Groupon - smoke and mirrors or real value?

[Stefanmuller]

I generally just don't like the business model, it creates a reason for salespeople to over or undersell the proposition to make sales and can then easily hurt the client who is trying to get some good publicity by not being able to supply or just hurting their brand. Also it creates packs of deal-hunters who will probably not buy again or would have bought anyway. Thus I think a lot of times using Groupon can actually do more harm than good if not very carefully managed. Unless you are selling volume based online type stuff I think you are taking chances with your brand where some other avenue could do a better job.

I agree. For vendors selling units this works well because you can just make sure to order enough. For smaller service companies it can cause more harm than good. See my post below from another thread, based on what happened with people I know who registered a deal, which they eventually had to cancel.


If you had a bad Groupon deal it is usually the vendor's fault - they get overloaded by customers who bought vouchers and can't deliver properly on all of them. For most of these deals the vendor is actually giving a 75% discount because Groupon takes half of it. So a 50% discount advertised means half of that goes to groupon and the vendor is left with 25%. Example: Sell a manicure that usually cost R200, for half price R100. You need at least, say 50 vouchers bought for the deal to go through. Lets say the deal went well and 100 vouchers are bought. At the end of the deal period which is 3 days I think, Groupon pays you half of the proceeds = R5000 which equates to R50 per deal that you will normally sell for R200. Now you will effectively have to service at least 80% of these customers within the next 6 months if you allow for about 20% of people who wont use the vouchers. You wont get a cent from them on the day they book because you already received the money up front and only 25% of normal price. People use this for marketing in the hope that people will return in future or tell friends but for small startups the amount of traffic is huge. This is where their sales reps come in - to check if you can handle the traffic etc. I think it works for bigger companies and companies that sell goods or food, but for small service companies I will be hesitant to buy.

For instance, the manicure shop who maybe has two beauticians working there, and doing three or four clients per day, will now for the next 6 months have to not only service a hundred extra customers, but also their existing and walk in customers. And do the new customers for 25% price which they already received up front. My bet is you will struggle to get a booking when you redeem your voucher, and if you do, you will get crap service.

 

[Bern]

snip

Exactly, the design of the company and the way they get money leads to sales reps pushing clients in to unfavourable deals which hurt them - especially small businesses. What I see is a few small businesses that do use it effectively, but they typically have the knowledge and understanding of modern advertising and media to use many other methods and mediums available to achieve the same or similar numbers.

 

[ClintZA]

My understanding is that the company can limit the number of services/goods on offer via Groupon. Each offer I have seen usually has a timer as well as mention of while stocks last or limited numbers:

Fine Print
Limited number available
Special Import
For all redemption, delivery and product queries email: [email protected]
Terms and Conditions apply

 

[ClintZA]

Exactly, the design of the company and the way they get money leads to sales reps pushing clients in to unfavourable deals which hurt them - especially small businesses. What I see is a few small businesses that do use it effectively, but they typically have the knowledge and understanding of modern advertising and media to use many other methods and mediums available to achieve the same or similar numbers.

Why is Groupon to blame if a business owner cannot stand their ground? Perhaps they should not be in business then.

 

[Bern]

My understanding is that the company can limit the number of services/goods on offer via Groupon. Each offer I have seen usually has a timer as well as mention of while stocks last or limited numbers:

Why is Groupon to blame if a business owner cannot stand their ground? Perhaps they should not be in business then.

Sales reps convince the customer who doesn't understand the potential effects in short. Why, the rep gets more commission for more sales. Unlike here on the forum most people don't really understand the extremely rapid escalation social media can have and don't realise the kind of problems that can be encountered as they have never sold in this way (i.e. suddenly having all ticket buyers trying to redeem coupons at the same time).

Simple cupcake example:
Joe and Sue have a small cupcake shop, its winter and sales are down. Groupon rep says hey I have a great idea, why don't you get business going to cover costs and get exposure, then gets them to offer what they can produce over say 3 months. Unfortunately everyone tries to redeem their vouchers in the same week, the business gets swamped and customers get pissed off due to quality dropping and/or unavailability. So in short the rep does not manage the client's expectation/understanding of the medium and that can then lead to a net negative impact on the client's business.

 

[MFour]

From a small service company's point of view Grippon is a pain in the butt. Their reps keep phoning trying to convince you that they know your businesses marketing needs better than you do. They have this false perception they try and create that you cannot loose and the exposure would be so tremendous, that you will beg them for more. This unfortunately is not even remotely true, in-spite of their client base size.

All it turns out to be is a money making scheme for Grippon, at the expense of the vendor (talking services here). Very few service companies make any kind of profit by giving a 75% discount on their service. You can't even call it a loss leader as I found the "return business" to be non existing as their client base are cheap skates (pardon my French) and unlikely to pay full price for further services from you. "No I'll wait for the next deal" is the usual answer.

A total waste of time and money IMHO as a service business owner. Been there, done that, burnt the t-shirt.