| Social Media Today
Sign up | Login with →

Comments by Jeff Gibbard Subscribe

On Considering Offering a Groupon? Read This First.

Great link.  Very interesting article.  I'm still amazed at the number of people that defend Groupon so adamently as in the comments of the post that you linked to.  It's as if these individuals are protecting their ability to buy things at over 50% off, or maybe they just can't step inside the shoes of a business owner.  

August 19, 2011    View Comment    

On Considering Offering a Groupon? Read This First.

I have 0 disagreements with what you wrote.  Good points.  Your experience with the lake and how you reacted to it afterwards are a great testament to the potential positive outcome.  

Newer businesses can use Groupon to spread the word far and wide.  Unique products will likely benefit because less people are actively searching them out and the net gain is potentially huge by reaching an audience currently unaware of the product or service.  

I think the point I'd like to communicate is simply that a business should think long and hard about whether offering one is the right move.  In some cases it is, but in many (and I would argue: most) cases businesses are turning to Groupon without fully considering the potential negative implications.  That's not Groupon's fault, it's the same as any other bad marketing decision.  As many of the companies I've seen offering Groupons have very low margins and small budgets, I feel they are better off working on their core audience and existing customers.  Once a community exists it makes more sense to look beyond that for new customers.

August 19, 2011    View Comment    

On Considering Offering a Groupon? Read This First.

Fair enough.  Good example.  What happened when the membership expired, did the people from the Groupon come back and renew at full price?

August 19, 2011    View Comment    

On Considering Offering a Groupon? Read This First.

I completely agree with you, it is not Groupon's fault, the problem is the businesses are failing to retain customers.  I am not blaming Groupon for anything.  Groupon is a service and I feel there are better alternatives that businesses should consider first.  

I think it is a poor use of resources to spend the money offering a Groupon when that money should be going towards building an environment where customers come back over and over.  If everything is ducky and the business is growing and has some money to burn offering a Groupon to expand their reach, that is fine.  The problem is many businesses turn to Groupon to "get people in the door" because it is slow and then don't plan for how they are going to turn those customers into loyal customers.

 

August 19, 2011    View Comment    

On Considering Offering a Groupon? Read This First.

That's exactly what I'm advocating for.

August 19, 2011    View Comment    

On Considering Offering a Groupon? Read This First.

I see your point and I do think there are some businesses where it makes sense.  The spa example is a good one.  However while they are not technically losing money in that Groupon transaction, look at what Groupon has caused in the spa industry.  There is virtually no reason to ever pay full price again for a spa treatment.  As long as you don't mind switching venues, you can just keep buying new Groupons for spas.  The Groupon model has effectively reduced the average price of services in the spa industry by creating a half priced option that is virtually always available.  

It certainly makes more sense than for restaurants but there are still other options that don't reduce average sale price.  That spa could just give their customers 30% off on next visit.  It would build loyalty and they could compete in the full priced space rather than the deal space.   

August 19, 2011    View Comment    

On Considering Offering a Groupon? Read This First.

Again, to be clear, I'm, not blaming Groupon.  I presented my case for why I think it's a bad idea. If people choose to offer a Groupon, more power to them, I hope it works out, but if it doesn't the blame is on them for not considering whether Groupon is a good idea or if there is a better, more cost effective alternative.

You mentioned recruiters. I don't feel like recruiters are a good comparision to Groupon.  I think recruiters are more similar to the alternative strategy I propose.  A good recruiter doesn't just go out and blast a job posting to anyone and everyone looking for a job, they find people that match a profile.  Recruiters often leverage their network to get the exact right targeted fit for a company. Businesses that use Twitter and Facebook to build a following will need to leverage their network of existing customers and seek out individuals that fit the target audience they want to build awareness with.

To summarize, I'm not disputing what Groupon has the potential to do if all the circumstances are right, I'm saying that, in general, there are better, more cost-effective and more targeted alternatives that have a greater possibility of long-term financial gain.  

August 19, 2011    View Comment    

On Considering Offering a Groupon? Read This First.

I agree with everything that you wrote.  To be clear, I don't think Groupon is entirely bad.  Groupon DOES work better in certain industries and it is a great way to get big exposure for new restaurants.  I think many businesses just hop into the Group buying game without fully considering the implications. 

August 19, 2011    View Comment    

On Considering Offering a Groupon? Read This First.

Is Groupon or what I've proposed as an alternative a more targeted approach?

Is Groupon or what I've proposed as an alternative a more cost-effective approach?

You said to stop thinking of Groupon as a sales tool and to start thinking of it as an advertising vehicle.  So let's call this advertising.  I'm curious what you think the purpose of advertising is?  It's to generate sales.  Good advertising is targeted, Groupon is a blast.  Good advertising maximizes ROI,  Groupon is more expensive than offering a straight 50% to existing customers.  

Yes, there are examples of businesses that benefit from offering a Groupon.  Yes, Groupon can help you reach a large number of people.  Yes, Groupon may lead to repeat business.  And yes, Groupon will allow you to raise awareness more quickly.   

So, if you want to offer a Groupon...offer a Groupon.  If you want to use it as marketing, use it as marketing.  If you read through my entire post, you'll see I didn't once advocate for printed coupons, tv ads, radio spots or anything else. 

The only thing I offered as a better alternative is to build your business starting with your customers first.  Incentivize and reward your customers to bring in new people.  I also recommended that a Groupon could be used creatively such as offering a very small amount just to get people in and then going above and beyond.

I don't have stock in Groupon or any other group buying platform.  I don't have a horse in this game.  My perspective is that it's not the best use of resources, you are free to disagree with that.  I'll be advising my clients to focus their time, money and energy elsewhere.  

August 19, 2011    View Comment    

On Considering Offering a Groupon? Read This First.

I'm not blaming Groupon,  I'm stating a case for why I think businesses should think twice about offering a Groupon.

My point was that using a Groupon is a specific marketing decision.  

It is a decision to blast out a 50% off coupon to anyone that is looking for a deal.  This is the target audience, they're on a daily deal website.  In order to reach this demographic you must forfeit approximately 30% of the remaining revenue from the sale of that Groupon, leaving you with 35% of the cost of product or service.  That's $35 for every $100 worth of product or service. 

If you were to decide that you wanted to offer a discount, I would argue that it makes more sense to offer 50% coupons to your customers and give them one coupon for a friend.  That's $50 for every $100 worth of product or service and it comes with a referral.  You net 30% more money and your discount is targeted to existing customers and their network.  Do that, create loyal customers and keep building outward from your community.        

Unless the business has fixed costs, like with a Vineyard or is trying to clear out old stock items, Groupons don't make financial sense.

I love them as a customer because who doesn't want 50% off?      

August 18, 2011    View Comment    

On Considering Offering a Groupon? Read This First.

One more thing: Do me a favor and tell me what percentage of businesses can actually afford to offer 65% off regularly?  Here's the math: 50% loss in gross revenue to the customer and another 30% of the remaining 50% in gross revenue to Groupon totalling 65% less gross revenue.  

To put it simply, a company sells something for $100, how sustainable is it for that company to sell it for $35.  Can they possibly break even or generate even a tiny profit?  Even furniture companies?

August 18, 2011    View Comment    

On Considering Offering a Groupon? Read This First.

I agree that the first pie chart is off.  Here is a more accurate one: https://skitch.com/jgibbard/ftybj/groupon

Beyond that let's get REAL, there is a reason why more than 50% of businesses say "NEVER again" after offering a Groupon.
[Source]: http://www.businessinsider.com/groupon-survey-results-2011-7 

Or "Worst decision I have ever made"
[Source] http://www.huffingtonpost.com/2011/06/10/groupon-merchants_n_874896.html

Financially it simply does not make sense especially when you compare it to the alternative that I describe: building a community and offering them the discount instead and keeping the 30% that Groupon takes.  This isn't a jumping on the bandwagon article, this is basic math.  What sort of evidence would convince you beyond the basic math that it's not a good financial move and that most businesses that run a Groupon say they wouldn't do it again?

You may not be the one writing the article but you ARE commenting, so unless you have data to contradict the claim I'm making I'm not sure how you can claim Group-buying creates "many repeat customers."  

How about this: "Only 1% of Groupon customers become long-term merchant customers..."
[Source]: http://www.businessinsider.com/groupon-merchant-churn-uk-2011-6#ixzz1VOARJJs0

Finally tell me where I'm getting cost and profit wrong?  If I can have new customers come in at full price and repeat customers come at a discount (thereby incentivizing repeat business) OR I can offer 50% off to anyone AND THEN 30% of the remaining 50% to Groupon...which is the better profit model for the business?  Who is MORE likely to tell others about a restaurant or spa: the one the goes all the time, follows on Twitter and Facebook, and just got an awesome new discount OR the daily deal shopper that comes in and spends $5 more than the Groupon?  

I await your response. 

August 18, 2011    View Comment    
 
Logo