I'll be honest, I know Groupon and its ilk are terrible business, but as a user of the service I've had lots of fun exploring activities and restaurants that I literally would never have bothered with or known about. In the last few weeks I've taken a Scuba lesson, a Horse Riding lesson, an intro to art class, found a couple new amazing sandwich shops. I took an amazing trip to Ireland for something like 50% off the lowest rate we could find, and it forced us to explore virtually the entire country since the package had us in different castles every couple nights. I've visited some oddball museums I hadn't bothered with before.
I would have probably not done almost any of these things, or been more judicious in what I went to. I've found some new things that I'll be returning to, and some things that I won't.
As a customer, these kinds of services are amazing. And really all they're doing is centralizing good deals. A less "grow fast and explode like a Unicorn" business model would probably make it work better for participating businesses.
I stopped using groupon because of the near-universal resentment I felt from the employees of the stores selling the groupons. Clearly, these businesses weren't getting the value they thought they would get, but I wonder how much of that was the way they treated the new customers that the groupon generated.
My experiences with Groupon mirror your own. Whenever my friends and I would show up to a business with a Groupon, we would be treated with bad attitudes, worse service and just general reluctance when the exact opposite should have been true. I mean, that is the entire point of Groupon right? To promote a business -to spread the word on the street about how great your restaurant/bowling alley/pub is.
Sadly, it has been my experience that a lot of the businesses that sign up for Groupon don't know what they are getting themselves into and as a result, take out their frustrations on customers when they can't break even for the month... which is, I think, a fatal flaw in the human psychology aspect of the business model. I'd rather just pay the sticker price and enjoy better service than have to deal with all that.
My experience has been different. I used a Cheesecake Factory Groupon once and was given a special meal that reflected the "value" of my Groupon. It felt like a complete rip-off on top of a restaurant that was already overpriced. $30 for Cheese, bread, and a few grapes and strawberries? I stopped using Groupon after that.
It reminds me of Massdrop. You expect to get a deal by purchasing something in "mass" with others but it turns out you are paying at best Amazon retail price but most likely MORE than you would pay buying from Amazon not to mention shipping costs.
Off topic, but this reminds me very much of being put up in a hotel by the airline Avianca when they oversold a flight I was checking in for, meaning I had to take a different flight the next morning.
We were told that dinner would be provided, and given a coupon for the hotel's restaurant. Upon presenting said coupon prior to being seated, we were greeted with a look that I can only describe as 'oh, I see' - promptly seated at the absolutely worst table in the place, and given a 'special menu' with one or two very plain options (think, chicken with vegetables and a plain sauce) in an otherwise very nice-looking restaurant. We were summarily ignored for a very long time before our order was collected, and when the food was served it was sort of plonked down with no ceremony or pleasantries.
It's an awful experience to be treated this way, as a second class customer. As though you've broken a social contract by being allowed in through some hack, and the staff will 'serve' you to the absolute letter of the definition and no further. Almost pointedly so as though to emphasise how unhappy they are with your presence.
I never used groupon for a restaurant, but I can completely see that something like this might happen and understand why you never went back!
I had a similar experience in Stockholm, and the restaurant wouldn't even serve us a standard beer, only low-alcohol beer. I'd rather had paid the difference for the real stuff, but they didn't even give us the option.
Yeah, this was one of my increasing issues. As soon as word got around that lots of businesses were taking a bath because they weren't getting repeat customers, or the expected alcohol sales to make up the difference, etc. because hey, shocker, Groupon purchasers were looking for low-cost deals, they started with this approach.
Groupon then became a way to drum up business when things were slow while still hopefully making some margin on them by using the cheapest ingredients, smaller portions, offering a less costly (ie. higher margin) experience, etc.
Ended up leaving a bad taste in the customers' mouth almost guaranteeing they wouldn't return.
I guess we're a bit off topic, but I look at Massdrop as a curated list of competitively priced items. I agree they're pricing isn't rock bottom, though they imply it, however, I still think it's a great service because it's always a good price and generally a good product.
How does this set it aside from Amazon, aside from "generally a good product"? Massdrop marketing seems to be all about the pricing when in reality its just a curated list of (ostensibly) good products.
Massdrop's keyboard section typically sets it apart from Amazon. Not sure about other categories on the website.
Mass drop sells DIY kits to build ergodox keyboards which you typically can't buy anywhere else. Additionally they just arranged a production (with a lot of help from a Redditor) of custom key caps (Triumph GMK Adler https://www.massdrop.com/buy/triumph-adler-gmk-keyset).
Edit: just remembered I looked at buying headphones from Massdrop once. The starting price for the group buy was MSRP and the final unlocked price was the same as on Amazon. This definitely mirrors what others are saying.
In my experience I have also had mixed results buying non-keyboard related items on massdrop, but the keyboard things I've bought where excellent and at great prices.
Well for one thing there's often stuff on Massdrop that you can't get from Amazon. If the item is on Amazon it's generally about the same price, but I've definitely picked up things from Massrdrop that aren't on Amazon for a much better price than I found anywhere else. But yeah, I see it as a curated list of good products with the occasional deal.
There's quite an easy solution to using a Groupon without compromising your experience: don't disclose that you're using it until you're completely served. I strive to hand it to the server during the final bus, so that they don't have to print the bill twice. If I'm slipped the bill unexpectedly early, I put down the Groupon with my payment to similarly avoid an extra round trip (and I mention that it's there, not let the server discover it at the POS station).
Most, but not all, Groupon deals have fine print prohibiting this by stipulating that the Groupon be disclosed on arrival or while making a reservation. I disregard this because I would much rather give the restaurant the opportunity to not honor the discount (I will pay in full including tip, and use the Groupon properly on a return visit) in exchange for uncompromised service.
I have never had restaurant staff so much as hint any sort of disapproval when I slip them the Groupon late, let alone reject it. Not even close. I think it's because they get it - it makes sense to do this.
(The above applies only to full-menu fixed-discount deals such as "$50 to spend on food and drinks". Obviously I cannot and do not use this method when the deal involves anything along the lines of a prix fixe menu, because in those cases one must be treated differently upon arrival.)
I tip based on the pre-discounted bill and generally the service is great enough (thanks to this technique) to hit the 18-20% mark. If I disclosed the Groupon earlier and received subpar service as a result, I'd give an appropriately low tip.
I thought that before even trying Groupon. I can't imagine how coming in as a 2nd-class customer will improve my experience. Rather pay well, tip big and enjoy the best service they have to offer. Also, as an Engineer with a 1st-world salary, its socially responsible for me to spread it around.
But shouldn't Groupon just be a marketing expense? I'm not saying that the company should be ok losing money all the time, but it's common for companies to spend money to acquire customers. Do you avoid all "new customer" deals?
It seems like companies on Groupon, for whatever reason, often offer way more of a discount than they're comfortable with. I wonder why that is.
I think there were a bunch of stories implying that it was because of pressure and misleading reassurances from the Groupon sales people signing them up combined with poor business sense from the small-time owners, in most cases.
I've heard the same, but the company treating Groupon customers badly is still irrational behavior.
The money being lost on the Groupon is a sunk cost, so you've got:
Option A: Lose money on the customer, treat them like second class citizens, probably lose the customer forever, possibly have the customer tell all of his or her friends how bad they think the business is.
Option B: Lose money on the customer, still treat them just as well as any other customer or even better and try to convert them into a repeat customer and/or organic spokesperson for your business, recoup the lost groupon money over time through repeat business.
I can't speak for everyone but I know that if I'm an option B customer, I'm going to be an enthusiastic spokesperson for the business. Getting a great deal and good service early on is a good way to convert me to be a customer of yours for life (early impressions really stick with you, sort of the reasoning behind buying the first round of drinks, you probably don't need to buy another drink all night because you're the cool guy who bought the first round).
So all-in-all, I don't think all the blame of having Groupon customers treated badly (if this even exists as a real thing and isn't a perceived occurrence that isn't statistically a real thing) can be placed with Groupon.
I suspect at least part of it is likely just the fact that a lot of businesses have terrible customer service these days (probably due to a number of factors including low wages, races to the bottom on margins, etc) and as a customer you would have been treated pretty poorly anyway but the groupon thing gives you something to latch onto as far as reasoning it out.
This is great advice. The thing many businesses probably fail to realize is that, generally speaking, where [A] is the baseline customer base, the audience with Groupon is not "[A] with some subset of [A] paying cheaper prices" but instead, "[A] + [B], where [B] is an audience they never would have found."
To increase your audience, you almost always have to pay.
In contrast to big business, America especially likes to celebrate and idealize the small business owner as the one who truly knows the value of treating the customer right. But if these stories are frequent, it probably just exposes the sad truth that it's not as common, even in small business, as we like to believe or hope.
Bingo. I saw pre-internet confusion on this point from small businesses too. I remember being little and my mom got a coupon at the car wash for a pizza at some nearby place. When we went to use it, the manager turned us down saying, "nah, this is dine-in only, yeah, otherwise we don't make any money off it".
Even at that age, I was like, "wha? But, isn't that the purpose of a promotion? So someone tries your stuff and might come back?" It wasn't like a coupon in the back of a magazine, but something the car wash guy actively promoted.
It's not always the company. In the case of the USA and their insane tipping customs, a customer coming in with groupon specials is going to end up tipping less. Since the whole service at USA restaurants is based around tipping, the employees know they won't really get tipped well so they're very customer hostile.
I'm sure a lot of people do that, but the appropriate etiquette when using a coupon at a restaurant is to tip on the full price. Most adults who frequent restaurants should know that.
You know that most of the world's population doesn't tip at all? Given that, it seems kind of strange to assume everyone just knows the appropriate tipping etiquette without being told when getting the coupon or sitting down.
Plus the most active users of groupon are probably doing it to save as much money as possible with coupons. They're unlikely to willingly throw away those savings on massive tips... and from what you hear about frequent groupon users they really don't tip the price pre-coupon.
I was replying to your comment specifically about tipping customs in the US. If you grow up in the US and go to restaurants it's not unreasonable to absorb tipping etiquette along the way.
You still save money with a coupon, you're not paying full price for the meal. That's no reason to screw over the server who depends on tips for a living. If someone is seriously strapped for cash and needs to save money, they should be cooking at home, not going to restaurants.
Don't get me wrong, I'd happily do away with the whole tipping culture and just have the entire price printed on the menu. But, as long as we have tips, take the time to learn how to do it right.
I've grown up in america and is the first time I've ever heard this and I imagine I'm not alone. It's also kind of difficult since people factor the tip at the end of the meal when they get the receipt, not when they have a menu in front of them.
I hope you're an exception. Tipping on the full amount should be a fairly well-known practice. Also, your receipt will probably show the original price and the final, discounted price. You shouldn't need to remember the menu.
That's a huge assumption. It's something I also have never heard of until reading this post.
I'm personally bothered by the entire tipping culture in the US. Once used to acknowledge that someone has gone above and beyond, now it is just used by businesses as a means to pay below minimum wage (which is too low already). The fact that it is also percentage based this means a person working at a restaurant with higher prices likely makes more money just because I'm charged more for the food. This doesn't seem fair to those workers who are wait staffing at a more affordable restaurant. I can tip above standard percentages at those restaurants, but this isn't going to translate to the whole.
It is also well known that other discriminatory issues factor in to tips (age, gender, race, attractiveness, etc...)
Bottom line, tipping should be thrown out as an expectation and should have zero impact on wait staff wages. Restaurants should be forced to pay at or above minimum wage and menu prices can be adjusted accordingly. As dependent as today's society is on the food service industry, maybe it is about time they unionize and start striking at the local and/or national levels until some laws are changed to treat them fairly.
I've never heard of the idea that you should tip full amount. That sounds like one person's opinion rather than custom. I should provide the disclaimer that I haven't used a coupon when eating a meal, so I may not have had the opportunity to come across it.
That goes back to the gratuity pricing being a percentage of cost is a problem in itself. If I go to an Applebees or a private "upscale" restaurant the pricing will be significantly different, but the effort required by the server will typically be similar.
I'll add to the discussion that until a bartender friend of mine taught me about this a couple of years ago, I had no idea. I asked a few friends and family if they were aware of this and it was a real mixed bag.
I think there are a lot of people like me who before groupon, never used a coupon at a sit down restaurant in my adult life, and therefore it was never something I ever had to even think about.
Don't get me wrong, I'd happily do away with the whole tipping culture and just have the entire price printed on the menu. But, as long as we have tips, take the time to learn how to do it right.
This is really the main point. Similarly, you're free to decide that it's gross to shake hands with the people you meet, but you should be aware that you're acting outside of cultural norms.
I'm aware of tipping based on the full amount, and I agree with the practice. But there are other nuances to it that people can quibble about. For example, it's not expected to tip on drinks according to some people.
The bottom line is that tipping is a custom and an etiquette. These things vary quite a lot from location to location. It's surprising to me that someone would assert that there's really only one proper way to do it in a country as big as this.
Emily Post, for example, says to tip only on the pre-tax amount of the meal plus 1-2$ per drink and nothing at all about coupons.
Edit:
Still doesn't change the fact that Groupon has a rather nasty habit of taking advantage of small businesses and generally screwing them over. But that's a mixed bag also. I use Groupon a lot and find them to be a great source of places with generally well-meaning owners who are a good alternative to large corporate chains and work hard to keep me coming back.
My ex-girlfriend used Groupon to find ways to go cheap and took advantage of it with absolutely no intention of ever going back to see anyone a second time. Her repeat business could not be bought with any exceptional level of service.
Ultimately, it's a business decision the owners have to make for themselves. The problem for Groupon as a company is that their largest appeal is for people who are going to be a bad business decision for the owners using their service. It's a bad model, and it's clearly failing, so that means things are working exactly as they should.
Well, of course. The service the waiter provides does not change just because you're getting a discount on the food.
On the other hand, the service is also the same whether you order two expensive items or two cheap ones, so it shouldn't scale with menu price at all, but it does.
Of course, using a percentage of the price does have the advantage of scaling with inflation... but then the percentage itself has increased significantly over the last couple decades, for no discernible reason.
Basically, nothing about tipping makes sense, so you just have to learn the thoroughly arbitrary rules.
I like to compare it to the research done on olympics and their economic impact. Big investment in hopes of a strong injection in the economy.
The opposite happens, once the event is done, the facilities/stadiums/everything goes unused -- novelty and interest lost.
Same thing happens to these business when they worked with Groupon: make some money (oftentimes they don't even break even) during their promotions/deals, but as soon as it was over hardly any bothered to return.
Groupon makes money the more transactions take place, but for the business there is a limit to how many transactions you can successfully carry out with optimal service.
Sounds like this tension hasn't been managed very well.
Perhaps the 'group' aspect should have been played up more, and sold to restaurants as "pre book a group of 10 or more and save 20%". Getting a group of folks to book ahead of time will let them know when to schedule, they'll have a deposit, and they can accomodate the group accordingly. Don't treat them as 2nd class, but they're booking ahead so they get better treatment... ?
Remember that the manager/owner who decides to sign up for groupon isn't always the worker on the floor who gets to deal with the people offer brings in. They get to work harder for less tips. How likely is it the restaurant manager told all the servers that they'd be getting a bonus for each groupon table they serve?
I think businesses hope that these discount customers will enter cheaply ... but linger to enjoy more of the services and eventually convert into long-term, loyal customers willing to pay full price.
That just doesn't happen. People show up for one quick, cheap engagement, and then they're gone. Once front-line sales people realize this, the desire to welcome Groupon customers evaporates.
There are two culprits in this. One is the Groupon field sales force, for over-promising the business value of getting a flurry of cheap visitors. The other is the target company's senior management, for agreeing to a dumb deal and not working better with the front-line sales/service folks to make a better go of things.
This mirrors somewhat my experience many years ago with bartering. The places that were bartering were doing so because it was some low hanging fruit way to increase business and it was easy to to. And they were places that weren't particularly popular on their own (restaurants let's say) so they would do bartering to bring in customers on Monday nights but not allow it for obvious reasons on Saturday or Friday night. There is always a feeling on the part of small business owners that barter dollars are not real dollars (even though there is value in many cases) and barter business is not real business. A place that isn't doing that well to begin with (and once again I realize this is a generalization that is not true in many cases) is not going to have the best employees or the best attitudes because they are running short on cash and can't pay the best wages or have the best working conditions. So it's an entire ecosystem of mediocrity that you (in your case or me in my case) might end up experiencing.
So I guess in theory someone taking groupon (or barter dollars) should just be a regular business that is doing well wanting to increase business. But in actual cases it might more often (from my experience at least) be a marginal business that is trying to fix a situation with marketing that isn't exactly going to work as planned by bringing in groupon dollars or barter dollars (that will end up being used by the owner to go out to dinner with his wife (and yes that is what happened)). Valuable things (in the case of barter dollars) that a business needs are not typically available with barter dollars. What you get is a bunch of things like dining, travel or accountants or attorneys (and how many of those do you need).
So in other words the restaurant barters meals and gets "trade credits". The other participants barter either the products they are selling "plumbing supplies" or services "lawyer, accountant" and so on. They get trade credits. The barter exchange keeps track of how many credits a business has so they know what they can spend. Typically people who sell services or perishable products are big winners. Losers would be businesses with low margins. For example you wouldn't find any Plasma TV's typically on a barter exchange. You might find jewelry though because that has a big markup. I actually was able (and this was some time ago I have to add) barter an apartment for myself as well as apartments for some of my employees. Other big items are perishable products such as hotel rooms, travel and so on. Magazine or newspaper ad space are other examples.
Use it or lose it to the vendor. There is an active and most likely a separate channel of travel barter that operates independent of any barter exchange. (Billboards for radio time let's say. TV for travel expenses.).
This is the same reason why I'm careful which site I book hotel rooms on. Years ago I thought hotels.com was great and convenient, now I realize your experience is tainted from the moment you book with a third party. Now I make every attempt to book direct.
I had a bad experience with hotels.com a few years ago where the hotel didn't honor my request for two beds—a request that I thought was guaranteed. Reading the fine-print, I discovered that it was completely up to the hotel; not surprisingly, my booking got very low priority. I now book all travel—hotels, airfare, etc.—directly with the provider. The service ends up being a lot better, and the cost is usually the same.
though, hotels often do themselves no favours here. If an aggregator has rooms for $200 a night and the hotel gets 80% of that, you'd think the hotel would take 100% of $200 from a direct booking, but often it'll be $300+... Conceptually, booking direct should be cheaper since the hotel sees all of the money (and users of an aggregator pay for the convenience/discovery/ease factor)
Some of the big chains now have a "best rate guarantee" intended partly as marketing, and partly to pressure their franchisees to offer the cheapest rates through the official booking channel. If you book directly and then find a cheaper rate elsewhere within 24 hrs, they'll match + usually give you something extra. For example Holiday Inn matches plus makes the first night free; Hyatt matches plus an extra 20% discount; etc. This is enforced by corporate management's customer service, but gets charged back to the individual hotel, making for interesting dynamics.
In practice whether this actually works is all over the map. Some chains will deny the claim if the cancellation terms are even slightly different, e.g. they'll say the rate on the official site was more expensive but doesn't violate the best-rate guarantee, because it allows cancellation until 6pm, instead of 5pm, which is a better set of terms. This then makes it easy to discount in third-party channels without technically violating the guarantee, by deliberately modifying the terms slightly. Other chains follow closer to the spirit of the "guarantee", but it's a bit of a lottery.
As for why they don't just offer their best rates on the official channel to begin with, without some kind of policing from the franchiser: mostly, it's market segmentation based on price sensitivity. People booking at an aggregator are more likely to have no real brand loyalty and be sorting by price, so hotel owners want to discount their rates to show up competitively in the comparison. But people booking through hyatt.com or holidayinn.com are more likely to have brand loyalty, possibly be accumulating points/status on the company dime, possibly are already committed to a specific hotel, etc. The hotel in this channel isn't competing as directly with side-by-side search results from other brands, so doesn't want to unnecessarily discount. It's in the brand's long-term interest if the official channel becomes known as having the best rates, but each individual hotel may sometimes benefit from charging more through the official channel and discounting elsewhere, hence this back-and-forth between the franchise owners and the brand management.
"In practice whether this actually works is all over the map. Some chains will deny the claim if the cancellation terms are even slightly different, e.g. they'll say the rate on the official site was more expensive but doesn't violate the best-rate guarantee, because it allows cancellation until 6pm, instead of 5pm, which is a better set of terms. This then makes it easy to discount in third-party channels without technically violating the guarantee, by deliberately modifying the terms slightly. Other chains follow closer to the spirit of the "guarantee", but it's a bit of a lottery."
Best Buy is guilty of this too. Not their worst offense, but a lot of things that are harsh on price match, like hard drives, often have their own retailer-specific model number. The same drive might be identical, but the one on Amazon has a different model number to BBY to thwart price matching.
Having some experience in this area, some hotels were only getting 1/3rd even 1/4th of the sticker price on the aggregator website.
Part of this was on the hotel though, for not managing their rates through the aggregator properly. Often hotel management would call up angry about the rate they received, but they could barely use a computer, much less manage using multiple aggregator's backend websites.
I find saying something like: "I'm confused, because I can find a better price online for this room of $XX.XX" works every time that I've used it. I've never even had to apply the additional pressure of: "It seems unnecessary, but if you can't match that, then I guess I'll have to book online."
Telling an aggregator "I'm going to be selling this room for $180, why don't you guys sell it for $200" is a good way to end the talks right there. The middle ground is arranging some kind of "lowest published price" agreement, where neither party can go below the price, but can lure the customer via some other non-monetary methods (points, loyalty rewards, etc.)
I think part of it may be price discrimination. The customer that comes to your site directly already has your hotel in mind, and is probably less price sensitive, so you fleece them. The customer that goes to the aggregator is more price-sensitive, so you ask for a lower price in order to get at least some money out of them.
For hotels the majority of bookings come from third party sites. Why would hotels use third party sites regularly if they hate serving customers that book with them?
At Groupon merchants get paid for unredeemed vouchers (not all at once but staggered).
For the human psychology of a business owner of say a restaurant that's terribly, as this means every time someone walks in, that's $25 of revenue and say $5 of profit walking in for your business and its employees to extract, but a guy walking in with a voucher is just $20 of costs.
Even if the voucher was bought for $25, that feels like money 'earned' weeks ago, and anyone who actually makes use of the voucher feels like it's costing you $20 even though it'd constitute the same $5 profit as a normal customer.
Combine that with the fact the vouchers in this hypothetical example wouldn't actually be priced $25, but rather discounted to $15 or $19 which has to be shared with Groupon, and the fact those who're use Groupon (discount seekers) not always but on average tip less, really kills the mood for typical Groupon's merchants: struggling business owners who don't sit in an office and look at customers on a purely rational level and see them as just numbers.
So I agree, it's a human psychology flaw in the business model. It's not unsurmountable, if Groupon runs a solid Merchant Centre full of 3 minute videos for merchants on Groupon's research that shows how their service affects the success of a Groupon deal generating repeat business, how instructing your employees to say x y z words when a Groupon member comes in etc, you could go a long way to mitigating this.
Google for example runs a clever incentive structure where the quality/relevancy of the ad plays a role in your ranking vs other merchants, and so the better & more relevant your ad, the less you have to pay for your add to be more visible. This means some merchants who build relevant ads actually pay less to be on the nr 1 spot in the search ad rankings, than companies who pay more but offer shittier ads. And they run a whole merchant centre with tons of videos to explain this whole process and what you can do to improve it. [0] This improves the experience for users by rewarding merchant's quality control, which benefits them, too. Groupon should run something similar which they probably already do in some way but I'm not very familiar.
Another solution is more controversial and hard to sell to merchants, which is to not pay merchants for vouchers that go unused and expire. This way a merchant can't be 'hopeful' that a Groupon user doesn't come in, because he doesn't earn any money when a person buys a voucher and doesn't use it before it expires (like I've had happen myself a few times.) Every groupon user who comes in is one he'd otherwise not get paid for, and so it flips the story around, every time a person comes in he gets paid by redeeming the voucher. Right now he gets paid regardless and people coming in are just costs, so obviously a merchant isn't thrilled to see groupon users come in today.
That seems like more of a pricing issue if the business can't break even.
I have a good friend that uses Groupons for his business. What he has shared, is that customers that come in with a Groupon, often come with a sense of entitlement. I know this isn't the rule, and maybe it a defense mechanism from the customer who thinks the business is giving them a "second rate" experience. However, this ultimately led him to ending his Groupon deals.
Not to defend the attitude/behavior of the employees, but I can share my perspective as someone who has managed a small food business that repeatedly used Groupons (because they worked for us, despite what I'm about to describe).
There was always a large minority of Groupon users trying to get the rules bent/broken in their favor--so for example, the Groupon they purchased might say "Only useable Monday-Thursday, does not stack with any other Groupon, coupon, promotion, or discount" and then they'd come in on a Saturday and try to use their Groupon with another discount. When we'd explain why that wasn't possible, they'd complain, hold up service for other customers, and/or write negative online reviews. This happened pretty consistently over the course of 2 years and 3 different Groupon deals we had.
However, we were not a restaurant--we sold pre-packaged gourmet sweets--and so none of our employees depended on tips to get paid. We also had high profit margin on our goods, so we still made a good amount of profit with the discounted Groupon prices. Additionally, despite the above-described behavior happening consistently, we had even more Groupon users discover the place for the first time, and then become returning and loyal customers.
So Groupon worked out for us, but I think it's because we had a pretty unique situation.
I've also noticed a pattern in which a large proportion of the negative reviews for some restaurants (which I know to be good from my own direct experience) mention groupon, and others don't mention groupon but have very similar complaints. I wish Yelp would let you just exclude reviews from people who used groupons because their experiences and/or expectations seem to have nothing in common with mine...
I think it was a feedback loop. More often then not, Groupon's provided no return business, so you'd continue to lower you expectations about the people who were buying them.
I'd compare it to how hotels will sometimes give you the worst rooms if you booked through an online site that gets heavily discounted inventory.
I think it was a feedback loop. More often then not, Groupon's provided no return business, so you'd continue to lower you expectations about the people who were buying them.
How much of that is because the business owner made no attempt to establish a direct relationship with the customer while they were present? If you use a groupon to get me in your restaurant, great. But even better if you do some "permission marketing" and get me to add my name to your newsletter list, or "like" your Facebook page, or something that lets you keep in contact with me.
It's amazing how few restaurants and hotels and what-not seem to even try to do this kind of customer relationship / one-to-one marketing stuff, in 2015. I get regular emails from Petterino's in Chicago, letting me know about specials on Mother's Day, Father's Day, etc., or other special events. I don't live in Chicago so I don't visit their restaurant very often, but they keep themselves on my mind, and you can bet that next time I'm in Chicago, I'm more predisposed to visit them than most of the other restaurants I vaguely remember from my last time there. OK, to be fair, it helps that the product is really good as well. Their "Midwest Corn Chowder" is to die for. But still, it boggles the mind that none of the other places even seem to try.
Anecdotally, the people I've talked to who bought and used a Groupon have no intention of a continuing business relationship. They got a steal, they know it, and they'll move on to the next Groupon, whatever it is.
There's something to be said for the type of audience you cater to. (TL;DR Market to those who know what the idea of "value" is compared to "cheap".)
This was my experience too. We had a 7-course taster meal in a restaurant in Shoreditch and the waitress turned from delightful to rude in an instant after hearing the word "Groupon"...
Yes, there's an element of self-fulfilling prophecy about it, but there's also acceptance of the inevitable. I know a few servers who I trust would remain professional and courteous to groupon customers. Universally complain that groupon users make poor customers. (Not strictly limited to groupon. "$2 specials everywhere" bar crawls of any ilk draw similar complaints.) I mean, it's not like all the servers got together and decided to A/B test groupon customers by being meaner to them than others just for the funsies. How does a server with no priors come to treat one group differently than another?
It's less self-fulfilling than you would expect. Research shows that tip amount isn't very affected by the quality of service, but much more affected by the person doing the tipping.
If you walk down a street and nine people punch you in the gut as they pass, it's a bit rich for the tenth person to complain that you flinched as they walked past. The wait staff are simply playing the odds.
I guess it's true that, had I tipped at all in that instance, I would have tipped based on what I paid on the night. Bearing in mind the Groupon was already paid for, that wouldn't have been a lot.
Having said that, I also went for a great Groupon meal somewhere else, which included a cocktail that was so good I had another 2, bought more food on top and ended up paying as much as a 'regular' meal would have been elsewhere (and tipped accordingly for the good service). That was the exception to the rule, though, even based on a very small sample size.
Nearly everyone tips based on the coupon value, not the market value. So that's maybe 50% less. They're also more "value minded" customers, who are likely to tip at the low end. Regular customers sometimes get the expensive bottle of wine; groupon users only ever get the cheapest bottle, if any. And then you get a subset of people who bring a $20 groupon and exactly $20 to the restaurant.
It doesn't mean everyone using groupon is automatically a jerk, but it definitely selects in that direction.
I naively thought that it's fair game that because I'm buying a £20 Groupon I might pay exactly £20. I never did, but I felt that it should be implied that that's acceptable. I certainly wouldn't have expected to be treated worse for it.
I think the expectations are not always in alignment, hence the friction. A simple solution would be for the groupon to say "$20, fixed menu, all tax and tip included." But you don't see a lot of that, although a lot of the advertising probably sounds like it. Your expectations aren't unreasonable, just... wrong. :)
> groupon users only ever get the cheapest bottle, if any.
Yeah, because absolutes like this help. Groupon customers can be just like any other customer out there. Some "regular" customers will get cheap wine, some will get an expensive bottle. Similarly, some Groupon customers will get the cheapest wine, others will take the money they saved by getting a Groupon and get the expensive wine. Being a "Groupon customer" might move the needle towards one direction but it's far from absolute the way you're making it out to be.
> I stopped using groupon because of the near-universal resentment I felt from the employees of the stores selling the groupons. Clearly, these businesses weren't getting the value they thought they would get
I think that's just a misunderstanding on the stores part. A groupon is just another form of advertising (which costs money) - but businesses believe that by offering groupons they will come out ahead.
I've personally gone to places I wouldn't have normally because of groupon and usually spent extra.
The business typically only makes 25% of what they would have. A restaurant cannot survive on that margin.
And most Grouponers are bottom-feeders. Just looking for a deal. They're also the most likely to be vocal on Yelp (there was a study somewhere showing how Grouponers/Living Social people were more likely to leave bad reviews).
Groupon's salespeople are so high-pressure and portray an overly optimistic view of what a struggling small business should expect.
Speaking from personal interactions from several business owners who have tried daily deals here. Sure, a business needs to calculate it's ROI, but I think Groupon 1) oversells the value of 'getting their name out there' through their deals and 2) doesn't explain how bad their customers are.
If it is a common misunderstanding on the stores' part, I think it's Groupon's job to manage that. If an organization is set up to sell the product to the wrong customers, that organization should fix their sales process.
But I suspect it's a correct understanding on the part of the employees. When I talked with servers at restaurants, their experience was that the average Groupon customer was demanding, cheap, and a bad tipper. And they were also unlikely to come back, meaning there wasn't a lot of incentive to invest in a relationship.
I've had this experience a few times and every single time it was mentioned on the Groupon, I actually checked out the menu before hand, and bought or refused the deal there and then. This isn't really unique, you buy a specific deal so you get that deal's menu, Groupon rarely sells some kind of carte blanche 20% discount card on whatever the company offers which seems to be what you were expecting.
I've also had Groupon redeem me for stuff that I had no right to in the TOS but was morally sensible to do.
There are quite a few things I criticise Groupon for but they've always been pretty transparent about their deals and willing to right any wrongs in my personal experience.
I got a groupon(or similar) for a straight-blade shave. The guy was using replaceable blades, was obviously using and old blade, and absolutely tore my face up. Nicks and blood everywhere. When I didn't give him a tip, I could tell he was upset.
I believe the vast majority of barbers use a replaceable blade shaver. It's called a shavette and just makes more sense for professional use.
If you're not familiar with that, not sure how you could know the blade was old. How often and by what method do you shave/get a straight razor shave? Both of those could affect the quality of the shave more than the age of the blade.
You're right, it was a shavette. This was the one and only time I've gotten a straight blade shave, but at the time, I was often shaving with a double edge razor at home. The blade in the shavette appeared very similar, and I can definitely tell the difference between new blade and old. To me it was a clear case of "penny wise, pound foolish". *I just noticed from your link that the type of blade used was the DE blade, about which the author says "I cannot, in good conscience, recommend any shavette style razor that uses DE blades."
My understanding is that some of that (specific to employees) is because people tip on the basis of the discounted price, and I've gotten groupons where they explicitly say something about "please tip based on the non-discounted price."
I've had businesses refuse to honour coupons they had sold for money because they weren't getting the return. If I feel resentment from a business because I'm exercising what is essentially a contract, my solution is to not patronize that business again.
Isn't this the whole problem? You used Groupon to do a bunch of stuff you wouldn't normally do at below cost. That's great for you. It's also exactly the opposite of providing value for a business as you're going to hop to the next Groupon deal instead of sticking to that first Scuba company. You'll probably never Scuba again as soon as the coupon expires.
EDIT: I think you might be right that it could work though. It's a numbers game. If you lose $X in groupon charges but gain $Y in new customers then it's a net win for the business. However, you also lose $Z from existing customers (lots of obvious reasons here). So you need $X to be small enough - and obviously that isn't the case with Groupon. However, there's no reason why a company couldn't work that uses customization to supply the 'right' individual with a coupon instead of everyone with a coupon. Credit history? Tip history? Recurring business history?
One of the problems with Groupon is that it's not just a marketing expense. It brings people in which need to be serviced, which ties up the normal operations for the business. Businesses do retain some customers via Groupon, but it's probably less than 10%, and I think those retention rates need to be better understood so businesses can better reason for how to use it as a marketing tool.
Yeah, was in the $Z I mentioned. It's actually more than just using up normal operations. Most physical businesses have a core group of users that like the 'ambiance'. When you bring in all of these new customers, you break that. Maybe it's too crowded for two weeks, maybe wait times get too long. That leaves a bad impression on regulars who might be less keen to come back. So as soon as the coupon expires, you nearly all the new groupon customers and you've lost a share of your regulars too! That has to go into $Z too.
I get the feeling just estimating $Z is a major task, and needs to be done for every customer. So I'd guess the next 'Groupon with AI' would need to be structured around helping businesses that use them minimize $Z.
I think it's a good market actually - but it's going to need a lot of finesses and expertise. The groupon method of bludgeoning businesses with quantity didn't turn out to be correct.
>That's great for you. It's also exactly the opposite of providing value for a business as you're going to hop to the next Groupon deal
That's not always true. I rarely use a groupon alone and ending buying addons at the regular price. You might lose money in one item but win in another. That's why retails focus in bringing you to the store not matter what.
Yeah definitely. It's why I added that 'edit'. You're the type of customer that Groupon needs to be selling on to businesses. They need to identify people like you somehow and offer you coupons, while denying coupons in some way to people just looking quick discount hopping and ultimately making groupon a negative instead of a positive.
I think retails focusing on bringing people into the store is different for an important reason - when you're inside the store and buying something, it's almost guaranteed that you want a few other things too. You could jump between 10 stores all with different specials to get all of them cheaper but that's incredibly time consuming.
Groupon however is trying to get return customers. It's not about someone doing Scuba diving picking up a few extra scuba diving lessons while he's there - he has to actually come back later. It's no longer an impulse 'easiest path' purchase that retail focuses on by getting you in their store and not the store down the road.
Lots of things might be great for consumers, but for businesses it just doesn't make sense. Besides what I've read, I've heard from business owners/clients who try "group" discount services, but walk away feeling that it did little to help their customer growth long term.
Would you be willing to pay more for those same experiences?
It always seemed strange to me that the coupons were essentially "get a $30 gift card for $15, to use whenever", when it seems like a lot of the deals could actually be good for both parties if structured more rigidly.
For example, selling a $5 cinema pass for a specific day, time, and show. So they book the whole screening room, sell exactly as many passes as there are seats, pack the house, and hand you your popcorn on the way in. Similarly with restaurants, where the whole venue could be booked out, and there's only two meals available (kind of like Summerlicious).
You're definitely not getting the regular-experience-but-cheaper doing that, so there's maybe a better chance of converting to try it out after the coupon, but even if you're only ever going to do it on the coupon, you can do it over and over again if it's good for both parties. If Groupon's marketing muscle can pack the house with cheapskates a few Tuesday nights per month, that's probably an all-around win.
Well, and that's partly why my proposal minimizes the coupon-iness of what they sell, in favour of something that sounds more like an actual "group buy".
But of course with an eye toward long-term sustainability by making it a good deal for the businesses.
I've heard from business owners/clients who try "group" discount services, but walk away feeling that it did little to help their customer growth long term
Sales and discounts aren't a good way to increase customer growth unless they're done consistently. There's a reason that I get a free salad when I get a pizza; no one really wants that salad. There's a reason they have $5 beers every Monday at a bar; no one wants to drink on a Monday.
If the business owners/clients are stupid enough to give away the best experiences for cheap, it's their own damn fault for not having any business sense whatsoever.
> If the business owners/clients are stupid enough to give away the best experiences for cheap, it's their own damn fault for not having any business sense whatsoever.
And yet Groupon is closing down operations in 7 countries and laying off 1000 people.
Groupon's customers are these small businesses, for Groupon to succeed it needs to be in a symbiotic relationship with these businesses. "It's your fault for being an idiot" isn't the correct way for anyone to think about Groupon's relationship with its customers; that sort of thinking will only backfire even harder.
Yes many companies wish they had the opportunity to burn fat stacks of VC cash. Some of those might have expanded to two countries instead, and not been forced to write off the whole thing soon after.
I agree. Personally, I'm not sure my retention on things I've tried has been great for the businesses doing the offering. Things seem to end up a few different ways:
1) I love what they're offering, but I want to do their thing somewhere else, so another business gets the benefit.
2) I don't like what they're offering, oh well, gave it a try
3) I like what they're offering and they're in the right place for me to continue doing business with them
#1 is the hardest for businesses, and I admit to engaging in a fair amount of "Groupon tourism", where I'll go a little out of my way to try something just because I got it for cheap on Groupon.
For #2, sometimes there's a reason why places aren't doing well and turn to Groupon to try to boost sales, sometimes it's just a bad fit for me as a consumer. For example, I just used a Groupon for a local new Mexican place in my area. Turns out the reason their gorgeous restaurant is mostly empty is because the food sucks. There's a Mexican place down the road from them with low budget hand-made booths that's exploding with customers, the difference is that their food is good.
I'd say I probably stick with less than 10% of the new places I find through Groupon. I'd probably be willing to pay more to try new things...but not a whole lot more. As a consumer I have to change my basic behavior patterns and maybe travel out of my way to try something new, I feel like I'm meeting the place halfway. Sometimes I have to travel someplace I've never been before, and after getting there I'll know if it's reasonable to continue coming out there. The horse lesson I took I enjoyed, but it's also an hour of hard driving to get there, while I live right on the edge of plentiful horse country. Now I know I had fun taking a lesson, I might give a go at one of the local places, but I'll probably not return to the place I used the Groupon with.
There's also places, like a zipline center I Grouponed at. It was cool, I'll return. But it's not like it's an every week kind of place. So I think businesses also have to consider their model. I wouldn't have tried it without the Groupon, but it acted more like an advertisement would.
I also went to a high-speed gokart center on a Groupon. Turns out they already have lots of business, but it's all dedicated racers who knew what they were doing. When I went there I had to sit through a half hour of safety training videos, and when I got on the track it was terrifying because everybody else was hardcore and very aggressive. It could have been fun if everybody wasn't taking it so seriously, or they bundled all the Grouponers into a beginner league or something. So I don't think it worked as an expansion of their basic business.
I think business issues with Groupon are more complicated than people give credit for.
My experience with groupon involves two different times. Both times involved me calling the business and being immediately asked if I had a Groupon. I don't think this was a groupon only number, but the business pretty much runs entirely off Groupon. One was to have my carpets cleaned when they arrived they said the Groupon was for using water only (it wasn't steam cleaning just regular) and I had to pay extra to actually get the carpets clean. All said and done it was the same price as going with someone else from the beginning.
I've seen the same deal locally with car detailing. You can walk in off the street and pay $100 or get 50% off regular $200 on Groupon. Or groupon car detailing doesn't include (long list here) so basically you just overpaid for a car wash.
I have never used Groupon, but I can definitely share the same feeling that using coupon can make some people feel like using food stamp. However, interestingly enough we don't have a problem using retail coupons. You would sign up for a Macy's card and use the coupons you get in the mail every time you shop. You would also have no problem walking into a local supermarket and use the deal coupons.
I think the size of business is definitely a factor, but also this needs to be a culture change. You have to get used to it, people have to get used to it.
Food, in general, seems more precious than the rest of the things we do in our life with money.
Maybe in the future when you pay everything electronically, you never have to let people know you are a groupon user, you just swipe and discount at the end. BTW, why do people need to disclose that they are groupon users when they walk in? That's my impression of stories below.
I'm not sure it's so much feeling like using a food stamp but, in a restaurant with a server, using a coupon is just an awkward transaction. You have to lay it out on the table before the meal to make sure the server knows you have a coupon, i.e. you have to sort of make a big deal about it. (Over and above any issues with the server now suspecting they might get a crappy tip.)
For a more conventional purchase situation, you just hand over the coupon with your credit card and things are taken care of in a very transactional way.
Thanks for posting this comment. I think you raise what most of us should really think hard about when we see the struggles Groupon is going through. We like to throw them into a big, bulk, category and dismiss the entire thing as "bad business". But just like you pointed out, you really enjoyed it as a consumer. And I know businesses that have been running groupons for years, because they also get a lot out of it in profitability.
Groupon's dismissal as a "terrible business" reminds me of Kozmo. Kozmo was another "terrible business". Delivery in an hour of food, videos, electronics. Grew way too fast. Spent all their money, and couldn't profit. But if you looked at it in detail, they were making profit in some of their locations. Of course, some of their expansion made no sense. They did grow too fast. But the business? Now we have instacart, postmates, Amazon Prime Now, Peapod, and more making this model work of fast, local, delivery.
There's a bunch of comments in this thread already - and really in every conversation of Groupon - about how it's "terrible business". And Groupon does have a lot of bad things going on, no doubt. But dismissing its entire business model is a sure way to miss some of the things we can learn to apply to our own businesses.
Yes, there's a ton of business where Groupon has made no sense, and maybe even helped those small businesses go bankrupt. It's a really dangerous sword to wield when you share a massive discount. But there's some really interesting parts of the product and business that have worked. There's probably some great things to learn for the next person who wants to build a company that helps promote local small businesses. Be careful not to throw out the baby with the bathwater.
> Now we have instacart, postmates, Amazon Prime Now, Peapod, and more making this model work of fast, local, delivery.
We also have smartphones now.
I was a big fan of Kozmo (and its NYC competitor UrbanFetch) but it was an entirely different kind of experience shopping on an EGA monitor with a dialup connection and I understand why it wasn't as easy to make it work.
Kozmo also had no delivery fees as I recall. The services you mention have either delivery fees, substantially larger purchase lots, or some combination thereof.
That's exactly my point. Kozmo as a whole didn't work. But some bit of Kozmo worked. It wasn't all garbage. Local delivery + fees + free delivery using monthly club payments + better smartphone logistics can turned it into a great business. But so many people have missed it though throwing out the entire business idea of "local delivery" until some smart folks behind instacart/postmates/etc. realized the gems in here. This is happening here again with Groupon. "Group coupons are a terrible idea" I hear. Yeah, for a lot of people, but not all. I bet there's some really great ideas buried here for those folks who can dig into what's working and what's not.
Was Groupon's fundamental problem that it started out with the wrong economics? Was 50% off and 50% of the remaining going to the business just never viable?
> A less "grow fast and explode like a Unicorn" business model would probably make it work better for participating businesses.
I know a few more local versions of groupon who went into the game with this game plan. They all failed or pivoted out of it. It seems like a product that can only succeed by going big.
I agree with you. Seems like they should have stayed small and been happy with small returns. Any business can throw a 50%-off deal up on their facebook page or website. They weren't adding value by consolidating those deals to one site.
The value they added at first was the viral nature of the deal - you only got the deal if enough people signed up. This prompted people to tell their friends, which created buzz. Once they got large enough, there was never a sense of urgency and that value was decreased.
You touch on something quite important that is really kind of at the core of the whole startup community, the predatory nature. Startups end up taking on massive financing and several masters with massive egos and even bigger expectations nX returns which pushes companies and founders towards becoming predatory and manipulative and generally cheating out of necessity because their masters have set quotas. Groupon "and its ilk" could very well be reborn one day and in a far more sustainable manner by not preying on businesses and undercutting markets.
Anyone getting their emails has known it was coming for a long time. They used up all the good places pretty quickly - they got the return customers and didn't need to re-run coupons. Now it's all weight loss scams, online courses "worth" $2k but sold for $20, and even sex toys lately.
Exactly this. It stopped being a good way to discover local places you may not have heard of and instead became a way to shove cheaply mass produced junk or freely mass produced digital junk in to eveyone's mailbox.
With that in mind, what services are good at finding local places? I figure services like Yelp and Groupon had this in mind, but generally attract the people who have negative experiences or opinions to share them.
Well this probably has to do with Groupon deals being "bad" for many restaurants/local businesses and not wanting to be burnt by them. I used to take the restaurant ones, and ensure I bought drinks etc and tip appropriately for the full value of the meal.
Speaking to some of the proprietors/staff, people would come in, eat the offer and drink water, then leave without tipping and never be seen again.
You hit on something interesting there. If Groupon delivered great long-term value, they'd have repeat customers. But that wasn't the case. One might then think "that's fine, I'll just use it once to launch my business" and that could be fine for some time as there's always new businesses being started. However once word got around that it wasn't worth it and didn't drive repeat business, that was the other shoe dropping.
It reminds me of the game console crash of '83. It's a great product, but when you gouge your customers you can create a lot of bad feeling that doesn't go away quickly. A company like Groupon could easily be profitable charging businesses a fraction of what they do, but they chose not to. This is the opposite of what most start-ups do (delay profitability until later.) The short-term thinking of overpricing has long-term repercussions for them and any other business that resembles them.
Looks like businesses have collectively realised that groupon is a miserable deal and it's finally caught up with them, after having been running on fumes [1] for a couple years now.
My brother in law runs a restaurant back east, and he said that Groupon has been a great channel for driving business. Anecdata, I know.
I think there's a business opportunity to help people running groupons capture the most value out of the leads (at the least, sign them up for an email newsletter).
It could also vary widely based on whether or not advertising was a business's greatest problem. If your biggest problem was that not enough people know about or had tried your restaurant, Groupons probably did a lot of good.
If your biggest problem was that your food wasn't really that great or your prices were too high or you were in a terribly inconvenient location or your staff was unbearable, then getting more people in the door doesn't really help anything in the long run.
I think you're right, and I think the facts coming to light, even just in this discussion, prove that the vast majority of businesses trying to make magic happen with Groupon were just not sustainable. Groupon has ridden the notion that small business owners could get a "web 2.0" surge to success. What's happened is that entrepreneurs have burned through their startup budgets, and ignored sound business sense in favor of fadish practices. Really, Groupon has bled a bit of startup capital out of the economy. It's not a zero-sum game.
It's like how online journalism is collectively wringing their hands about ad-blockers and crying, "But what about the CONTENT?" Well, most of what passes for "content" these days is regurgitated click-bait non-sense, recycled in a dozen places, and it should all just go away anyway. Cry me a river. In both of these cases, the "good" notion of capitalism is working just the way it's supposed to.
I think it depends on the business. Someone up top mentioned it was a great way for them to try scuba, sky diving, etc. That's not the sort of thing you necessarily see a lot of repeat traffic for. Not sure.
Scuba and skydiving are the exact type of hobbies where if you make people interested, then you can get a lot of very expensive follow-up business. You won't get most of them hooked up; and if you make the first experience a lousy one because of Groupon pricing issues, then you won't get any of them hooked up, but in general if your business current weak point is excess capacity and a need to bring in new people to the hobby (since your current customers are doing it as much as they can and won't do more), then a deeply discounted first trial is pretty much the main way to do that.
Business owners really ought to know what their margins are. I feel bad for the ones who got pressured into bad deals, but they have to know what their literal bottom line is.
The value proposition with Groupon is largely that you are selling a limited deal at promotional prices (i.e., ones which you would not be profitable sustaining) to build business. It was essentially, when it was novel, a new acquisition channel.
Even business owners that new their margins wouldn't know its value to their business without testing it in their actual circumstances.
> It was essentially, when it was novel, a new acquisition channel.
It also had a touch of loan-sharking from what I understand. I could be wrong about the exact details but I believe one of the main attractions was that a business could do a Groupon, and get all the money from the Groupons sold as soon as the promo was completed, but still have weeks or months for the customers to actually trickle in and claim the offer. Which may have led to a lot of the frustrations people had actually redeeming them, getting on the schedule for massages or reservations, etc.
How is that "loan-sharking"? Seems to be pretty much just run of sale of redeemable credits. Loan-sharking means that someone is making money by charging high interest rates on loans -- here, the "loan", insofar as there is one, is effectively from the customer to the business, and there is no interest being charged on it.
It was intended as a euphemism, not a literal example of loan sharking.
But the analogy holds. Selling something for 20% of its value with the expectation of having to fulfill the order in a few months is effectively the same as paying an extreme rate of interest on short term business financing.
Isn't this kind of thing beneficial if run with more reasonable margins and a subscription model for customers?
Basically, the customer subscribes to the service and gets discounted meals at the cost of not being able to choose the restaurant himself.
Restaurants can use the service whenever they expect to have empty tables, allowing to still profit for them, but with a reduced profit margin.
I'm not sure if it works for restaurants in particular, but it should work for businesses that cannot easily change supply levels, aren't selling something that is completely a commodity and ideally where varying suppliers is enjoyable for customers.
> Restaurants can use the service whenever they expect to have empty tables, allowing to still profit for them, but with a reduced profit margin.
Businesses receive 20-25% of retail price when they take a groupon deal, so you'd need a profit margin >75% to even entertain that idea. Also it cannibalises some of your existing customers, converting your 75%+ profit margin customers into near zero or loss customers. I'd leave the tables empty.
You do have to consider the advertising in the calculation. If they spend $2K/year on advertising now, and a GroupOn sale might be viewed by 10K/people and purchased by 100-150, then still might come out ahead even with $0 or -$10/head ($1500 in loss for the GroupOn).
If a place is doing a GroupOn it is unlikely a zero revenue person will displace a paying person, since the place would have to be almost at capacity for that to make sense (and if they're that popular, why are they doing a GroupOn?).
But then the real question is: "How effective of an advertising platform is GroupOn?" And that I do not know.
PS - Anecdotally I have read that the "type" of customer GroupOn attracts might hurt it further (people claim they're very demanding, hard to please, and unlikely to return). But anecdotes and anecdotes, have to take them with a pinch of salt.
PPS - I myself wouldn't do a GroupOn because I would feel like it was de-valuing the establishment. It sets the new "normal" to the discounted price.
> then still might come out ahead even with $0 or -$10/head
After blowing an entire year's worth of advertising on a single promotion...
Which is an awful idea because a) advertising needs to be sustained; and b) Groupon users are a small subset of the local population that might be interested in your product.
It's not running on fumes. It would have been more accurate to say that it is growing more slowly (and as of the last few quarters, has seen its growth flat-line).
2012: $2.33b in sales
2013: $2.57b in sales
2014: $3.19b in sales
Their biggest problem is the inability to achieve profitability on $3 billion in sales after so many years in business. They still have $1.1 billion in cash however, and have reduced their bleed rate to a benign level.
> Their biggest problem is the inability to achieve profitability on $3 billion in sales after so many years in business. They still have $1.1 billion in cash however
Doesn't this just mean the investors would be better off winding it down and investing the $1.1b in something that is profitable, or at the very least has a higher ceiling? It doesn't seem all that likely that the latest round of cutbacks is going to turn this into a profitable company and even if it does, the scope for profits is very limited. As you say, they've been going for a long time and nothing is really getting better. Even the 2.5% you get from the S&P 500 would be a better use for that billion in cash.
By virtue of the way indices work, a lot of public companies in general would have been better off throwing their cash in index-driven mutual funds. That being said, if it were easy to tell ahead of time which these companies are, it would be easy as an investor to beat index-driven mutual funds.
Right. That's why I suggested Groupon be wound down, not that they continue operating at a loss but invest their cash differently.
This does raise an interesting question, though. There seem to be a lot of corporations out there that have no obvious reason for existing: minimal to negative profitability on a sustained basis, uninspiring business with little potential, and a long track record that doesn't suggest a turnaround is likely. Groupon is just one of many. Presumably in many cases, equity in these corporations is held primarily or even entirely by index funds. Why should such a company remain in business? By definition, if all your shareholders are indexers, there is not a single person alive who considers you an above-average investment. In a rational market, such a company would be wound down or the price of its shares would fall so low that it would be taken over by someone who believes he can do better. But the index funds create a sort of circular reasoning, or perhaps an isolated reality separated from outside feedback, allowing these zombies to keep living. A variant of this was covered by http://www.bloombergview.com/articles/2015-07-22/index-funds..., but this seems like a more extreme case. Of course, Groupon's "institutional ownership", which includes various active and passive funds, pensions, endowments, etc. is only 65% per Google Finance. There are corporations with 100% and even >100% institutional ownership (i.e., there are a lot of non-institutional shorts). Why do they continue to exist, and what can be done to kill them off?
They don't have a million sales people -_-, 11.8k employees total is a better estimate [1], dropping to 10.7k soon.
Maybe fumes was not the right word. The things they offer as "deals" are fumes. I just loaded the Toronto section, and saw "$179 for $2392 worth of laser hair removal" with >200 sold. I don't believe that the $2392 figure is not grossly inflated. Also "$430 for a $899 iPhone", but then you notice "condition: refurbished".
These things don't come across as credible promotions, but rather the result of someone packaging something up to appear to be a promotion, but it's just a normal price disguised in some way. Perhaps there are some actual promotions on there, but these pseudo-promotions reduce the credibility as a whole. So what's special about groupon again? I can get normal price things anytime/anywhere, and not have to go through the hassle of buying the coupon in a specific time frame, and only be able to use it in a different specific time frame and another dozen restrictions.
This article doesn't tell the whole story. As a user of Groupon Panama, I can tell you that they face stiff competition here from a Groupon clone, ofertasimple. I think they're exiting because it was a small market to begin with and they haven't been able to win it. Many people, including myself, find the competing service superior.
> "We believe that in order for our geographic footprint to be an even bigger advantage, we need to focus our energy and dollars on fewer countries."
Did this company spokesperson just pass first year business writing? It's like the writing prompt was, "Your company is downsizing, what is the most absurd way you can describe it?" I couldn't help but laugh at the sentence.
Glad someone else noticed this. I kinda glossed over it at first, then read it again and broke it down thusly:
1. Our footprint is a big advantage today (presumably this means more reach).
2. We want to make that advantage bigger.
3. Therefore we are reducing our footprint.
At first it sounds like an outright contradiction. But it does make sense, in a very convoluted sort of way. The advantage of having broad reach will be increased by exiting those markets that are losers for them, because the (still presumably fairly broad) range of markets they're staying in will be more profitable overall. But it would have been much simpler to just say "We're exiting a handful of smaller markets where we aren't leading or growing, focusing our efforts where they're doing the most good." But I guess you can't say that these days.
Groupon was a deliberately calculated scam once it started getting huge investment though. Investors are always willing to burn the long term (the public) if they can pop the short term (themselves).
"Altogether, $946.8 million, or roughly 86% of the funds raised across the three investments, was paid out to Groupon directors, officers and stockholders. Just $151.4 million was retained by the company to use as working capital and for general corporate purposes."
It's mind-blowing that anyone would subscribe to an F or G round in the first place. That they would do so despite the obvious scammy nature of the whole thing is probably criminal, at least if they were managing OPM.
Greater fool theory, they're thinking they'll make money on the IPO. They might have, actually, or they were very close to doing so -- a couple more weeks before the bad press Groupon started getting around the IPO and they'd have been sitting pretty.
There was a comment yesterday about how investors only operate by FOMO ("fear of missing out"). Once you convince one, many more will follow.
That's one reason this go-nowhere, do-nothing startup had so many investors: https://www.crunchbase.com/organization/clinkle — it's all psychological games ungrounded in any sense of reality. Once you have one name brand investor on board, the other investors basically abdicate their entire decision making ability.
If you've ever been turned down by a16z, you can legitimately go around saying investors think less of you than they think of clinkle.
There might be direct pressure from earlier investors to commit to an F or G round so that on future deals you might get in earlier on the next racket.
Anyone else notice they refer to Puerto Rico as "international"? Fun Fact 1: It's a US territory, where residents are US citizens but can't vote for president. Fun Fact 2: Journalists these days ain't what they used to be.
I feel very similar to this blog post I read a few years ago, calling the Groupon era "The Locust Economy".. It wasn't good for businesses, consumers logically just abused the mechanism until these companies were ruined..
Thinking about locusts and the behavior of
customers around services like Groupon, I’ve
become convinced that the phrase “sharing
economy” is mostly a case of putting lipstick on a
pig. What we have here is a locust economy.
I've never heard of this negative reaction to Groupon like you folks are describing. What was the negative side? Was it not a good advertising investment for companies? Were expectations not being set correctly by Groupon? Do they take too much of a cut? Are they just jerks to the companies?
Is there room in this space to not be a shitty actor?
I think some of this is inherent to the model, and part of the problem is that businesses aren't building the right expectation in to their budget. They're thinking in terms of getting a bunch of ordinary customers in by giving them 50% off of an entree, and given their metrics on ordinary customers, that seems like a good deal -- a coupon of the same sort, sent out in one of those mailers, would pay for itself easily. But Groupon is bringing in a different set of customers -- low-value customers who don't provide much repeat business and often pick a fight over trying to get an even steeper discount.
Wait staff often complain of Groupon'ers either not tipping at all, or tipping a low percentage and basing their low percentage off of the discounted bill (such that the net tip is like 1/4 to 1/3 of what it would normally be for the same meal.) Some places complain about Groupon'ers overstaying their welcome -- they come in for half price entrees, don't order appetizers or drinks or dessert, and stay at the table for 3 hours eating wave after wave of complimentary breadsticks. They're the ones still at the water park when the staff locked the gates ten minutes ago. They come in multiple times in the next week trying to return something for full price or otherwise scam the store. Many places report an excess of complaints of the "I'd like to speak to your manager, you're doing a terrible job" variety directed at their best employees, because people are unhappy paying 50% when they think they can somehow get it down to 45%, or they're unhappy paying 50% for 100% of the experience when they think they can stretch it to 105% of the experience.
This doesn't happen to every company, but it does happen to some companies and leaves them feeling pretty burned.
In my view, the whole "daily deals" thing that they started with was always unsustainable at scale. It's one of those things that works well in small doses, but as you scale it up the value declines. However, it was novel enough and generated enough volume that it took small business owners a while to collectively realize that Groupon promotions didn't help them in the long term.
Let me guess: Groupon agents (who got a commission?) would push for the best deal possible; naïve pizza joints and dry cleaners would do it. Response would be overwhelming, leaving the company broke after a month. Rinse and repeat.
There was nobody in the process who would/could responsibly manage the actual value of the coupon. So they were either useless or debilitatingly lavish.
Yeah, is there a medical condition called "Marginally Useful Apps Used as a Trojan Horse for Marketing Crap You Don't Need" Fatigue? Because I'm pretty sure I've got that.
Yeah, for me, there was a certain novelty value to Groupon and its ilk. But, after the third time I had to go out of my way to redeem something that it wasn't really convenient to redeem, I sort of lost interest. That, combined with the general decline in the quality of deals, meant that at some point it just wasn't worth opening the emails.
Have any of the groupon competitors reached critical mass? I realize that a large number of "me-too" competitors were started when Groupon exploded, but it seems to me a "groupon that doesn't suck" could be a pretty good business.
Making it not suck for the businesses would be great for actually having a regular rotation. At that point, though, you're basically completing with these guys:
In Denmark we have http://downtown.dk, they managed to get traction here before Groupon, so they have had most of the market, however it seems like Groupon have been eating parts of their business recently.
As an aside Groupon seems to be 100% https, where downtown is only partly https :(
We have a lot of Groupon alternatives in Denmark, from online sites to discount boxes you buy physically in stores, most of them taking considerably less than 50%.
I remember, back during their heyday, listening to pundits discuss how Groupon was going to run Google out of business if Google couldn't find a better way to offer daily deals. I regularly saw people mentioning Groupon in the same breath as Amazon and Apple when speaking of tech giants.
Will Groupon founder Brad Keywell's newer venture, Uptake, face a similar outcome? A recent Forbes article suggests he's better at starting a company than running it.
Chicago dev here. Lots of friends in the groupon circle I know have been unhappy and left. Know two people at uptake, both miserable there. They seem to have a big problem with claiming/trying to be a great place to work, but executing poorly.
Groupon was, at one point, the largest rails install in the world. They had some REALLY good Rails guys. Then they ditched the entire codebase for node.js and a lot of the best Rails developers quit soon after.
That's a crowded space to get into these days. You're competing directly with the big boys at Microsoft, Google, IBM, etc. as well as countless other startups. This seems especially difficult to do when you don't even have a product to sell.
Outbound sales I'd imagine. It takes a lot of people to make calls to businesses to convince them to sign up for Groupon, how to structure their deals etc.
That sounds about right though. The developers are really just building a CMS that should be able to in theory handle an infinite amount of cities, while securing a new sale for one city every day could be a full time job (and probably done best by someone actually in that city).
At first I thought this was bad news for Groupon, but after reading about it, it seems like a logical strategy. Groupon recently exited Turkey and Greece, which makes a lot of sense considering the economic turmoil in those countries and in the region in general. The 7 countries that were affected in this news were fairly small markets. Since when was Uruguay a major player in the global economy? The layoffs of 1100 mostly in sales and customer service seems reasonable when operations in 7 countries are shut down. Groupon has over 10,000 employees. A 10% reduction in staff trims some of the low performers. Microsoft and Amazon probably cut more staff each year with their stack rankings. (I know MS supposedly killed off their stack rankings, but I have a feeling it still exists albeit in a less visible capacity.) Overall, I think these moves make Groupon stronger, more competitive, more focused and more capable in a cutthroat market.
Half of Groupon's failure is the email spam model, another half is the business partners. If you signed up for a service where you give discounts and got any less than a shining smiling face when I come in with one, guess what - I'm not coming back to you. Groupon should have screened businesses the same way Apple screens apps, very carefully.
I feel like the small business man or woman was hurt the most by groupon, whether it be the mom pop shop or the family owned franchise. And when you exploit them, you hurt America basically. And that isn't a biz model that people can get behind. Had groupon done things differently, we'd be reading a very different article today.
Some points that caught my attention (edited by me)
...Groupon’s got a healthy business. Almost forty million people, in more than a hundred and fifty cities around the world, have signed up for its e-mails,...Groupon isn’t going away. Unlike many Web companies, it’s been profitable from the start. (It takes fifty per cent of the revenue in every deal.) This year, it had half a billion dollars in sales, and estimates are that, before long, it could have as much as two billion dollars in revenue." End of my edits.
India, where groupon is hugely popular, has behaved like a spin-off. It recently independently raised 20MM from Sequoia.
I've had in a hand in a few Groupon/daily deal campaigns for some clients and their experiences all seemed to depend on the quality of the product/service they could provide. An established restaurant I would find it hard to believe they would extract value out of this type of discount. However, a new product to market that believes a customer can have a good enough experience and can deliver on that the first time they try it out, may be more apt to succeed on daily deal type of sites. It follows the "free trial" model of direct response (without the shady autobilling on the backend), just get the product in their hands and let it do the talking for you.
As a consumer, I love the model. As a business owner/marketer, the results have been so/so.
Wondered when that was going to happen. Don't get me wrong, I liked the concept but when you don't get repeat business because the structure is so bad it's just not a good sign.
What is the significance of this line?
"taking a pre-tax charge of $35 million in the process"
It cost them 35 million to lay off 1,100 folks? They are getting a tax cut?
So on what contract were these 1100 people employed? 0 hours guaranteed, get in and get paid for the hours you work and your contract can be terminated any day? It always baffles me to see a thousand(s) of people getting laid of with the flick of a finger. That's like an equal amount of people added to the economy unemployed, right now.
Illinois is an at-will state, so like any other employee in the state they can be let go at any time for any reason, with the exception of a few protected classes, since we also have a state Employment Non-Discrimination law.
I'm guessing you're not from the US? That's pretty much how it works here, except for government or unionized jobs. Most employees, whether hourly or salaried, don't have any kind of employment contract.
I'm not terribly surprised. I stopped using Groupon 3-4 years ago after a couple of bad experiences, watching the CEO in an interview on TV and also learning about how some small businesses were negatively affected.
I think there is a class of business ideas that may seem good in the beginning but eventually fail for various reasons.
Much to my surprise, I've found Groupon to feature killer deals for discounted refurbished phones, tablets, etc. I've gotten a 32GB Nexus 7 (2nd gen) LTE for $200 , they have a Samsung S5 right now for $270 (but check reviews, caveat emptor etc).
Sometimes you dont see the flaws in a business idea until it is practiced for a while. In Groupons case it was an idea to easy to copy and businesses who though they were get a short deal. I thought it was worthwhile to try out.
It is just a badly ran business. The Chinese version of Groupon is ran by the very competent Xing WANG, who was a physics graduate student. And last time I looked at it Meituan was worth $15B.
Not really sure why "was a physics graduate student" means anything about his business acumen here. Eric Lefkofsky has a law degree, Brad Keywell has a JD and an MBA, we could do this all day. Having a graduate degree in a hard science could certainly suggest a person has a different way of approaching business, but Wang dropped out so he could unapologetically clone other people's ideas.
I think the OP is stating the opposite, that being a physics grad student would imply he probably couldn't run the business as well as the Groupon founders.
The two aren't really related. The TC article shows that they are laying off sales people in marginal countries where they aren't doing as well, and changing their strategy to invest more in technology and less in sales. That's entirely consistent with them hiring mobile developers in the US.
I would have probably not done almost any of these things, or been more judicious in what I went to. I've found some new things that I'll be returning to, and some things that I won't.
As a customer, these kinds of services are amazing. And really all they're doing is centralizing good deals. A less "grow fast and explode like a Unicorn" business model would probably make it work better for participating businesses.