
Groupon Client Goes Public With Beef at SXSW - gavingmiller
http://www.fastcompany.com/1738257/groupon-smackdown-on-the-pepsico-stage
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jprobert
I work in this space and we have received feedback on Groupon from hundreds of
merchants. In many cases they were not happy with their promotions for the
following reasons: 1) Groupon didn't adhere to the sales limits and oversold
vouchers 2) Once the promotion was set in stone (a few months before it ran)
the sales reps for Groupon were unreachable. Additionally, merchants could not
contact sales reps to run another promotion. 3) Customer retention was very
low.

I agree with the comments in the article that the sales force has no idea what
is going on operationally. Really all they care about is inking the next deal
so they get paid while all other considerations for proper customer service
and the well being of the merchant fly out the window.

~~~
d0mine
Something doesn't add up _"could not contact sales reps to run another
promotion."_ and _"Customer retention was very low."_

Why would unhappy business run another promotion?

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crunchykeith
This could not be more true. I have ran three groupon in 3 different markets
and although they were successful I felt the Groupon representative I worked
with in each case had no idea what was going on. The first time around they
sent the wrong coupon codes to everyone and had to resend them. The second
time they promised us that we would be the primary deal in our entire region
of 250,000 people. We ended up getting sent out to subset of 50,000 people
most of whom were not in our coverage area. A similar thing happened with the
third Groupon.

The problem in my case seems to be that the Groupon representative is just
trying to make the sale and is lacking a lot of operational knowledge.

~~~
sequoia
Out of curiosity, why did you go with them three times? There must have been
some benefits; how did you make out all told?

EDIT: Would you go with them again?

~~~
crunchykeith
They were all successful and Groupon is the leader in the space so we figured
we would get the most exposure by using them. Despite them being successful
there always seemed to be something that went wrong. Groupon tries to sell
these things as miscommunications which I don't buy. We have also run deals
with living social and twongo. Both of these we not nearly as successful as
the Groupon deals we have run.

The problem is that I can't help but get the feeling that Groupon doesn't
really care about the success of the merchants business. All they care about
is how many Coupons they are going to sell and how much money they are going
to make off it.

Another incentive to stay with Groupon is that they have made us a preferred
merchant which gives us a couple of advantages i.e. receiving our money from
the deal much sooner than the average Groupon merchant.

Yes we are going to use Groupon again and again and again because for our
business it has been a major customer acquisition strategy that we have solid
numbers to prove is definitely working.

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adolph
I was thinking there was going to be a super bbq deal at the link; there are
hilarious quotes instead:

 _"We need to merge our marketing excellence with our operations excellence
and get it all to the same level." . . . "We want to help them not only
understand how to use Groupon,"_ [Darren Schwartz, Groupon's SVP of sales]
_said, "but how to run their business better."_

~~~
kouiskas
In other words... promote synergy, direct workflow, like a boss.

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zandorg
I see Groupon as a company that re-sells spas, manicures, meal deals and teeth
whitening. If you see it in those terms, it just seems like normal retail.

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Cherian_Abraham
This is the inherent problem with Groupon or even SCVNGR who is moving in to
this space with its "deals for repeat customer" mantra.

I have tried Groupon and has bought a handful. The ones I bought were already
businesses I was patronizing (in which case they lost money), or businesses my
friends were patronizing (which I was planning to go to, and Groupon didnt do
anything to add to that experience) and businesses that were unknown to me
(which till now has not translated me Groupon buying in to a repeat
experience).

SCVNGR jumping in to this space still has to deal with the sticker shock for a
customer, who spent 25% of the total price the first time, 50% and 75% the
second and third time respectively. It all comes down to this: If they have a
great product and it appeals to me, I will buy it. Groupon or not. If not,
even 90% off of the sale price would not get me through the door the second
time because the product sucks.

Just my $0.02

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gavingmiller
One of the areas I've seen Groupon work is in the CrossFit fitness class I'm a
part of. What they're able to do is add people to their daily classes while
maintaining their original cost as if those people hadn't joined (there's
still just 1 person teaching the class.) In this case Groupon works well for
them because they can scale their business without adding cost. And if they
don't retain the Grouponers no loss, they've still made money, albeit not at
the same margin. Obviously if they do retain the Grouponer they're even
happier.

The only real issue that the business is facing now is moving to a bigger
space to accommodate the growing demand.

~~~
raganwald
That works in the short term: you have ten paying customers, but you can
accommodate twenty-five with very little additional cost. So you bring in
fifteen people at a lower cost. Presto, found money.

However, eventually the market catches on and your existing ten people start
waiting for the GroupOn deals, and now only five people are willing to pay the
full price.

Selling unused capacity at a discount without cannibalizing your existing
business is non-trivial, especially in this age of rapid peer-peer sharing of
information. I suggest that the problem GroupOn solves--selling the capacity--
is not the hard problem for this scenario, the hard problem is getting away
with pricing discrimination.

(running a "sale" every once in a while is a different scenario, of course. I
am only talking about regularly selling off excess capacity.)

~~~
tptacek
Selling excess capacity is not the problem Groupon is intended to solve.
Groupon is a promotional tool, not an inventory management system.

~~~
raganwald
Yes of course, but I am not responding to the article being discussed: I am
responding to a comment suggesting that a local fitness service is
successfully using Groupon to generate marginal sales. My comment absolutely
does not suggest that Groupon tries to solve that problem :-)

~~~
tptacek
I guess I'm sensitive to the different lights in which people tend to cast
Groupon. Newspapers also have ad salespeople who, at the end of the day, are
motivated entirely by their revenue targets and not by the well-being of their
customers. It is entirely possible to overspend on newspaper ads (for a lot of
businesses, $1 is an overspend on it).

At the end of the day, as a business owner, you are responsible for creating a
marketing plan with a budget and allocating it in the best possible way for
your business. You cannot push off any of that responsibility to a salesperson
at another company.

You are clearly right: using Groupon as an inventory management valve is
probably a very bad idea.

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wheels
I was curious a bit back how successful Groupon promotions actually are --
i.e. if there's actually significant value being created or if they were just
moving from one burn to the next based on hype. Turns out for 66% of customers
it does pan out. Here's the study:

[http://www.ruf.rice.edu/~dholakia/Groupon%20Effectiveness%20...](http://www.ruf.rice.edu/~dholakia/Groupon%20Effectiveness%20Study,%20Sep%2028%202010.pdf)

I'm glad to hear that they're planning on pulling together ROI management and
more general metrics stuff for small businesses. I've thought for a while that
was the natural direction for them to run. Small businesses are usually
experts in their product domain, but are often lacking in the more traditional
business skills.

~~~
webwright
Whoa-- I think you're misreading the study. To quote:

"So were Groupon promotions profitable for our respondents? Yes, they were,
for about two thirds (or 66%) of our respondents. However, a significant
number in our study, 48(or 32%) reported their Groupon promotion was not
profitable."

It's important to note that this is a SURVEY-- I'd wager most small businesses
have no way of tracking the marketing impact of a Groupon (i.e. how many
people come from 2nd visits or word of mouth from Grouponeers).

Interestingly-- the survey also asked how people of the merchants would use
Groupon again and how many would recommend it to another merchant. 42% said
they wouldn't use Groupon again-- so they definitely have some challenges.

~~~
phlux
> _...I'd wager most small businesses have no way of tracking the marketing
> impact of a Groupon (i.e. how many people come from 2nd visits or word of
> mouth from Grouponers)...._

Aren't there ways to solve this; e.g. change the name/sku/price/etc of the
item you are selling through a groupon. When it gets bought, referred to,
asked for etc via the new tag-info you can relate it to the groupon?

IANA sales/retailer etc... but I can imagine that you could figure this out.

\---

On another note; My friend owns a successful cup-cake shop in SF, groupon was
asking them to sell what was typically a $36 box of cupcakes for $15 -- and
then asking for 50% of the $15. So effectively sell the cupcakes for 25% of
what they typically retail for.

That just sounds like BS. -- however, as another HNer wrote earlier in this
thread- this model works really well for things such as fitness - where your
product is effectively just the groupon-buyer's attendance.

I was talking with some people the other day and they said they bought some
work-out boot-camp deal that was retailing for $600, for $200 and that was a
good deal.

I agree that it is a good deal - but it also proves to me that the $600 price
point is way to freaking high...

