1. The merchant didn't think through the consequences of their promotion. They made a deal that was too appealing to an unnecessarily broad swath of potential customers. A commenter on the blog points out that the better approach is to figure out how to bait the hook for a specific type of desirable customer instead of having a fire sale.
2. Groupon didn't look out for their partner merchant. Groupon's job is to be really smart about the business they're in and to share those smarts with their partners. Sure, they're relatively new at this too, but a part of their sales process should be qualifying the deals they're going to be running for people and saying "hey, you know, this might be giving away the farm."
Agreed. She should have constrained what it could be applied to so she could manage her losses. If I was going to embark on a Groupon campaign, I'd want to look at how much money I would lose per Groupon and then figure out how many Groupons I could afford to sell.
If you just open the floodgates without calculating how much you can afford to lose, it's not Groupons fault, it's your own. Even a layman should be able to understand that you're going to take a loss in the short term, so don't allow yourself to take a bigger loss than you can afford.
She even makes it clear in her facebook post that this is entirely her fault:
"...I hung up and thought it over. I called him back and said we would have to get at least 50% to cover our costs of product… to this day I don’t know why I thought even 50% would be a good deal for us. Maybe because I thought since we were covering our food costs. What I didn’t think clearly enough about was that that margin we mark up is what covers all of our other costs… like staff, rent, utilities, etc. Our overhead is roughly $25,000/month, and this decision was about to make it so that we didn’t cover any of those other costs."
Yeah, your #2 really burns me up. Groupon should be the ones to call out point #1 to the business owner. Work with the merchant to design a deal that benefits them.
Plain and simple: She should have driven a harder bargain or not gone for it.
Also #3, #3, #3, and #3. People don't read the little bit on Groupon where it says "tip like you're not getting a discount," or just ignore it, and also #3.
Our company was on Groupon NYC and they took their 50% cut of each Groupon sold (plus the merchant pays the credit card fees - don't forget about that. Your take is actually less than 50%). Luckily we had a bit of a math on our side as our markup on our products is pretty big so even after Groupon's cut, we still made about 15%. As of this writing, only 28% of our Groupons have been redeemed, so we're quite ahead. But I think our case is the exception - I have yet to hear too many stories about businesses thriving because of these social deals.
Making a poor business decision and then somehow blaming Groupon for it is no better than building a house in a flood plain and not having flood insurance.
Groupon works wonderfully for businesses with predictable fixed costs and decreasing marginal costs - bowling alleys, stadiums, art museums etc... It does not work well at all for businesses who need to source product, prepare goods, or provide service - restaurants especially
> "It’s because we cannot afford to lose any more money on this terrible decision I made"
Quote from the end of blog post. Having read through the whole thing I do not believe at any point she blamed Groupon for her predicament - she walked into it eyes wide open and appears to acknowledge this.
It does, however, raise interesting questions about Groupon's relevance to the small businesses they purport to help. Groupon is supposed to be a win-win for consumers and small businesses alike, but it would appear this may not be the case. Seeing as how this is core to their business model, if this is a regular case I would expect this to sink Groupon sooner or later.
"the single worst decision I have ever made as a business owner"
"we cannot afford to lose any more money on this terrible decision I made"
Jessie owns up to being the one at fault here.
Beyond that though, what does it say about online marketing, and our industry in general, that high pressure sales tactics are leading small business owners into bad decisions like this?
An industry based on caveat emptor, a lack of trust between actors, zero sum games, and the love of a quick buck over all else leads to an ugly future.
The numbers do not add up. Assuming 1,000 customers;
$8,000 in losses is an $8 loss per customer. With $3 of revenue. So they're claiming $11 in variable costs to service each customer, for $13 worth of product. No way that is correct - if it is, Groupon is merely the straw that broke the camel's back. Their markup on product should be way higher.
Also, that's assuming no increase in follow on transactions, and that all coupons were cashed.
I don't buy it. Although it definitely could have been a net loss, it wasn't of that magnitude.
Are you familar with the restaurant/food industry? For most places, profit margins are pretty awful. I'll admit ~14% is low for the type of venue this is, but believe me this is common
The item they're selling for $13 could be a low/zero margin product usually used to bait further purchases or tips. Another issue they noted was people not tipping as if they had paid $13, but tipping as if they had paid $3.
What I learned in food service is that a general formula is 30% food cost, 30% labor, 30% overhead, 10% profit. If things are running well, you take home some money at the end of the day. The margin for error isn't huge.
im a chicago entrepreneur and had a crowd funding startup. i sat on a panel with andrew last year before groupon got massive and know as much as anyone about the inner workings of groupon (pun intended).
i write this to give some context to the comment below.
groupon (i dont think maliciously) uses the fact that they are sophisticated and the small business owner isn't to their advantage.
you might think "so what? all is fair"
well, the small business community doesn't live in a vaccum. they talk to each other and talk about groupon (especially here in chicago).yes, they don't know how to create promotions (one of the real values groupon sales people provide) BUT what they do talk about are these horror stories.
so whats the moral here? people aren't idiots and if groupon wants to make sure their two sided platform survives, it can't abuse one side for the benefit of the other.
so, then, would you think that there is a place for a business similar to groupon but focuses more on trying to cut deals that encourages the growth of repeat business and/or good customers?
Like I keep saying, groupon's longterm value is very, very questionable.
The #1 value they are bringing at the moment is convincing shop owners to give a really kickass coupon. That's it!
That mailing list of theirs? Sure it's valuable. But send that same mailing list a 15% off coupon typically found in the newspaper and they won't give a crap.
And give the same groupon offer in the newspapers and...a lot MORE people would use it!
I disagree. I could create a steep discount coupon. 50% off, bam! The trouble is selling several thousand of them in a day, and my website has a lot more visitors than the typical mom and pop shop.
Distribution is worth paying for. Perhaps not paying a multiple of LTV for. But worth paying for.
Watching the evolution of Groupon clones in China has been very fascinating. First, there was an explosion of sites just like Groupon and a market leader (Meituan) pulled ahead. Just as Meituan really started to clean up, all the major social networks (the Chinese Facebooks and Chinese Yelp) tapped their gargantuan userbases and launched their own Groupons, integrated with their sites. They've really clobbered the original Groupon clones (I know firsthand because the salespeople who contact us from them have become increasingly desperate).
I wonder why Facebook and Yelp don't just clone Groupon and integrate it with their sites. It would be a money-maker, especially for Yelp, since the demographics are perfect.
I spoke with a business owner recently that had used Groupon and he shared a similar experience with me.
He said that with Groupon you must discount your offering by at least 50%, and that you must share 50% the sales with Groupon. That means the most you can sell your goods is 25% of there normal price. Where they made the mistake, he said, was in not thinking it would be very successful. You are able to put a max on the number of sells, but they only thought they would sell ~40 so they left it open. They ended up selling over 800.
He said you have to think of Groupon as a marketing cost. Multiply the max you are going to sell times the discount and make sure you are okay spending that much on a marketing campaign.
One thing the article does not mention is "breakage": "Breakage is a term used in accounting to indicate gift cards that have been sold but never redeemed. Revenue from breakage is almost entirely profit, since companies need not provide any goods or services for unredeemed gift cards." http://en.wikipedia.org/wiki/Breakage
This article (http://www.journalofaccountancy.com/issues/2007/nov/accounti...) says that the average breakage is 10-19%. Let's say it's 10% to be conservative. Posie's Cafe said that over 1,000 customers bought the promotion. A 10% breakage implies that at least 100 customers bought but never used their Groupon coupon. Posie's Cafe only gets half of this, but it does give them a free $300. I guess that's not that much, but if breakage is 19%, 190 customers would have given them a free $570.
EDIT: using kareemm's datapoint of 30-40% below, the breakage would be $900-$1,200.
I immediately thought of this quote too. I see this as sort of a honeymoon for Groupon while people figure out how it really benefits (or doesn't benefit) their business. Over time their margins will probably drop considerably, so why shouldn't they take what they can get now? I can see how this sucks for small businesses who get flattened by the runaway train, but is it Groupon's responsibility to sabotage their own business model by performing due dilligence for their customers? From what little I know everything seems clearly above board.
I work for a Skydiving company that has, to GREAT success, ran two GroupOn promotions. We sell three different types of jumps, 10k 15k and 18k. The 10k goes for $169 and is out of a 5 seat Cessna, available only on some weekends. The 15k and 18k are available weekends and most weekdays and cost $199 and $259. Our 15k and 18k jumps are out of a large, 15 seat aircraft.
We sold 10k jumps for $99. The COGS for this product is about $130. We cannot disclose our cut with GroupOn, but assuming the average 50/50 cut, we're selling these things for less than half of what it costs to produce. Why did we do this?
1.We know that 50% of our gift certificates are never redeemed.
2. We know that 60% of our customers purchase video and/or T-Shirts.
3. We know that about 90% of our customers will jump from 15k or 18k. We just ask that the GroupOns pay the difference in price. $30 to 15k, $90 to 18k.
4. We know that many of our customers bring friends, sign up for our solo training, come back for a second jump, post their video on YouTube, and tell the world how much fun they had.
Our first run sold 800, our second sold 1000. GroupOn customers aren't awful, but they seem to carry a higher percentage of snooty, complainy people. The vast majority of our poor reviews on Yelp come from GroupOn people whose experience really wasn't horrible, they are just particularly nitpicky.
GroupOn is a very dangerous game. I can TOTALLY understand how someone can get their ass handed to them. However, that's part of the numbers game you play. I agree with other comments, if you find a way to get 1000 people to walk in your door and spend money, and you can't figure out how to turn that into a positive for your business, then, well... Maybe you should do something else with your money.
GroupOn is crazy awesome. We love them! We have so far sold 1800 skydives through GroupOn! To put that in perspective, our busiest month this year we put 400 tandems up in the air. In two GroupOn promotions we've sold almost one year's worth of business. Staggering numbers.
Good job on crunching the numbers and making it profitable. Groupon is definitely a win-win in some cases.
Did the Groupon people help you with all this, or did you have to figure it out yourself? My main complaint is that Groupon doesn't seem to be looking out for the small biz owners and steering them toward successful deals. It sucks to feel like you can't rely on a partner to look out for your interests.
Having a hard time seeing how this is Groupon's fault. Maybe a better job reminding business owners not to offer more coupons than they can actually support?
Well, the basic economics of giving away too many coupons is definitely the core of the problem, but it looks like Groupon aggravated it somewhat.
By taking a high cut and targeting discount-minded (rather than repeat-custom-minded) clientele, the $8000 basically went down the drain, and the business experienced more headaches dealing with testy Grouponers than they would normal clients.
Part of this is a learning experience about what you offer as a discount, how you offer it, and who you target. Instead of offering half-price cookies, offer half-price vegan cookies or similar. Do a smaller test first (though maybe Groupon doesn't allow that?) so you can get an idea of repeat rates and discount-hungry one-off customers.
The word of mouth gained from this one campaign may well echo forward for months to come, but it's still sad to see a business struggling when a site like Groupon is supposed to be fantastic for both parties involved in the transaction.
at this point groupon has more or less a monopoly so they can easily rape the businesses..
but this article seems to blame groupon instead of the business owner.
1. why would you price your promotion at a loss?
2. losing "$8,000" may sound like a lot...but in reality it should be looked at as $8,000 worth of advertising. And getting your message out to 200,000 or so local customers for that little isn't that bad.
1. That's groupons business model. The average profit margin in the service industry is less than 10%. If you give people a 50% discount, you are definitely going to be losing money. The idea is that you let them try your place, then they keep coming back. In practice, most of the places I've talked to haven't seen it this way.
2. It's really expensive for what it is, and could easily tank a small businesses cash flow. I know of two different places that did $30 gift certificates for $15. Of the $15, $7.50 went to Groupon, so the businesses got $7.50 per transaction. Both sold over 1000 coupons. If half of those coupons are redeemed in the first month, and it costs $27 to service each $30 transaction, you would see a negative cash flow impact of $9,750, and a total cash flow impact of $19,500. The average restaurant spends about $850/month on advertising, so a single groupon would soak up their entire budget for two full years.
Everybody that I've talked to that has used groupon (~10 restaurants) has said that they would never use it again. It's too expensive, and the people that buy it aren't the people they want to attract.
Ultimately, I'd be surprised if somebody else didn't come in and offer the exact same service for free. It doesn't take a genius to sell stuff to people for less than it costs. Incidentally, I did a survey of some of my customers (http://barsannapolis.com) about offering the service for free, and they largely weren't interested because it doesn't produce the results they want.
2. It's -$8000 net gain which means that advertising cost them $8000 plus any additional profit it brought.
I still don't get it why you would vouch for such a thing like groupon. For me, it's quite obvious that you'll get a line of people wanting to buy coffee and a cake for this coupon and nothing more. With zero conversion AND negative profits.
By that logic you argue that $40 CMP's are reasonable for a email marketing campaign.
I haven't priced that kind of a service and on the surface it sounds pricey. However it may in fact be much cheaper than some other mediums with that type of each like radio or TV ads.
You could always advertise using google local which would be much cheaper, but something tells me that being the groupon deal of the day is a much more compelling proposition.
I guess I agree, it isn't a bargain but it's probably not the worst investment considering the the alternatives.
A Groupon salesperson called us awhile back to see if we were interested. We crunched the numbers, wondered how anyone made money using Groupon, and told them "no thanks".
In retrospect, I can see it working in a few cases:
1. You are not well known and will attract new customers (marketing expense).
2. The Groupon is worth much less than your typical sale.
3. Your overhead is fixed and you are not at capacity.
Great quote from the article: "When you buy something cheap and bad, the best you’re going to feel about it is when you buy it. When you buy something expensive and good, the worst you’re going to feel about it is when you buy it." Of couse, this assumes that you can afford it at all. But largely accurate if so, IMO.
It seemed like the business owner jumped in with a no-holds barred approach as far as discounts were concerned in order to get more feet into the shop. Improper planning, failing to study the market and unrestricted incentives were the points of failure and not Groupon. If anything, they just got a big boost as far as the # of customers was concerned.
Maybe they should have restricted the $ amount or number of coupons given out in the promotion or introduced some conditions instead of just going all out.
Completely wrong. Just because Groupon doesn't have any variable cost doesn't mean all of their revenue is profit. Credit card processing, bank fees, and chargebacks will eat up 2-5% of the (gross) revenue, and Groupon spends much more than that buying clicks to drive traffic to the merchant's deal.
"When you buy something cheap and bad, the best you’re going to feel about it is when you buy it. When you buy something expensive and good, the worst you’re going to feel about it is when you buy it."
I think this is the best takeaway from the article generally (not focusing on the Groupon aspect).
A photography deal offered on Groupon in Atlanta yesterday turned messy when it was revealed that the photographer had promoted her work with stolen images and was far from equipped to carry out the terms of the Groupon.
[+] [-] danilocampos|15 years ago|reply
1. The merchant didn't think through the consequences of their promotion. They made a deal that was too appealing to an unnecessarily broad swath of potential customers. A commenter on the blog points out that the better approach is to figure out how to bait the hook for a specific type of desirable customer instead of having a fire sale.
2. Groupon didn't look out for their partner merchant. Groupon's job is to be really smart about the business they're in and to share those smarts with their partners. Sure, they're relatively new at this too, but a part of their sales process should be qualifying the deals they're going to be running for people and saying "hey, you know, this might be giving away the farm."
3. People are dicks; doubly so in a down economy.
[+] [-] annon|15 years ago|reply
If you just open the floodgates without calculating how much you can afford to lose, it's not Groupons fault, it's your own. Even a layman should be able to understand that you're going to take a loss in the short term, so don't allow yourself to take a bigger loss than you can afford.
She even makes it clear in her facebook post that this is entirely her fault:
"...I hung up and thought it over. I called him back and said we would have to get at least 50% to cover our costs of product… to this day I don’t know why I thought even 50% would be a good deal for us. Maybe because I thought since we were covering our food costs. What I didn’t think clearly enough about was that that margin we mark up is what covers all of our other costs… like staff, rent, utilities, etc. Our overhead is roughly $25,000/month, and this decision was about to make it so that we didn’t cover any of those other costs."
[+] [-] MicahWedemeyer|15 years ago|reply
[+] [-] Marticus|15 years ago|reply
Also #3, #3, #3, and #3. People don't read the little bit on Groupon where it says "tip like you're not getting a discount," or just ignore it, and also #3.
[+] [-] waterside81|15 years ago|reply
Our company was on Groupon NYC and they took their 50% cut of each Groupon sold (plus the merchant pays the credit card fees - don't forget about that. Your take is actually less than 50%). Luckily we had a bit of a math on our side as our markup on our products is pretty big so even after Groupon's cut, we still made about 15%. As of this writing, only 28% of our Groupons have been redeemed, so we're quite ahead. But I think our case is the exception - I have yet to hear too many stories about businesses thriving because of these social deals.
[+] [-] GlennKelman|15 years ago|reply
[+] [-] brm|15 years ago|reply
Groupon works wonderfully for businesses with predictable fixed costs and decreasing marginal costs - bowling alleys, stadiums, art museums etc... It does not work well at all for businesses who need to source product, prepare goods, or provide service - restaurants especially
[+] [-] potatolicious|15 years ago|reply
Quote from the end of blog post. Having read through the whole thing I do not believe at any point she blamed Groupon for her predicament - she walked into it eyes wide open and appears to acknowledge this.
It does, however, raise interesting questions about Groupon's relevance to the small businesses they purport to help. Groupon is supposed to be a win-win for consumers and small businesses alike, but it would appear this may not be the case. Seeing as how this is core to their business model, if this is a regular case I would expect this to sink Groupon sooner or later.
[+] [-] alanstorm|15 years ago|reply
From http://posiescafe.com/wp/?p=316#
"the single worst decision I have ever made as a business owner"
"we cannot afford to lose any more money on this terrible decision I made"
Jessie owns up to being the one at fault here.
Beyond that though, what does it say about online marketing, and our industry in general, that high pressure sales tactics are leading small business owners into bad decisions like this?
An industry based on caveat emptor, a lack of trust between actors, zero sum games, and the love of a quick buck over all else leads to an ugly future.
[+] [-] bkmartin|15 years ago|reply
[deleted]
[+] [-] reitzensteinm|15 years ago|reply
$8,000 in losses is an $8 loss per customer. With $3 of revenue. So they're claiming $11 in variable costs to service each customer, for $13 worth of product. No way that is correct - if it is, Groupon is merely the straw that broke the camel's back. Their markup on product should be way higher.
Also, that's assuming no increase in follow on transactions, and that all coupons were cashed.
I don't buy it. Although it definitely could have been a net loss, it wasn't of that magnitude.
[+] [-] dzlobin|15 years ago|reply
[+] [-] jlees|15 years ago|reply
[+] [-] wiredfool|15 years ago|reply
[+] [-] unknown|15 years ago|reply
[deleted]
[+] [-] unknown|15 years ago|reply
[deleted]
[+] [-] ladyada|15 years ago|reply
If you try to get new customers with quality goods at a fair price, you will get customers who will pay a fair price for quality goods.
[+] [-] qasar|15 years ago|reply
i write this to give some context to the comment below.
groupon (i dont think maliciously) uses the fact that they are sophisticated and the small business owner isn't to their advantage.
you might think "so what? all is fair"
well, the small business community doesn't live in a vaccum. they talk to each other and talk about groupon (especially here in chicago).yes, they don't know how to create promotions (one of the real values groupon sales people provide) BUT what they do talk about are these horror stories.
so whats the moral here? people aren't idiots and if groupon wants to make sure their two sided platform survives, it can't abuse one side for the benefit of the other.
[+] [-] noodle|15 years ago|reply
[+] [-] zaidf|15 years ago|reply
The #1 value they are bringing at the moment is convincing shop owners to give a really kickass coupon. That's it!
That mailing list of theirs? Sure it's valuable. But send that same mailing list a 15% off coupon typically found in the newspaper and they won't give a crap.
And give the same groupon offer in the newspapers and...a lot MORE people would use it!
[+] [-] patio11|15 years ago|reply
Distribution is worth paying for. Perhaps not paying a multiple of LTV for. But worth paying for.
[+] [-] garply|15 years ago|reply
I wonder why Facebook and Yelp don't just clone Groupon and integrate it with their sites. It would be a money-maker, especially for Yelp, since the demographics are perfect.
[+] [-] bradly|15 years ago|reply
He said that with Groupon you must discount your offering by at least 50%, and that you must share 50% the sales with Groupon. That means the most you can sell your goods is 25% of there normal price. Where they made the mistake, he said, was in not thinking it would be very successful. You are able to put a max on the number of sells, but they only thought they would sell ~40 so they left it open. They ended up selling over 800.
He said you have to think of Groupon as a marketing cost. Multiply the max you are going to sell times the discount and make sure you are okay spending that much on a marketing campaign.
[+] [-] vidar|15 years ago|reply
[+] [-] BobbyH|15 years ago|reply
This article (http://www.journalofaccountancy.com/issues/2007/nov/accounti...) says that the average breakage is 10-19%. Let's say it's 10% to be conservative. Posie's Cafe said that over 1,000 customers bought the promotion. A 10% breakage implies that at least 100 customers bought but never used their Groupon coupon. Posie's Cafe only gets half of this, but it does give them a free $300. I guess that's not that much, but if breakage is 19%, 190 customers would have given them a free $570.
EDIT: using kareemm's datapoint of 30-40% below, the breakage would be $900-$1,200.
[+] [-] kareemm|15 years ago|reply
[+] [-] itblarg|15 years ago|reply
http://venturebeat.com/2010/09/15/demo-the-secret-of-groupon...
[+] [-] dasil003|15 years ago|reply
[+] [-] jojomagictime|15 years ago|reply
We sold 10k jumps for $99. The COGS for this product is about $130. We cannot disclose our cut with GroupOn, but assuming the average 50/50 cut, we're selling these things for less than half of what it costs to produce. Why did we do this?
1.We know that 50% of our gift certificates are never redeemed.
2. We know that 60% of our customers purchase video and/or T-Shirts.
3. We know that about 90% of our customers will jump from 15k or 18k. We just ask that the GroupOns pay the difference in price. $30 to 15k, $90 to 18k.
4. We know that many of our customers bring friends, sign up for our solo training, come back for a second jump, post their video on YouTube, and tell the world how much fun they had.
Our first run sold 800, our second sold 1000. GroupOn customers aren't awful, but they seem to carry a higher percentage of snooty, complainy people. The vast majority of our poor reviews on Yelp come from GroupOn people whose experience really wasn't horrible, they are just particularly nitpicky.
GroupOn is a very dangerous game. I can TOTALLY understand how someone can get their ass handed to them. However, that's part of the numbers game you play. I agree with other comments, if you find a way to get 1000 people to walk in your door and spend money, and you can't figure out how to turn that into a positive for your business, then, well... Maybe you should do something else with your money.
GroupOn is crazy awesome. We love them! We have so far sold 1800 skydives through GroupOn! To put that in perspective, our busiest month this year we put 400 tandems up in the air. In two GroupOn promotions we've sold almost one year's worth of business. Staggering numbers.
[+] [-] MicahWedemeyer|15 years ago|reply
Did the Groupon people help you with all this, or did you have to figure it out yourself? My main complaint is that Groupon doesn't seem to be looking out for the small biz owners and steering them toward successful deals. It sucks to feel like you can't rely on a partner to look out for your interests.
[+] [-] eli|15 years ago|reply
[+] [-] jlees|15 years ago|reply
By taking a high cut and targeting discount-minded (rather than repeat-custom-minded) clientele, the $8000 basically went down the drain, and the business experienced more headaches dealing with testy Grouponers than they would normal clients.
Part of this is a learning experience about what you offer as a discount, how you offer it, and who you target. Instead of offering half-price cookies, offer half-price vegan cookies or similar. Do a smaller test first (though maybe Groupon doesn't allow that?) so you can get an idea of repeat rates and discount-hungry one-off customers.
The word of mouth gained from this one campaign may well echo forward for months to come, but it's still sad to see a business struggling when a site like Groupon is supposed to be fantastic for both parties involved in the transaction.
[+] [-] vaksel|15 years ago|reply
but this article seems to blame groupon instead of the business owner.
1. why would you price your promotion at a loss? 2. losing "$8,000" may sound like a lot...but in reality it should be looked at as $8,000 worth of advertising. And getting your message out to 200,000 or so local customers for that little isn't that bad.
[+] [-] jcnnghm|15 years ago|reply
2. It's really expensive for what it is, and could easily tank a small businesses cash flow. I know of two different places that did $30 gift certificates for $15. Of the $15, $7.50 went to Groupon, so the businesses got $7.50 per transaction. Both sold over 1000 coupons. If half of those coupons are redeemed in the first month, and it costs $27 to service each $30 transaction, you would see a negative cash flow impact of $9,750, and a total cash flow impact of $19,500. The average restaurant spends about $850/month on advertising, so a single groupon would soak up their entire budget for two full years.
Everybody that I've talked to that has used groupon (~10 restaurants) has said that they would never use it again. It's too expensive, and the people that buy it aren't the people they want to attract.
Ultimately, I'd be surprised if somebody else didn't come in and offer the exact same service for free. It doesn't take a genius to sell stuff to people for less than it costs. Incidentally, I did a survey of some of my customers (http://barsannapolis.com) about offering the service for free, and they largely weren't interested because it doesn't produce the results they want.
[+] [-] xentronium|15 years ago|reply
I still don't get it why you would vouch for such a thing like groupon. For me, it's quite obvious that you'll get a line of people wanting to buy coffee and a cake for this coupon and nothing more. With zero conversion AND negative profits.
[+] [-] cludwin|15 years ago|reply
I haven't priced that kind of a service and on the surface it sounds pricey. However it may in fact be much cheaper than some other mediums with that type of each like radio or TV ads.
You could always advertise using google local which would be much cheaper, but something tells me that being the groupon deal of the day is a much more compelling proposition.
I guess I agree, it isn't a bargain but it's probably not the worst investment considering the the alternatives.
[+] [-] bond|15 years ago|reply
How sweet this is for Groupon, they take it all with almost no costs at all...
[+] [-] dminor|15 years ago|reply
In retrospect, I can see it working in a few cases:
1. You are not well known and will attract new customers (marketing expense).
2. The Groupon is worth much less than your typical sale.
3. Your overhead is fixed and you are not at capacity.
[+] [-] kenjackson|15 years ago|reply
[+] [-] dean|15 years ago|reply
[+] [-] desigooner|15 years ago|reply
Maybe they should have restricted the $ amount or number of coupons given out in the promotion or introduced some conditions instead of just going all out.
[+] [-] heyjonboy|15 years ago|reply
Completely wrong. Just because Groupon doesn't have any variable cost doesn't mean all of their revenue is profit. Credit card processing, bank fees, and chargebacks will eat up 2-5% of the (gross) revenue, and Groupon spends much more than that buying clicks to drive traffic to the merchant's deal.
[+] [-] hexis|15 years ago|reply
[+] [-] CGamesPlay|15 years ago|reply
I think this is the best takeaway from the article generally (not focusing on the Groupon aspect).
[+] [-] jsm386|15 years ago|reply
A photography deal offered on Groupon in Atlanta yesterday turned messy when it was revealed that the photographer had promoted her work with stolen images and was far from equipped to carry out the terms of the Groupon.