Groupon Client Goes Public With Beef at SXSW | Hacker News Reader

Groupon Client Goes Public With Beef at SXSW

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48 pointsgavingmiller27 comments

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.

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?

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.

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 said they were successful.

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.

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."

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

sounds pompous.

Should we let them know platitudes are not the solution?

marketing excellence (we talk the talk) / operations excellence (we walk the walk)

Groupon does one of those well.

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.

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

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.

What about the intangible cost of diluting the experience for valuable, fully-paying customers by loading down the class with a bunch of yahoos who don't value/respect it anywhere near the same level? Doesn't that impact things a little?

That's a great point I hadn't thought of - I haven't seen this happen since I go to the 6am class, but I suspect the later afternoon classes have this happening with them.

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.)

I'm confused - I thought GroupOn did one-off offers, not a long-term discount. (Of course, if you're willing to go to a different business every week and there are plenty of one-off deals, the difference isn't that large.)

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

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 :-)

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.

> 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.

Maybe, but it depends on the product or service too. For example, is there any evidence sites like Hotwire and Priceline, that sell unused capacity for hotels or car rental agencies, really cannibalize the existing (i.e. non-discounted) sales that much?

I can't speak to Hotwire, but in the case of airline seats and hotel rooms, one of the dynamics of the market is the uncertainty of availability. What you are really buying in the case of an airline seat is the guarantee of a seat on that flight. Couple this with businesspeople who absolutely, positively have to be in a certain city at a certain time, and you have a market where there is a limit on how much leakage you will have between classes of customer.

That might play out for seats in a spin class, but it might not. It would depend on whether customers have flexibility about which classes they take and whether they care about which gyms they attend. The more flexible and mobile they are, the harder a business has to work to do this kind of price discrimination.

I'm not suggesting it's impossible or that web businesses can't help, just that ONLY selling excess capacity at a discount is a problem. I posit that you must sell excess capacity and do something else to succeed.

Perhaps how the business would lose is in the form of quality members; essentially they are signing up because they see it as a good deal rather than an investment in themselves. I would doubt if the business will be happy dealing with such customers.

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...

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.

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.

>...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...

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