Groupon in Retrospect
posiescafe.com
posiescafe.com
"Sure Lucy." There, I did it. What was the hard part? The part where you say yes or the part where you comp your most valuable customer six bucks in flavored water?
Good customer service starts with accepting that you are no longer an employee and that any rule causing bad customer service is your personal fault, because ultimately, you wrote the rule.
See also a customer walking in and offering you six bucks cash for the Groupon deal. That is strictly better than selling her a Groupon for six bucks and paying $3 to GroupOn. Yes. I think we can make an exception for you, ma'am. Just this once... and for anyone else asking the same.
Edit: Worth the read for description of a sales call between an unsophisticated consumer and a business with 90% margins, though. (cough Who do they think they are, coffee sellers?)
Now, there is a real barrier to just giving Lucy the deal. The entire point of the blog post is that the discount was ruinously unaffordable and didn't attract customers. When you can't make payroll, maybe you genuinely can't afford to comp six dollars of flavored water! Or maybe you don't want to set the public precedent of honoring expired coupons when the coupons were bad business even during their active dates and an entire line of customers is listening to this exchange while waiting behind Lucy. Maybe you get a flood of people digging out their expired coupons, or just demanding to be treated as well as Lucy - exactly what you can't afford. If something is unsustainable then you need to stop sustaining it, and that means there has to be a first person you tell "No."
I suspect that was the sense in which the original poster said she "can't" give Lucy the deal: The deal can't be continued - it's been a disaster - it can't go on. Strictly speaking, you have the power to treat customers however you want, but at the end of a bad business decision related to customer discounts, it's only human to frame everything in terms of "we need to get out of this bad deal."
But taking the Groupon deal at a bad price, such that she painted herself into a corner with her best customer, was still the original poster's own mistake.
I feel it would be unambiguously better, in a social and moral sense, if Groupon provided more advice and guidance to discount providers so that they don't risk going out of business. The mistakes may have been the responsibility of Posie's Cafe, but problems are problems, and Groupon wasn't exactly an uninterested bystander in the issue. I think it would probably be better for Groupon's long-term economic interests as well; if you burn your business partners, you earn a bad reputation, and eventually you run out of people who haven't heard the nasty rumors.
According to the fine print on one of the Groupons I have, after the expiration date the coupon is still good as a voucher worth what the customer originally paid.
You're not entitled to the advertised deal, but that coupon is worth money toward goods and services. For example, your $25 coupon is no longer good for a $75 spa treatment, but you still have $25 credit at the spa.
That's neither here nor there for the one case of a loyal customer asking for a discount; of course this business owner is sorely mistaken (and also doesn't appear to understand the concept of a marketing budget, or figuring out what that marketing budget can buy).
She goes out of her _way_ to make those customers feel loved, and would never, ever, do something so insane as to jeopardize that $1K in annual profit over something as stupid as a $13 comp.
I used to live in Brighton, Massachusetts in a place with no internet and I'd go work at a cafe. The nearest place was called CafeNation, and it was pretty good. I'd go in there 5-6 days a week when I wasn't traveling, and usually got a crepe and then a coffee or tea. I was a regular, most people knew me.
One day I was in and out real fast to confirm something on email, I set my computer up, jammed away for 30 minutes in a hurry, didn't buy anything that time. Very, very unlike me, I was just absorbed in work. Whatever it was, it was semi-urgent.
The girl at the counter was new and didn't recognize me, and as I was packing up, she said, "Excuse me, are you going to buy something or what?" I was kind of shaken by this. I bought a juice to go, but then I started going to CafeNation a lot less.
Thing is, in retrospect it was totally silly. It shouldn't have made a difference - one employee who didn't know who wasn't even that rude from her perspective. I didn't even reply to her that I was a regular, I just gave her $2 and grabbed the orange juice and left, and then I started going to CafeNation a whole lot less. Kind of irrational of me, actually, since I see how her actions make sense from her perspective, but I just had a bad vibe about the place after that.
In exchange for loyalty to a venue, customers expect and deserve a little "extra", be that in the form of benefits over-and-above, or simply taking extra care to not be rude!
If it's a new employee it's obviously a grey area - it's no one's fault explicitly, but management could have prepped the new employee better. The employee thought they were doing the right thing, which is unfortunate.
She could even still invalidate the coupon, but say, because I value your business (and return customers are the lifelines of restaurants), I'll take $12 off the bill, just for you. The Groupon is still expired, customer receives discount and is happy, and business enjoys continued business from loyal customer, and perhaps even a customer's obligation to bring more business to the coffee shop.
To outright deny the coupon or some other good-will gesture just seems bizarre. If someone is spending on average $8 and shows up 10 times a month, why risk a $1000 in business for a $12 coupon?
What benefits were there to being Dugg? Sure, you got exposure- but it was exposure from Digg users, unlikely to actually care much about your site or subscribe to it. And Digg users don't click ads, so there was no money to be made- in fact, it could even hurt your rates in Adsense.
All the site was left with was a large bandwidth bill and an Everest-like (yet meaningless) Google Analytics spike.
If you get 30,000, you retain 3000, which could potentially be the 3000 that you need to gain traction and start gaining new users organically.
Made-up percentage numbers aren't an accurate means of prediction. Doubly so since the "customers" that Groupon brings in are looking for freebies.
You could not have realistically have 300k wives at the same time, but you could have 300k customers.
What you're saying goes completely against any type of advertising or promotional model that I am aware of. This is why there is more than just Cost Per Acquisition ad models.
Starbucks loves getting in the New York Times for being socially conscious latte liberals who are in favor of small furry creatures, artisan coffee farmers, and other South American mammals. Is there anywhere on the page to buy coffee? No. Does it sell coffee? Yes. SEO is like that, except many orders of magnitude more efficient.
Although, it's more like 99 times out of 100 and is still a bargain.
"And now there are many more businesses trying to join Groupon than it can handle. Owen noted that the company takes a big cut of the revenue (up to 50 percent) earned from these deals. But since Groupon has a waiting list of 35,000 businesses, Mason said, “If we were economically rational, we would take even more.”"
From http://venturebeat.com/2010/09/15/demo-the-secret-of-groupon...
Everything is negotiable, and everyone likes to be negotiated with (even the drama queens in car sales that yell in outrage in the back room with their manager then gives you your price).
99% of the consuming public doesn't give a damn about doing that, though; probably because swiping plastic doesn't feel like money until the end of the month.
Haggling is healthy, it's the lifeblood of commerce. If it's how retailers negotiate at the wholesale level, why can't we turn around and do it at the consumer level?
I think, if you call it anything, you should call it the "authority tax", because you're trusting their price as gospel because they're the big, scary faceless monolithic vendor of great success. They're just a business. We're all in business. We all should be looking at CDW, OfficeMax, Dell, Apple, as the same as us. It's American worship of the corporation that makes us roll over and give them all their 30% growth year over year, not the fact that they're "honest".
At my company, I've come across people who find it in their nature to haggle the price. There are only 2 ways to deal with them. Up the price and come down to your normal price or don't deal with those customers.
99% of the time, I tell that we don't negotiate price. We charge what we charge because we do a good job and you're going to love it when we're done. 1% it's a good friend so yea...
If they ask again, I tell them we're not a good fit for each other. 7 times out of 10, they try to convince me to do business with them after that. 3 out 10 walk away, which is awesome because they just saved me a shit load of headache.
Nothing personal but I feel cheat out of money if I give into hagglers and if I'm not happy, I find it harder to serve them as well as I want to. Better to refuse that business than to provide sub-par service.
I haven't been to Posies cafe, but the local independent coffee place I stop at most days on my way into the office charges less than $2.00 for all 3 size options (12, 16, 20oz), deals almost exclusively with organic sustainable save-the-planet type growers, has beans from around the world, and a top-notch large batch roaster in house (which someone has to staff for pretty much the entire roasting period).
If they were actually charging $4 for a "caffeine water", then they shouldn't be bitching about Groupon (IMO). If they're charging the more typical ~$2 for coffee, ~$4 for an espresso drink, then their prices are pretty reasonable, and you have to sell a fuck-ton of cups to make your rent.
Isn't almost everything entirely dependent on two parties agreeing that it is worth the given asking price?
What kind of business has advertising overheads of 75%? I can't see how this could work for anyone. And you can't cap the number sold? wtf??
I feel really sorry for her. She got sold the deal by Groupon, against her better judgement. I know how that feels, we've all done it. She wont make that mistake again.
1. They are betting people will spend above their groupon value. So if you have a $30 that give you a $60, they are hoping you will buy $90 worth of food.
2. They are trying to get loyal customers that will come back every month and have a greater life time value than that first sale.
I feel for the business, however. I've had to turn down customers that I know aren't going to be repeats, and it is difficult. But at the same time, I would never ever agree to a 75% reduction to my sales. My repetition period for returning customers about 4 years due to the nature of my business, so maybe I don't have the market for that kind of thing though.
2. Understood. But the aggressive discounting is going to encourage a lot of people who just want to get something on the cheap, and will never go there again. As point 1, you've no idea how much repeat business you're going to get.
I would never do this unless I could cap or trial it first, so I could get a proper assessment of what the deal is worth.
If, on the other hand, you are not offering a commodity experience, and you can reap some significant and repeat benefit then $10/customer is absolutely nothing.
For Example - I've been looking for Hookah Bars in the Bay Area for 5+ years, and have visited most of them, and returned to 90% of them a second time only one or two times - but, my current hookah Bar, I come to two-three times a week, with an average spend of $60/visit, on products like hookahs that have a 75% margin. Take that 18 months * 8 visits/month * $60 * .75 = $6480 Profit off of me. If only 1% of their customers who came in with a $20 groupon coupon became loyal customers like me, that is still a major win for the business. Actually, at 75% margin, the breakeven on a $20 groupon coupon would be about $30 of additional business - that's about 1/2 of one visit.
For businesses that are right on the edge, that don't do anything to encourage repeat visits - groupon may not make sense. But, for those unique little niche business, that may have phenomenal repeat visits, and just need to get people to come in and see how awesome they are - groupon is precisely what is needed to make them successful.
So not only did she kindof make one of her customers unhappy, she actually made her unhappy to the point of never wanting to come back again?
This is terrible, terrible business practice.
Recently a supermarket offered a Groupon for $40 for $20 and it sold out at $1,000. This promotion essentially cost them $20k... surely there is a better way to get customers for $20k?
Seems like this was doomed from the start. I think the real problem here is that the small business owner thought Groupon was working for them. They didn't realise that they're the ones being sold the product.
"make your partners more profitable" is a better long term strategy
But I'm surprised that Groupon wants to take 100% of the payment if less than $10, with no way for the local business to set an upper-cap.
A good parasite doesn't destroy it's host, a bad parasite does. To expect a small business to sell $13 worth of retail-priced product for $0 seems like a bad parasite to me.
Also this from the blog posts comments is quite a gem:
"what could I expect from the only establishment in Portland without a drive through window that is using crisco and kraft “mayonnaise” while claiming to be kid friendly."
OOH SNAP!
I am interested to hear if anyone posting here will admit to working for a Groupon competitor, though.
Groupon is to coupons as Digg is to traffic. One gives you bad customers the other gives you bad traffic. Critical mass that few owners with sophistication and expertise in managing.
I would like to know more experiences in dealing with account managers at Groupon. They should hand-hold some clients more, explain to them the concept after deals are posted online, teach them how to harness customer information to prepare for all this. You know, being a good marketing partner, establishing a working relationship to repeat business, and thrive.
But that's not aligning with Groupon's interests, Groupon's model only works when SMBs don't think this through. That's why you hear hyperbole--you'll never have to advertise again!--it's snake oil sales tactics. They want to come off as being neutral good but end up lawful evil.
Groupon has said they have 35,000 businesses waiting to participate so I guess the real lesson to making money isn't so much about satisfaction but capitalizing on naivete. Last week I learned making money isn't about making something good but copy what's out there until the numbers work.
I think a coffee shop, or really anything selling a commodity, is particularly ill suited to groupon type sales whereas a climbing gym, or really any business with probably a monopoly in a geographic area, is particularly well suited.
The Posies blog post sounds like lots went wrong - misunderstood goals for the Groupon itself, ill-conceived deal (perhaps even a bad fit for a Groupon at all - too small of a deal), ill-prepared staff. Time will tell if the Posies Groupon created any new loyal customers - that's the whole point.