Groupon

[E Storey]

Just went to my local Italian.

They signed up to a deal with groupon.

I think the restaurant is great, but I wanted to share with members how nasty signing up to groupon can really be for your business as I'm betting groupon sales people don't tell potential clients this!

It's amazing to see how basically all the rubbish reviews mention groupon. I'm guessing the owner ran a loss leader on these vouchers too.... and for what?

As a business forum, what do you all think of groupon, I know Scottish enterprise push it, as they do trip advisor but is this not just an all too familiar of a small business [and I can vouch it's not a substandard one!] falling prey to quasi marketing/review scams?

 

[Fred_the_frog]

You have to make sure you put a limit on how many offers you will give. Lets say you offered a full meal for 50% the original price. You might be working on a margin of 0% or something very small (with that offer), so this offer is purely to get people into the restaurant to try it. If you don't put a limit on it, you'll find you are suddenly working for nothing.

 

[Matt1959]

I wouldnt offer Groupon if I was able to nor will I buy a groupon offer as I think they are a can of worms. Not every business researches offering Groupon therefore their groupon offer can end up compromised....

not a fan of Groupon

 

[businessfunding]

Surely it is mainly about maing informed and intelligent commercial decisions?

Groupon are a sales organisation so it is reasonable to assume they will over-state the benefits. However the business owner can gather sufficient information to work out the true cost.

Personally I would never suggest loss-leading, but there can be secondary benefits to filling seats / tables / boxes during quiet periods.

 

[FlexF]

Discounting has been around for ever and is very powerful if its used tactically. That power can be damaging if its done the wrong way.

Most small business owners have no idea what it costs to acquire a customer so the deal sites can use fuzzy math to calculate the cost of the promotion.

There are a small number of businesses who have worked out how to use Groupon, livingsocial etc very successfully and use it for what it is, the largest email marketing list in the world.

The model is already evolving but I think anyone who is selling directly to consumers should be doing the maths on how to use it. If you're a wholesaler/distributor then it opens up a whole world of opportunities

I know the space pretty well so if anyone wants a steer I would be happy to help.

 

[ecenica]

Just went to my local Italian.

They signed up to a deal with groupon.

Did you go to your Italian armed with a Groupon offer?

From what I gather a well-planned Groupon offer can be good for small businesses.

The key apparently, is to turn the new influx of customers into repeat customers by getting them on your marketing newsletter and putting another offer in their hand to tempt them back.

Rich

 

[TelesMedia]

Surely the key is in how much the restaurant is saving in marketing and sales.

Meal minus Marketing & Sales will probably end up the same profit ???

The cost to buy lists, SEO, time spent bulk emailing potential customers etc.

What's everyones thoughts on this ?

 

[Moneyman]

If you have a high margin line of stock you need to get rid of and drive some new people to your store. Why not?
It is what it is. If you actually lose out on the deal then make sure there is a limit.

 

[businessfunding]

The shortcoming of most of these threads as to whether marketing media 'work' is that the ignore the concept of process and focus on a single event.

Any number of people will tell you that advertising doesn't work, yet Proctor & Gamble continue to invest billions in it - meanwhile SEO experts will try to convince you that using their services is the Holy Grail of doubling turnover.

In truth you will be very lucky to get and discernible results from a single ad, or from geting one keyword to the top of Goggle rankings for a week - It is all about the mix and the process.

 

[SillyJokes]

Do you not think it de values your offering and only attracts thse prepared to spend only a little?

 

[Liybpg]

I'm a bit skeptical when I see businesses on Groupon - you always get the feeling: either I'm being scammed or the business is being ripped off. I just can't see how business can viably sustain 50-70% discounts. Some probably might, but it's hard to belive that so many can.

 

[Mike W]

I just can't see how business can viably sustain 50-70% discounts. Some probably might, but it's hard to belive that so many can.

Most, if any, can't ... but they're not looking to 'sustain' it. It's just a loss leader, on a grand scale, designed to get bums on seats, with the aim of encouraging their future custom.

Works for some. Doesn't for those who don't do the maths.

 

[Liybpg]

Most, if any, can't ... but they're not looking to 'sustain' it. It's just a loss leader, on a grand scale, designed to get bums on seats, with the aim of encouraging their future custom.

Works for some. Doesn't for those who don't do the maths.

True, but it would be interesting to see any studies showing how many customers actually come back. Don't know how others see it, but to me it feels that these type of customers are just seeking the best deal and will just jump to the next place the moment you withdraw your offer.

 

[shugied]

True, but it would be interesting to see any studies showing how many customers actually come back. Don't know how others see it, but to me it feels that these type of customers are just seeking the best deal and will just jump to the next place the moment you withdraw your offer.

Some will, for certain, but others might like what's on offer enough to come back. I don't use it, not much use for local area B2B to my mind, but I could see how it might work well if you allocate any losses from offer take-up to your marketing budget.

If the initial offer gets them in, and they like what they find enough to come back, that's the time for profit.

I imagine those businesses which see Groupon and the like only as a means to make immediate profit are probably disappointed.

 

[Mike W]

True, but it would be interesting to see any studies showing how many customers actually come back. Don't know how others see it, but to me it feels that these type of customers are just seeking the best deal and will just jump to the next place the moment you withdraw your offer.

In many cases you're right. But, as I said, it all comes down to the maths and how astute you are.

Some businesses I know are doing very well out of the Groupons and Living Socials of the world. The offers they're setting bring the people in and, because of how they've structured the deal, they can easily sell add-ons at that time ....and the add-ons are bringing proper profit in.

Overall therefore, they're making on the deals themselves, albeit at lower margins, and they don't need to get much return custom to make it extremely worthwhile.

nb. one of these businesses learnt from the huge cock-up they made first time round

 

[NoxProperty]

I have to admit to buying from these sites (groupon, kgb etc) several times in the past year as Ive been furnishing our self-build.

I have had some good deals and some not so good. I am currently trying to resolve a situation with a sofa I purchased via KGB deals (half is for a left hand sofa the other for a right ).

From a buyers point of view I believe it could have the opposite effect. If I see a deal on a website like this I will take them up on the deal if it interests me but I wont then revisit the website to pay full price for the same/ a similar item. I will wait as it may come up again on the offers website. I'd feel like I was being ripped off the second time as I know they can offer the item/ service cheaper. I may however respond to a discount that they may enclose with my first order (ie not through Groupon).

I have bought a canvas print from one company via groupon and I am sure it did more harm than good for this particular company. They received an influx of orders and were unable to keep up with demand. Looking online they received many very negative reviews due to late postage etc.

I think companies really need to think in detail before signing up to these sites because it does quite often have the potential to cause a really negative impact.

 

[FlexF]

I'm a bit skeptical when I see businesses on Groupon - you always get the feeling: either I'm being scammed or the business is being ripped off. I just can't see how business can viably sustain 50-70% discounts. Some probably might, but it's hard to belive that so many can.

You have a "limited free offer" in your signature. How does the desired outcome differ from running an offer through another channel?

 

[E Storey]

True, but it would be interesting to see any studies showing how many customers actually come back. Don't know how others see it, but to me it feels that these type of customers are just seeking the best deal and will just jump to the next place the moment you withdraw your offer.

I'm guessing very few do come back, as they will move onto the next place offering goods/services at a loss.

What they also appear to do, disproportionatly so, is write trash reviews about the company! Perhaps it's because they tend to be more IT literate than the general population, or because they really expect a full cost meal for 1/2 the price ... The business I mentioned in the OP went from #16 to #576 purely because of groupon reviews.

 

[FlexF]

I'm guessing very few do come back, as they will move onto the next place offering goods/services at a loss.

What they also appear to do, disproportionatly so, is write trash reviews about the company! Perhaps it's because they tend to be more IT literate than the general population, or because they really expect a full cost meal for 1/2 the price ... The business I mentioned in the OP went from #16 to #576 purely because of groupon reviews.

You do a lot of guessing.

It is definitely apparent that customers through these channels are proportionately more likely to leave reviews. I can only speculate but I think they are generally offered a defined product when they buy the voucher. When it differs even slightly from the description they feel aggrieved.

 

[ecenica]

I'm guessing very few do come back, as they will move onto the next place offering goods/services at a loss.

Acccording to Groupons pre-IPO announcements it would seem 'Customer Retention' and 'Merchant Retention' are two areas they know they need to address.

In real terms this means keeping the customer coming back for more coupons, and Merchants coming back and paying Groupon to run more promotions.

For many Merchants, Groupon is a one-off marketing channel. Run a promo, get loads of customers through the door. Get them on your mailing list and then email out offers directly. Cutting out the costly middle-man, Groupon.

This is why I can't see any real long term value in Groupon's business-model.

Rich

 

[Mike W]

I totally agree ...

With anything in particular? :|

 

[integrity Rules]

edited

Acccording to Groupons pre-IPO announcements it would seem 'Customer Retention' and 'Merchant Retention' are two areas they know they need to address.

In real terms this means keeping the customer coming back for more coupons, and Merchants coming back and paying Groupon to run more promotions.

For many Merchants, Groupon is a one-off marketing channel. Run a promo, get loads of customers through the door. Get them on your mailing list and then email out offers directly. Cutting out the costly middle-man, Groupon.

This is why I can't see any real long term value in Groupon's business-model.

Rich

Yes, the flaw is that Groupons objectives and the Merchants objectives are at cross purposes.
Groupon knows that they have suck the margin out for themselves by getting greatest numbers of take ups per deal. So the push for low prices ( after all they are kind of like discount warehouse). They also push for a big chunk, up to 50% of the price for themselves. This means that for most businesses that have a high recurring cost for its product/ services , the deal itself will be loss making or very low margin.
The merchants objective is to gain the new client e mail list , and in terms of upsells , and repeat sells- independently of Groupon. If the client base does not convert to upsell/ repeat sales the promo is a failure so far as the merchant is concerned.
Merchant retention will be problem in this event. After all the merchant feels burnt by the experience…So over time, Groupon will have a quality-control problem. A constant churn of merchants.
And the end consumer will turn away from the model if they get let down on quality.
The model fails because it plays out to the lowest common denominator.

 

[DazRave]

There's a Karting track in Manchester that pretty much get's all it's customers via Groupon and has been going a few years now.

It advertises things like "80 laps for just £20" which at first sounds pretty damn good for Go Karting. If you were to check another local karting business, they charge what seems to be £20 more in some cases.

What's the catch? You do a complete lap in about 15-20 seconds at the Groupon advertised track, just 14 minutes of karting for £20, the other track which isn't on Groupon advertise their sessions by time not laps, 20 Minutes for £20 during the weekdays too!

My conclusion, the only businesses making money from groupon are also the ones ripping the customers off.

 

[Psl]

Discounting has been around for ever and is very powerful if its used tactically. That power can be damaging if its done the wrong way.

Most small business owners have no idea what it costs to acquire a customer so the deal sites can use fuzzy math to calculate the cost of the promotion.

There are a small number of businesses who have worked out how to use Groupon, livingsocial etc very successfully and use it for what it is, the largest email marketing list in the world.

The model is already evolving but I think anyone who is selling directly to consumers should be doing the maths on how to use it. If you're a wholesaler/distributor then it opens up a whole world of opportunities

I know the space pretty well so if anyone wants a steer I would be happy to help.

I would like to speak to you about it. Pls me.

 

[Luolou]

I do buy through Groupon (detox foods;protein shakes etc) and regularly re-buy as they repeat them regularly. I would never pay the "supposed" full price for these products, but then would never even have heard of them if it wasn't for my daily Groupon. So I see it as a win win really.

 

[integrity Rules]

I do buy through Groupon (detox foods;protein shakes etc) and regularly re-buy as they repeat them regularly. I would never pay the "supposed" full price for these products, but then would never even have heard of them if it wasn't for my daily Groupon. So I see it as a win win really.

I think you are using Groupon the best way as a consumer . Products like these will have high resale values , so probably can accommodate steep discounts. What the merchants should be doing, however , is to get you to buy from them direct , even if its at the Groupon deal headline price. Their margins improve , and you are no worse off!
However , for a service business like mine , if Daily deal clients adopted your approach, running Groupon deals definitely would not be Win-Win!

 

[integrity Rules]

edited

There's a Karting track in Manchester that pretty much get's all it's customers via Groupon and has been going a few years now.

It advertises things like "80 laps for just £20" which at first sounds pretty damn good for Go Karting.
What's the catch? You do a complete lap in about 15-20 seconds at the Groupon advertised track, just 14 minutes of karting for £20, the other track which isn't on Groupon advertise their sessions by time not laps, 20 Minutes for £20 during the weekdays too!
My conclusion, the only businesses making money from groupon are also the ones ripping the customers off.

Yes, the devil can be in the details.
A Groupon merchant will probably not give exactly the same service as they do for their standard price. ( e.g. restrictions on availability , etc)
Which, from my perspective as someone who has run daily deals in the past ( but am unlikely to do in the future ),is fair enough PROVIDED its all up front. I don't think theres any point misleading the client.
Someone who feels ripped off isn't going return.
And the only point of Groupon deals ( from my perspective ) would be gain repeat clients who will pay prices that are sustainable for the business.

 

[OakMarkLondon]

Groupon has a very specific audience. Those people are only looking for the next groupon discount hence it has a very slight chance for bringing new and genune customers.

 

[Simon.P]

I'm guessing very few do come back, as they will move onto the next place offering goods/services at a loss.

This.
I have eaten at a few places via Groupon and whilst I always end up spending more on things like drinks and desserts; i normally wait until another offer arises, so not returning to the original (Groupon) venue but another restaurant in the area which has good reviews and a good deal.

 

[integrity Rules]

edited

This.
1.I have eaten at a few places via Groupon and whilst I always end up spending more on things like drinks and desserts;
2.i normally wait until another offer arises, so not returning to the original (Groupon) venue but another restaurant in the area which has good reviews and a good deal.

1. This behaviour is good for the merchant , but means they must have "upsell" features, and good margin ones to boot.

2. This behaviour is the big downside for merchants! It's the lifetime value of the customer/ client that matters. What would have taken for you to return ? Service that was unexpectedly delighting, probably. But face it, if a business was capable of that it probably would nt need to resort to Groupon and its ilk.

 

[AllUpHere]

I would like to speak to you about it. Pls me.

It's an old thread that's been dug up. The member you quoted hasn't been back for a couple of years.

 

[Psl]

It's an old thread that's been dug up. The member you quoted hasn't been back for a couple of years.

Thanks. Note to self; pay bleeding attention!