You’ve likely heard about the concept of Daily Deals through Group Coupon Websites. While Groupon and LivingSocial seem to be the most popular, there are over a hundred such websites listed on tomuse.com.
Groupon has been generating a lot of awareness for this category with news of massive deals (though LivingSocial recently created substantial buzz through an offer on Amazon.com which happens to be an investor
) along with the much talked about attempt by Google to buy Groupon
. Groupon declined Google’s bid, but this weekend Google “leaked” news that they were planning on launching their own Group Coupon business called “Google Offers”. Mashable
broke the news on Saturday (January 22, 2011) with a blog post that noted:
“Google is preparing to launch Google Offers, the search giant’s Groupon competitor, Mashable has learned. One of our sources has sent us a confidential fact sheet straight from the Googleplex about the company’s new group buying service. “Google Offers is a new product to help potential customers and clientele find great deals in their area through a daily email,” the fact sheet says.
Google Offers Fact Sheet
Does this Make Sense for Google?
While it may appear that Google is attempting to be a Jack-of-all-Trades at first sight – maybe it really is a strategic move. After all, when Google announced Google Places it released statistics including that 20% of searches on Google are related to location. We’ve become more reliant on search engines to help us find business by geographic location. Making it easier for local businesses to be found by searches in Google makes sense. So perhaps offering deals via Google Offers makes sense. But does Group Coupon buying in its current state make sense to businesses?
Why Group Coupons Make Sense
Groupon and Living Social send daily deal emails to the subscribers in their database based on geographic location. This is great, especially for smaller businesses that do not have websites or websites that rank high on search engines. Group Coupons are clearly good at reaching a local audience that has an interest in buying offers (since they’ve subscribed) from companies or for services they may not have considered – versus consumers who search websites like Yelp.com for reviews left by other consumers.
Are the Group Coupon Buyers the Right Target Market?
Group coupon websites like Groupon claim that they target demographics that have money to spend – but I’m kind of hesitant about the claims because when I’ve signed up to receive deals I didn’t have to provide much in terms of disposable income. A quick search on Google reveals many businesses have found a notable volume of offer buyers who do not provide repeat business and while using their offer, do not shop beyond the offer amount or pay gratuities based on the normal price (which is suggested to buyers on Groupon and Living Social).
Are Group Coupon Websites (in their current state) Like the DotCom’s of the Early 2000s?
There’s a lot of buzz around Group Coupon Websites. Of course there is, in the recent past, there’s been an economic crisis that has caused many purse strings to be tightened. Of course we like the idea of getting 50-90% off! Sure the explosion of social media makes it easy for us to share offers with our friends and followers – but is this a consumer-centric fad with little long term viability for businesses?
Group Coupon Vendors Offer Limited Resources to Convert Offer Buyers to Repeat Buyers
To me, Groupon Coupon Websites are missing the boat by not focusing on providing services to businesses to help them in the process of converting Offer Buyers to Repeat Buyers. Here were are in a world where companies are increasingly using drip-marketing through newsletters and personalized web experiences and all Groupon offers is a checklist and possibly an offer to sell more of your products or services for 50 to 90% off.
By the Way, Just How Good Are these Group Offers Anyway?
I just looked at Groupon offers today:
Med-Contour – Deal = £99 for £750 – there is absolutely NO pricing listed on their website. I searched in Google for pricing and cached pages and still could not find any pricing. (Though a little humor for #WCM readers – searching the URL indicates they use Joomla. Yikes!)
The Life Center (Yoga Studio) – Deal = £35 for £112. I simply went to the company’s website http://www.thelifecentre.com/prices-and-booking/classes/ searched £112 – there is nothing on the website for that amount. This business might be gaming Groupon though - much to my humor they are offering a deal for new clients, “£14 for 10 consecutive days of unlimited adult classes from date of purchase”
Groupon’s text says, “…with today's Groupon: Pay only £35 for eight classes of yoga or pilates, rather than the usual fee of £112 at The Life Centre in Notting Hill. ”
Wait….but when I look at The Life Center’s pricing chart there’s no pricing for an 8 class package. Okay, let’s look at the math: £112 /8 = £14. The Groupon offer is based on the Drop in class for a length of 1.25 hours.
In Los Angeles there’s a deal today for Aquatic classes – try to figure out how they came up with the pricing. The first class is free. The deal $35 for $165. I don’t see a deal that easily translates to $165. The deal includes “…for $35, you get one private and four group CrossFit Kraken classes (a $165 value)”. On the website it says everyone gets the first lesson free, a private lesson costs $85 and 2x group lessons costs $150.
Uh-oh, more false advertising
: Three Groupon Ads Ruled Misleading in U.K.
The Buyer Experience
I purchased a deal at O Spa for 3 spa experiences in 90 minutes. The Terms on the voucher said the offer could be redeemed online or by phone. It was agonizing to book the appointment online because the dates would not show up in my Chrome browswer – though the website functioned better in Internet Explorer it was still a very long and annoying process. Who waits 5 days for someone to call them back unless they’re waiting for a job offer? When I went for my experience it was by far the worst spa experience! “Groupon” was noted next to my name on the reservation list and I can only guess that this is why the spa employees treated me as if I were imposing on them. I purchased a voucher for 50% off a sports band, redeemed it on the company’s website and received it within a week (though the sports band itself is a little gimmicky). I purchased a voucher for hypnotherapy and Neurolinguistic Programming. I ended up negotiating a different service than was on my voucher for an additional fee (still quite a savings) and though I won’t tell you what the therapy was for – I have to say I am absolutely astonished by the results! I have four other vouchers to redeem, I’ll have to report back on my experiences. Check out this website for Groupon Reviews from Offer Buyers and Business Owners
Business Owners that use Groupon Can #FAIL
Here’s an excerpt from a blog
detailing the harrowing experience of a small business owner:
“That’s $46,320 of merch at retail or roughly $23,160 at cost…of that I get around $10,000 because of course I only get 50% of the deal minus credit card fees (ugh!) Groupon gets their 50%.”
The Business Owner’s Experience at Posie’s Cafe
“After three months of Groupons coming through the door, I started to see the results really hurting us financially. There came a time when we literally couldn’t not make payroll because at that point in time we had lost nearly $8,000 with our Groupon campaign. We literally had to take $8,000 out of our personal savings to cover payroll and rent that month. It was sickening, especially after our sales had been rising.”
“The losses would have been worthwhile if the Groupon customers had become loyal, profitable patrons but many only cared about a discount, not about what made the cafe special…”
Read more about this business’s Groupon disaster on the owner’s blog post
You got them in the door…and then...
On Groupon’s website they explain how their service works mostly through videos. In one such video the narrator says,
“…we make Groupon risk-free to make sure our featured businesses always come out ahead…”
“…that very same day we mail you a check…”
But according to many business owner reviews that have used Groupon, they get several checks over the course of their offer’s validity. It seems Google Offers is attempting to go head-to-head against this by paying businesses faster. The Google Offers Fact Sheet says, “After your offer goes live, we’ll simply deduct our fee from the deal revenue and you’ll get cash in your pocket from the offer approximately three business days after the offer runs.” The fact sheet does not say you’ll get all the revenue – so I’m not sure about that.
Groupon is potentially great for getting people in the door. It’s not necessarily great for getting people in the door or for getting them to convert to longer term customers. However, Groupon’s website has a ROI calculator
. I tried it out using this info:
City: Los Angeles
Average bill: $25
Percent who become repeats: 5% (you’re supposed to estimate the percentage you want to convert)
Number of repeat visits: 1000 (you’re supposed to indicate the number of “regulars” you have annually)
Groupon Estimated Deal Value: $508,802.70
Groupon offers what I will call “a little support
” to help businesses convert Groupon customers to repeat customers. They offer help via a checklist that suggests ways of doing so through “Ongoing Consultation”. They now provide a “Capacity Planning Tool” and “Redemption Cycle Planning” to help businesses prepare for the influx of business. But as a marketer, I’m surprised they don’t provided integrated marketing services to help businesses convert these customers.
Excerpt From Groupon's Checklist:
Ways Businesses Can Fail at Converting Group Coupon Buyers Into Repeat Buyers:
- Get them in the door and provide a sub-standard service level. (If a business owner does nothing to account for the potential loss in gratuities or commission for employees they might inevitably provide lower levels of service.)
- Do nothing to bring them back (American Apparel tries to convert people to their email list for future marketing)
- Make the Groupon customer feel bad for having visited you with a discount. (Hey you offered the deal! Don’t make me feel bad for buying it!)
- Make an offer without the cash flow to handle it. You really need to assess how the redemption of vouchers will affect your costs staying the same (and growing unpredictably via redemption). It appears through a little research that many business owners haven’t assessed their profit margins and cash flow before they’ve made an offer – which has lead to a financial struggle.
Caveat Emptor! (Buyer Beware!) Both business and consumers CAN benefit from group coupons and they can both stand to lose out. My current stance is that Group Coupon Websites are in their infancy. The social aspect of the business combined with more integrated services (and yes technology) and better education for businesses could make this concept much more viable.