'?!

    And, the plates might be teacup sized for all we know...
    Posted: Oct 24, 2011 By: amy9 Member since: Sep 12, 2011
  13. Merchant UK

    Merchant UK Verified Business ✔️

    2,419 593
    I was thinking of starting up a "groupon" clone but without all the excessive fees and discounts which cause the business more damage than custom

    Even charging a ballpark 10% to businesses would mean the business keeping more of their profit as opposed to paying a min 50% to Groupon.

    Starting a city wide or county wide site to start and take it from there.
    Posted: Oct 24, 2011 By: Merchant UK Member since: Aug 15, 2010
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