Updated: 11/4/2011 1:47 PM ET|
Will Groupon spoil your dinner?
Welcome to long lines, businesses unprepared for the onslaught of (unprofitable) customers and resentful regulars. Some businesses aren't all that happy either.
What could be better than getting turned on to a new restaurant or hair salon for half the price?
Finding a place on your own with fair prices.
At least that's what an increasing number of Groupon users are deciding, as they deal with cafes, day spas and other retail businesses that are overbooked, understaffed and understocked.
The economic pressure of satisfying hordes of Groupon users paying a fraction of regular prices has crushed some coffee shops, restaurants and massage businesses. For others, it's just been a flop, turning away other customers, at least temporarily.
Indeed, while Groupon's website says that businesses that use Groupon "always come out ahead," that isn't so, say business owners, researchers and marketing experts.
"The risks are much more varied than people understand," says Bob Phibbs, a retail consultant and the author of "Groupon: You Can't Afford It -- Why Deep Discounts Are Bad for Business and What to Do Instead." Many entrepreneurs, he says, lack the knowledge to evaluate these deals and the potential impact to their business.
"I think it's a bad idea. I don't buy the loyalty. I don't buy the 'give (people) a deal so they will come back and spend more money,'" says Phibbs. " I think all of it is just built on hope, and that's really dangerous for business."
Groupon, whose stock went public Nov. 4, is the largest of dozens of online coupon sites, including LivingSocial, Gilt City and BuyWithMe, offering daily deals for cities around the country, typically at discounts of 50% to 80%. Groupon's email subscribers purchase these vouchers online, share them with their friends and family on Facebook and Twitter, and have a certain amount of time to redeem them.
It was conceived as a way for small businesses to get exposure and lure in new customers who, they hope, will become regulars.
Only that's not how it's working out for many businesses, marketing experts say.
"You get a disproportionate number of deal chasers that aren't very likely to come back," says Utpal Dholakia, a professor of management at Rice University's Jones Graduate School of Business who has run studies on the marketing effectiveness of these deal sites. And in many cases, you alienate your existing customers.
That's what happened in Diane Benney's boot-camp class in Rancho Cucamonga, Calif.
After her instructor, Cathy, did a couple of promotions on online deal sites, the class Benney had been religiously attending for more than a year doubled in size. The dynamic of the class changed, too.
"Before, the people that were there worked their butts off," says Benney, a stay-at-home mom. "Everybody was there for a reason."
The new crowd, however, seemed to be fitness dabblers who "weren't really into it." It made the class less enjoyable for her, and she counted the days until the Groupon deal expired. Almost none of the newcomers returned, she says, making the promotion a flop for everyone involved.
True, there are many business owners for whom these promotions are a success. But even they concede they can be a burden for their customers.
"I only do it in summer when business drops off," says Amy Peddycord, the owner of Invoke Studio in Indianapolis, which offers Pilates and yoga classes.
Peddycord says despite grumbling by some regulars, Groupon has been an unmitigated success for her business. Her three Groupon promotions have expanded her customer base by as much as 20%.
'We converted a high number of those people into (full-price) packages," Peddycord says, which has meant more pay for her instructors and improvements to her studio.
Groupon says that between 94% and 97% of businesses that did one of their promotions would do it again or recommend it to a colleague.
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Easy fix: don't allow "groupon" into your business'!
See? Simple and effective!
How in the WORLD can you blame Groupon for your cancelled nail appointment??? The nail salon agreed to enter into a deal WITH groupon, the nail salon CHOSE a deal to offer through Groupon, the nail salon selected DATES to offer the Groupon, the nail salon TOOK your appointment, then the NAIL SALON CANCELLED your appointment.... Seems to me that PERHAPS your anger is just a bit misplaced....
Businesses enter into deals with Groupon, Living Social, bloomspot, and the 1000s of other deal sites (and just because it's your "local" tv/radio station promoting %-off type deals, they're the SAME thing) because they need BUTTS IN SEATS!! There's no money in empty seats. You can't sell yoga packages to empty floor space, you can't upsell bottles of wine to empty chairs, you can't sell tires if there's no cars in the bays, etc. No one holds guns to business owners heads. You'll notice that the "hottest restaurant in town" isn't ever on there....wonder why?? People are driving sales to their slowest times. Groupon has a lot to offer people who want to try places out without spending a fortune to do it. It's the businesses responsibility to treat those customers like "real" customers so that they come back. Too often I hear owners complain about a lack of repeat business when they were ill-equipped to handle the business they received from the deals THEY put out. If you can't do 5000 coupons, just DON'T.
As an avid Groupon user and as an employee at a business who has chosen to accept Groupons, I've seen the best and the worst aspects of these relatively new coupons from both sides.
From the business owner's perspective, the Grouponers need to understand that it is nearly impossible to fathom the influx of extra customers you will receive IMMEDIATELY AFTER the Groupon goes on sale & IMMEDIATELY BEFORE the Groupon expires. In a perfect world, not everyone is a procrastinator and won't flood your doors right before these things expire. But unfortunately, this is 'Merica and it's not a perfect world.
Also, there are just as many scrounging coupon fanatics just waiting for the minute to be able to use their shiny brand new coupons as there are procrastinators. This being said......businesses should know to simply STAFF UP & STOCK UP for the first couple weeks after it is available to use and the last couple weeks before it expires. It's not as smooth sailing as the rep who sells these coupons to your business says it is.
As the one redeeming the Groupons, you also need to understand a few things: This is still a relatively new concept for businesses. Groupon hasn't even made into every city in the US and just barely is heading overseas. Be nice to the business owners...they don't know what they're getting into and are trying to offer you deals. If you want good service, don't flood the businesses doors right after buying it or right before it expires. Make reservations or appointments and be laid back about it. If you walk in to the establishment and everyone there looks pissed off or overwhelmed, then go pay full price elsewhere and try it again some other time.
I actually had one lady who was sitting at a table of mine as I was sweating bullets trying to take care of all my tables before our's expired and she had the audacity to say, "I use Groupons all the time. And every time I always wait until they are about to expire (like she was proud of that or something..) and EVERY TIME it seems like the businesses are underprepared and understaffed." I wanted to slap her and SCREAM: "WELL MAYBE YOU SHOULDN'T DO THAT LADY!!!" Duh.
Wow - interesting comments...I'm a Groupon user, mostly for restaurants, but have used for massage and salon services as well. Here is what I've learned (for me - your mileage may vary):
- don't bother with something that saves $10 unless I'm already a regular. It's not worth the hassle of keeping track of the groupon and making the effort to try something new.
- don't buy Groupons for places that aren't near work, home, or closeby between the two.
- don't buy more than one Groupon for a new place. If we don't like it or it's just not something we want to do again right away, it's tough to be motivated to use the second coupon.
- DO buy as many Groupons as allowed for places we already frequent.
- Expect (but don't accept) the eye rolls from wait staff. Can't blame them for being screwed so often by those who bring the discounts. I always tip on full price, and I believe Groupon (I know most of these things do) even put reminders on the ceretificate itself to tip on the full value before the discount. Unless there is problem, I generally tip 20%, for great service, it's at least 5% more or an extra $20. I don't know why EVERY restaurant receipt doesn't come with suggested tip amounts along the bottom. Have you seem this? It tells you what 15, 18 and 20% tip would be for your check - it's genius and a great reminder to the cheapskates who might just be forgetful and math-averse.
To "A Small business" - as to the expiration date. Sorry. It isn't my problem if you can't handle the push at the end of the valid period of a groupon. You need to figure out how to deal with that, and you should expect it. Either the Groupon is good or it's not and you've got to figure out how to honor it. If that is extending just those you couldn't serve those last few days, then so be it. But you can't tell the users that "It expires September 30 but you better use it before September 15 or you might not be able to use it at all." No - that's fraud if you want to decline to honor it prior to its expiration. For services, I would recommend instead of a "valid until" date, that there is a "book by" date (and maybe valid until well after that). That might save some of the problems, but I have to agree with other posts that the businesses who are so swamped that they are cancelling appointments and extending the Groupons, well, they didn't plan very well for the number of Groupons they allowed to be sold.
Something about a discount that turns people into strange beings.
I can understand a simple mistake, but some of the businesses seem very naive in their advertising and distribution of coupons. Anytime you advertise, you should be prepared for the increase in customers. If you offer a discount, it should be planned carefully to cover of the cost. Just running customers through the door doesn't necessarily mean profits.
Again, haven't the businesses in the article ever run a promotion before?
Time after time, hear the same story with these mass coupon sites.
Bottom line is this: if it sounds too good to be true, it probably is. Just because technology ALLOWS you to do all these sorts of things DOESN'T mean you SHOULD.
As a business owner, I believe if you focus on basics like produce or provide the best possible product or service, do so at a reasonable price and be consistant with it, you have the best chance at achieving success.
Many of these businesses that try these types of sites without researching reap what they sow.
It is the same as the ZAG pricing in the auto business. There is no loyalty for the business. The customer may come in for the net-loser price and the dealer tries to bump the warranty / rates to make up for the loss. The consumer does not get the same enthusiastic service and is "hammered" with additional products and the dealer makes nothing or less. All that Groupon and ZAG are doing is lining their pockets and taking away from the sales process.
How about just just present a good product and a fair price. Profit is not a dirty word and service will promote loyalty. (But then again, Americans are getting to be 'What is in it for me only' mentality".
I purchased a groupon from a local business. I always wondered about groupon and think that people who buy Groupons are always the ones who are just looking for a deal period. The groupon I puurchased was from a business I give more than enough regular priced business to.
I thought it would be nice to have a meal and a drink at a discounted rate for one night. Groupon is not the way of the future for marketing your business. I would not use this company to market my business to new clients. There are other more effective ways. But hey, you gotta hand it to Groupon for cornering a market in a very bad economy, which everyone is afraid to say is in a depression.
I see a lot of Groupon haters!! Groupon and the other sites wouldn't be doing as well without the business owners, big and small. I love Groupons. This year me and my kids have been to Indiana Beach, Laser Tag, Putt Putt, & Go-karting. This article is so negative! What about the families you can go have fun without spending a fortune!!!
As a consumer I the Groupon terms all the time. Why would a business owner do any less? I check Groupon every morning and I've see deals already say "limited quantity" and not many sales have been made. I guess the Spa didn't know about that. It's your business if you don't like their terms go else where. Don't whine about it in an article!
And they do give you your money back. A business closed, and they emailed me & asked was the groupon used or not. I've had no issues with them, all my Groupons have worked. I'm a Groupie for life and I love the App!
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