4 ms·

How is this any different than a company posting a 50% off coupon in their local newspaper? Groupon is just a different advertising route. I'm not sure why Grou

by singer 16y ago

How is this any different than a company posting a 50% off coupon in their local newspaper? Groupon is just a different advertising route. I'm not sure why Groupon is being blamed for what follows after customers get the coupon in their hands.

ydant 16y ago
The key differences I see are: * Groupon takes a large cut of the coupon purchase cost - up to 100% if Posies Cafe is to be believed. So it's more like a 80-100% off coupon as far as the shop is concerned. * All income is realized up front. Costs of the promotion are going to be known 100% and quickly after the "coupon" is printed. The actual impact of that could be spread over a long period of time. * People feel obligated to use the coupon because they paid money for it. I'm sure the redemption rate is a lot higher on Groupons - it feels like an awesome deal when you buy, it has the urgency of time running out so people are more likely to buy if they are on the fence, and then they want to spend the bought coupon, because otherwise it's lost money. If you can get around the (allegedly) absurd Groupon cut (which it looks like you can with negotiation), and you can price your discount so that you break even, Groupon could be a great way to drive business. The only thing Groupon is doing that seems even slightly "evil" is the high cut, but any business owner should look at that and make a decision based on the numbers and either negotiate a better cut or walk away. But while Groupon might be a great way to drive business, I'm not convinced it's a good way to drive GOOD business for all businesses. The site draws extreme bargain hunters, and those are the sort of people that are not going to be loyal and aren't likely to come back without a coupon. So I'd say that the blame is even more on the business owners if a Groupon goes wrong. The fact they know their total maximum liability before they even start the process makes this even better than a newspaper coupon campaign. With the tools they have at their disposal (not doing the groupon, negotiating the cut, setting a max number of sales), they are to blame if they lose money on the deal. It sounds like (from the article) that most companies manage that aspect ok, they just don't realize how bad a set of customers they are going to get out of Groupon. That's purely the numbers influencing them into running the campaign, but if they broke even, then so be it. They can just mark it as a lesson learned and move on.
garply 16y ago
Groupon takes a far larger cut than the local newspaper would.
- singer 16y ago
  I doubt newspapers take a cut at all. They charge a fee to post an ad. Regardless, this article is describing the aftermath of Groupon coupons.
  - garply 16y ago
    I meant as a percentage of the profit I would be making from the ad.
Jun8 16y ago
It's very different. When was the last time you cut off a coupon from your local newspaper (I don't even know the name of mine -> Google -> Oh, it's Daily Herald, cool!), saved it in your wallet and used it in the store a couple of days later? Groupon's difference is: (i) it's on the internet, fueled with great publicity it has generated (ii) the brilliant social aspect of the groupon system and (iii) the deal is instantly bought now, not later. So it's not a coupon at all but a web-based deal. Groupon is very good at creating hoards of customers; what it lacks, I think, is the consultation that should be provided to businesses about how to limit and handle the crowd. Even gap.com had a rough day when Groupon unleashed a national campaign recently.
- singer 16y ago
  "I don't even know the name of mine" That's kind of scary. I just got a Sarah Palin flashback. "Groupon is very good at creating hoards of customers; what it lacks, I think, is the consultation that should be provided to businesses about how to limit and handle the crowd." Maybe they just need to allow businesses to put a cap on the number of coupons that are sold? Since a lot of companies are only advertising to their local market, I wouldn't even think this would be an issue.
  - Jun8 16y ago
    :-) I doubt you read your local newspaper with the same zeal as, say, WSJ, Economist, etc. Local newspapers are quite irrelevant unless you are really tied to the community. I think they already have the cap thing. However, it's not as simple as that. A lot of businesses possess neither the experience nor the theoretical skills to analyze what-if situations involving hundreds or thousands of new customers. When you say the companies are "only" advertising to their local market you are making teh same gross underestimation that some of these poor small businesses do: local can be huge! For example, AFAIK Chicago metro area is around 3M people, when you throw in the suburbs it around 9M. When you advertise to Chicago groupon, all those people have access (e.g. I live 30 mi outside Chicago but still bought the Tall Ship Wendy deal at Navy Pier this summer, they were quite overwhelmed with the demand.)

by singer 16y ago

ydant 16y ago

The key differences I see are: * Groupon takes a large cut of the coupon purchase cost - up to 100% if Posies Cafe is to be believed. So it's more like a 80-100% off coupon as far as the shop is concerned. * All income is realized up front. Costs of the promotion are going to be known 100% and quickly after the "coupon" is printed. The actual impact of that could be spread over a long period of time. * People feel obligated to use the coupon because they paid money for it. I'm sure the redemption rate is a lot higher on Groupons - it feels like an awesome deal when you buy, it has the urgency of time running out so people are more likely to buy if they are on the fence, and then they want to spend the bought coupon, because otherwise it's lost money. If you can get around the (allegedly) absurd Groupon cut (which it looks like you can with negotiation), and you can price your discount so that you break even, Groupon could be a great way to drive business. The only thing Groupon is doing that seems even slightly "evil" is the high cut, but any business owner should look at that and make a decision based on the numbers and either negotiate a better cut or walk away. But while Groupon might be a great way to drive business, I'm not convinced it's a good way to drive GOOD business for all businesses. The site draws extreme bargain hunters, and those are the sort of people that are not going to be loyal and aren't likely to come back without a coupon. So I'd say that the blame is even more on the business owners if a Groupon goes wrong. The fact they know their total maximum liability before they even start the process makes this even better than a newspaper coupon campaign. With the tools they have at their disposal (not doing the groupon, negotiating the cut, setting a max number of sales), they are to blame if they lose money on the deal. It sounds like (from the article) that most companies manage that aspect ok, they just don't realize how bad a set of customers they are going to get out of Groupon. That's purely the numbers influencing them into running the campaign, but if they broke even, then so be it. They can just mark it as a lesson learned and move on.

garply 16y ago

Groupon takes a far larger cut than the local newspaper would.

singer 16y ago
I doubt newspapers take a cut at all. They charge a fee to post an ad. Regardless, this article is describing the aftermath of Groupon coupons.
- garply 16y ago
  I meant as a percentage of the profit I would be making from the ad.

Jun8 16y ago

It's very different. When was the last time you cut off a coupon from your local newspaper (I don't even know the name of mine -> Google -> Oh, it's Daily Herald, cool!), saved it in your wallet and used it in the store a couple of days later? Groupon's difference is: (i) it's on the internet, fueled with great publicity it has generated (ii) the brilliant social aspect of the groupon system and (iii) the deal is instantly bought now, not later. So it's not a coupon at all but a web-based deal. Groupon is very good at creating hoards of customers; what it lacks, I think, is the consultation that should be provided to businesses about how to limit and handle the crowd. Even gap.com had a rough day when Groupon unleashed a national campaign recently.

singer 16y ago
"I don't even know the name of mine" That's kind of scary. I just got a Sarah Palin flashback. "Groupon is very good at creating hoards of customers; what it lacks, I think, is the consultation that should be provided to businesses about how to limit and handle the crowd." Maybe they just need to allow businesses to put a cap on the number of coupons that are sold? Since a lot of companies are only advertising to their local market, I wouldn't even think this would be an issue.
- Jun8 16y ago
  :-) I doubt you read your local newspaper with the same zeal as, say, WSJ, Economist, etc. Local newspapers are quite irrelevant unless you are really tied to the community. I think they already have the cap thing. However, it's not as simple as that. A lot of businesses possess neither the experience nor the theoretical skills to analyze what-if situations involving hundreds or thousands of new customers. When you say the companies are "only" advertising to their local market you are making teh same gross underestimation that some of these poor small businesses do: local can be huge! For example, AFAIK Chicago metro area is around 3M people, when you throw in the suburbs it around 9M. When you advertise to Chicago groupon, all those people have access (e.g. I live 30 mi outside Chicago but still bought the Tall Ship Wendy deal at Navy Pier this summer, they were quite overwhelmed with the demand.)