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Groupon: Good or Bad for Your Business?
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13 comments
Margie,
Although I have not been associated with any Groupon venues, my experience in restaurants with various web based couopons has been largely negative.
I can add my comments in the negative about the clientele that web based discounts tend to generate, at least with my experiences in San Francisco, as well as in Napa Valley. These incentives seem to only bring in the bargain hounds, who do not generally follow the "hoped for" guidelines as per tipping on the "original amount". Also, the "Coupon Crowd" tends to be quite thrifty, and does not tend to participate in the total experience, but rather limits their involvement, often being order fire entree tables as opposed to those who want a full meal/experience. These folks also do not buy wine/cocktails. My experience is that these incentives do not draw the type of clientele who are going to be repeat customers, or even the clientele who will recommend their experience to others.
Sadly, these efforts are rarely rewarded in any significant way, especially considering the downside.
Perhaps with a burgeoning economy. we may see some different results in the future, but for now, thumbs down.
Bret Fenton
Although I have not been associated with any Groupon venues, my experience in restaurants with various web based couopons has been largely negative.
I can add my comments in the negative about the clientele that web based discounts tend to generate, at least with my experiences in San Francisco, as well as in Napa Valley. These incentives seem to only bring in the bargain hounds, who do not generally follow the "hoped for" guidelines as per tipping on the "original amount". Also, the "Coupon Crowd" tends to be quite thrifty, and does not tend to participate in the total experience, but rather limits their involvement, often being order fire entree tables as opposed to those who want a full meal/experience. These folks also do not buy wine/cocktails. My experience is that these incentives do not draw the type of clientele who are going to be repeat customers, or even the clientele who will recommend their experience to others.
Sadly, these efforts are rarely rewarded in any significant way, especially considering the downside.
Perhaps with a burgeoning economy. we may see some different results in the future, but for now, thumbs down.
Bret Fenton
09/09/10 @ 08:22
I admit I have been enthralled with Groupon ever since I discovered it online. The Marketing concept is so simple and so potentially powerful that I have been following it as both a consumer and a business person. While I have not been able to figure out a way to use it with our company, an Off Premise Catering company, I have shared the web site with other Vendors in my Network who have used it with success. I have also discussed it with staff at every company where I have used a Groupon. I have been greeted warmly at every establishment and the response has been consistent that it has served as a powerful marketing tool reaching an affluent clientele. Overwhelming is the most common word used.
The concept is that one great deal is offered for exactly one day. At no cost to your company a large receptive online population is studying your company whether they purchase the deal or not. Every customer is already registered online with a credit card so it is a very easy purchase, often an impulse buy. I, myself, will purchase most anything that I find appealing within a reasonable geographic distance. I work in Hospitality and consider it important to support local business and the Arts as well as keep up on culinary trends. I have gone to more restaurants and events in the past 6 months than in the previous 2 years at approximately the same out of pocket cost. I have returned to some and endorsed most within my large circle of acquaintances.
Having said that, this is NOT for all companies. If you do have not a superb product or service or do not have the capacity or cash flow for a large influx of business then you do not want to participate in Groupon. There is a significant delay in receiving in the funds and the clientele is Internet savvy so both positive and negative reviews will spread fast. Groupon or not, I have rejected restaurants that appear dirty or not up to my standards. I have also received my money back from Groupon so that means that establishment did not get paid. I do recommend that any company using Groupon put a limit on the deals offered for the day based on a realistic plan and consider wording and deadlines carefully.
Marilyn Chambers
The concept is that one great deal is offered for exactly one day. At no cost to your company a large receptive online population is studying your company whether they purchase the deal or not. Every customer is already registered online with a credit card so it is a very easy purchase, often an impulse buy. I, myself, will purchase most anything that I find appealing within a reasonable geographic distance. I work in Hospitality and consider it important to support local business and the Arts as well as keep up on culinary trends. I have gone to more restaurants and events in the past 6 months than in the previous 2 years at approximately the same out of pocket cost. I have returned to some and endorsed most within my large circle of acquaintances.
Having said that, this is NOT for all companies. If you do have not a superb product or service or do not have the capacity or cash flow for a large influx of business then you do not want to participate in Groupon. There is a significant delay in receiving in the funds and the clientele is Internet savvy so both positive and negative reviews will spread fast. Groupon or not, I have rejected restaurants that appear dirty or not up to my standards. I have also received my money back from Groupon so that means that establishment did not get paid. I do recommend that any company using Groupon put a limit on the deals offered for the day based on a realistic plan and consider wording and deadlines carefully.
Marilyn Chambers
09/10/10 @ 08:45
OK, here I go again! I see the duality of groupons but have strong feelings about them. I purchased one for a haircut at an upscale salon, with a newer stylist who was trying to build a customer base. I wanted a total new look so took the plunge on this place - but I gave her a nice tip. Knowing I would not be back because I almost never get down there and would not go regularly for haircuts - too far, no convenient free parking, etc - so bought a pile of product from the salon.
I recently bought some spa services as a gift to a former client that wants to work for free just to learn - and by gosh she kicked butt, saving me a late work night a couple of weeks ago. I don't know what she will do with hers - but I bought the 2nd offering they had and will go in for my own deal - but will purchase above and beyond the value of my Groupon. I will also leave a nice fat tip. It's not terribly conveniently located, but I will make the effort, when I want to get those services again, because at least they have a parking lot and it's not that far away.
If everyone did it this way - cool. But most don't - indeed they are trying to get by as cheap as possible. I am an upscale custom French pastry chef, who does wedding cakes, dessert buffets, and corporate work - I also do work for some caterers. I am NOT a discounter in any way and I think it would cheapen my image. I make a point of knowing my competitors - both product and price structure - and I always strive to be at least 50c per serving higher, on my wedding cakes. Perceived value is just as important as other aspects of how I present myself. A Groupon would in effect be putting me in a position of telling people to call my bluff - and I won't do that. There are a couple of other wedding cake folks in my area who have done Groupons on small birthday type cakes, and it feels very tacky to me. Two cupcake places did them too and did very well - that feels less tacky to me.
One huge objection I have with Groupon is that they take such a high percentage! OUCH! So for that reason, I only buy them for services that are labor only and don't additionally incur things like food cost. It feels insulting to me, to come in to a restaurant that is already running on a narrow margin. Seems like they would lose money the minute I walk in the door.
btw, when I called to ask questions about the deal with the above mentioned spa owner, he offered me the same deal in a gift certificate if I wanted to come in and buy it directly from him, instead of through Groupon - which I did. Not sure if he can get in trouble with them for that or not - but I'd rather see him keep more of the money.
Judy Tallant
Tallant House - Fine Sweets & Other Eats
I recently bought some spa services as a gift to a former client that wants to work for free just to learn - and by gosh she kicked butt, saving me a late work night a couple of weeks ago. I don't know what she will do with hers - but I bought the 2nd offering they had and will go in for my own deal - but will purchase above and beyond the value of my Groupon. I will also leave a nice fat tip. It's not terribly conveniently located, but I will make the effort, when I want to get those services again, because at least they have a parking lot and it's not that far away.
If everyone did it this way - cool. But most don't - indeed they are trying to get by as cheap as possible. I am an upscale custom French pastry chef, who does wedding cakes, dessert buffets, and corporate work - I also do work for some caterers. I am NOT a discounter in any way and I think it would cheapen my image. I make a point of knowing my competitors - both product and price structure - and I always strive to be at least 50c per serving higher, on my wedding cakes. Perceived value is just as important as other aspects of how I present myself. A Groupon would in effect be putting me in a position of telling people to call my bluff - and I won't do that. There are a couple of other wedding cake folks in my area who have done Groupons on small birthday type cakes, and it feels very tacky to me. Two cupcake places did them too and did very well - that feels less tacky to me.
One huge objection I have with Groupon is that they take such a high percentage! OUCH! So for that reason, I only buy them for services that are labor only and don't additionally incur things like food cost. It feels insulting to me, to come in to a restaurant that is already running on a narrow margin. Seems like they would lose money the minute I walk in the door.
btw, when I called to ask questions about the deal with the above mentioned spa owner, he offered me the same deal in a gift certificate if I wanted to come in and buy it directly from him, instead of through Groupon - which I did. Not sure if he can get in trouble with them for that or not - but I'd rather see him keep more of the money.
Judy Tallant
Tallant House - Fine Sweets & Other Eats
09/10/10 @ 12:14
Hi Margie,
I just read your newsletter re: Groupon.
I did a promotion with Living Social early this year, and was very happy with the results. They were professional, easy to work with, and very eager to promote my business. I did a 50% off for a two night stay and I think their cut was 30%. The promotion was for my lowest priced room only. Many people upgraded to one of the other rooms.
On one hand, it was, as you mention, a very deep discount. On the other hand, it was advertising dollars spent only on actual paying customers. And I love the target demographic--the people who took me up on the offer have been excellent guests and customers.
It's important to think about the consequences--I read feedback on other promotions, and then tailored my offer to minimize any potential negatives.
I sold 35 stays and was paid in full within a few days. I do expect to get return guests, referrals, and good reviews as a result of the promotion. I would definitely consider doing it again.
Thanks for asking. I enjoy your newsletter, btw.
Take care,
Bill Matte, Owner
Shooting Star Bed and Breakfast
Carnelian Bay, CA 96140
North Lake Tahoe
http://www.TahoeShootingStar.com
I just read your newsletter re: Groupon.
I did a promotion with Living Social early this year, and was very happy with the results. They were professional, easy to work with, and very eager to promote my business. I did a 50% off for a two night stay and I think their cut was 30%. The promotion was for my lowest priced room only. Many people upgraded to one of the other rooms.
On one hand, it was, as you mention, a very deep discount. On the other hand, it was advertising dollars spent only on actual paying customers. And I love the target demographic--the people who took me up on the offer have been excellent guests and customers.
It's important to think about the consequences--I read feedback on other promotions, and then tailored my offer to minimize any potential negatives.
I sold 35 stays and was paid in full within a few days. I do expect to get return guests, referrals, and good reviews as a result of the promotion. I would definitely consider doing it again.
Thanks for asking. I enjoy your newsletter, btw.
Take care,
Bill Matte, Owner
Shooting Star Bed and Breakfast
Carnelian Bay, CA 96140
North Lake Tahoe
http://www.TahoeShootingStar.com
09/10/10 @ 12:51
I think it depends on what you're trying to accomplish. Many small businesses think Groupon will bring them more business and added exposure but then realize they can't handle the volume it produces; which has a negative effect on the service they are able to provide. Additionally, with most deals being 50% off and then there being a 50% profit share with Groupon it's a significant hit on your margins.
If a business were to utilize it for say a specific event though, it could be beneficial. In this case, you know that the Groupons are only being used for that one day/event so it's easier to manage and determine the success from the promotion. If the event was successful and profitable you can utilize the site again, if not, you won't be waiting months for the Groupons to expire.
Marisa Fallone
If a business were to utilize it for say a specific event though, it could be beneficial. In this case, you know that the Groupons are only being used for that one day/event so it's easier to manage and determine the success from the promotion. If the event was successful and profitable you can utilize the site again, if not, you won't be waiting months for the Groupons to expire.
Marisa Fallone
09/10/10 @ 15:41
Hi Margie,
My thought on Groupon is that it drives brand awareness. I don't think the price or Coupon/ discount offer diminishes the brand. If a retailer or winery can drive traffic to both their physical or ecommerce site through Groupon, without compromising much relative to the margins, then why NOT? I keep thinking about how much press GAP received after their offer, and I almost find myself wanting to shop their store...GAP is in the forefront of my mind after that amazing sale on GROUPON.
Thank you again for all your wonderful posts!
Cheers!
Sheila Martin
My thought on Groupon is that it drives brand awareness. I don't think the price or Coupon/ discount offer diminishes the brand. If a retailer or winery can drive traffic to both their physical or ecommerce site through Groupon, without compromising much relative to the margins, then why NOT? I keep thinking about how much press GAP received after their offer, and I almost find myself wanting to shop their store...GAP is in the forefront of my mind after that amazing sale on GROUPON.
Thank you again for all your wonderful posts!
Cheers!
Sheila Martin
09/10/10 @ 23:32
Groupon is great for business. It brings in so many new customers with a fairly good rate of return patronage. As far as overwhelming a business, they offer caps to the offer so that things don't get too out of hand. It's free marketing!! What business doesn't love that?
Raven Tarpley
Raven Tarpley
09/10/10 @ 23:34
Me Again, Margie.
For us, the biggest reason that we will no longer use Groupons is the extended time that they are good for. In our industry, we want consumers to use the coupons during the time we are dead and could use more "butts in seats" and can accomodate the 500 plus Groupons sold during our promotion. Groupon touted this as the main reason to go with the program. As it turned out, and many other restaurants in this area can attest to this, the majority of Groupon users wait until the Groupon email, nearly 6 months later, reminds them they haven't used the Groupon. Then, when we were already busy, the rush was on, no one read the fine print and when they were days late and we offered the legally required discount of the purchase value we received terrible yelp reviews and indignant customers. There are more timely expiring offers out there, specifically SF Bay and some other newer ones that understand this problem. I was not at A Perfect Finish when the promotion was offered, but I may also have missed the 6 month expiration date myself, many were mislead into believing that Groupon purchasers use the Groupons early...they don't and therin lies the problem.
--
Tim Gallant
A Perfect Finish Wine Bar
http://www.apfwinebar.com
For us, the biggest reason that we will no longer use Groupons is the extended time that they are good for. In our industry, we want consumers to use the coupons during the time we are dead and could use more "butts in seats" and can accomodate the 500 plus Groupons sold during our promotion. Groupon touted this as the main reason to go with the program. As it turned out, and many other restaurants in this area can attest to this, the majority of Groupon users wait until the Groupon email, nearly 6 months later, reminds them they haven't used the Groupon. Then, when we were already busy, the rush was on, no one read the fine print and when they were days late and we offered the legally required discount of the purchase value we received terrible yelp reviews and indignant customers. There are more timely expiring offers out there, specifically SF Bay and some other newer ones that understand this problem. I was not at A Perfect Finish when the promotion was offered, but I may also have missed the 6 month expiration date myself, many were mislead into believing that Groupon purchasers use the Groupons early...they don't and therin lies the problem.
--
Tim Gallant
A Perfect Finish Wine Bar
http://www.apfwinebar.com
09/12/10 @ 12:25
You may want to look into Coupons for Causes in Baton Rouge. Very reputable company with good causes.
Walter Marcinowski
Walter Marcinowski
09/12/10 @ 12:27
Its very popular here in Washington, DC and very well known. Actually causing a bit of an issue because there are too many people purchasing the goods/services and some of the small to mid size businesses can't handle the daily volume.
Todd Thompson
Todd Thompson
09/12/10 @ 12:35
I'm considering contacting Groupon, to promote my service and bring in a short-term infusion of cash flow. Bt I'm not sure it would work with my model - private, customized, craft beer tasting events...from small parties, to large companies.
I'm just not sure I can make it worth all my time, monetarily, for all the work I put into each event...especially given all the $$ skimmed off the top.
I'm mulling over the idea...
I'm just not sure I can make it worth all my time, monetarily, for all the work I put into each event...especially given all the $$ skimmed off the top.
I'm mulling over the idea...
09/13/10 @ 09:08
I am in the wine international trade and wine B2C business to China (teddy98.com). We are trying to promote wine purchases across countries - Groupon model might turn out to be good for global B2C, where wines are shipped expensively due to international shipping charges and fees for custom clearance. When shipments can be grouped together into a large quantity purchase, they can significantly reduce the shipping and handling charges for each customer involved. In this scenario, the original purchase prices might not need to be really cut for groupon-like deals.
Ching Guo
Ching Guo
09/24/10 @ 13:33
Comment from: Lacy Empkey [Visitor] 
I agree with that is depends on the business to whether it would be work the investment for the vendor. I recently starting helping a friend with Half off Depot which works very similar. Half off Depot pays the vendor half the price of the certificate purchased however and there is no cost to the vendor to get started. They merely are getting paid to have a banner up and see if people purchase their certificates. Pretty great deal if you ask me.
10/17/10 @ 16:20
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