Getting the right deal from Groupon

Groupon imageAs we reported last week Groupon is facing an investigation from the Office of Fair Trading on over 40 counts. On the face of it, it's been accused of over-egging its advertisements to both end customers and merchants. It's confirmed it wants to talk to the OFT about improving, and in fairness you have to say that if it's a case of the same mistake 40 or more times then it may not be as bad as it sounds - but how do you get a good deal from Groupon?
I've gone into this in a little depth in my forthcoming book, "This Is Social Commerce" (out in February). This is some of what I found.

Consumers


If you're a consumer who sees a Groupon deal that you like, do some research. There have been cases of luxury facials which end up being done in a camper van - ask around about the company like you would any other purchase. Check also to see if the same seller is offering a better discount elsewhere - they're within their rights to offer whatever deals they want to whomever.

Also if you want a Groupon deal, get in early. Some merchants are caught badly unawares and they find after, say, midday they can't take any more bookings. So the deal falls through even after you've paid Groupon - then there's the question of getting your money back, which is straightforward but can take a little time.

Merchants


The people who've been hardest hit have been merchants, usually through mis-management or bad expectations. Here are two hypothetical examples:
  • A tailor offers a bespoke suit for £500. Their usual price is £1200. Since Groupon is taking 60% of the price (this is a guess) they're actually selling the suit for £200 - to make anything on this they need the customers to come back and order at full price. What they haven't considered is that the person spending £500 on a bespoke suit is not necessarily in a position to come back with £1200 - so this promotion may never pay off.
  • A beautician offers Facial cleansing and works out a price for a tester session so that he or she just about scrapes a profit on every sale in a Groupon promotion. However, once it's public the phone doesn't stop ringing for two days; existing customers are put off and the appointment book is suddenly full until the end of January - and nobody books a tester facial further in advance than that. Existing customers are angry that there are no appointments.

I've changed the industries but these are not unrealistic examples. If you're a merchant considering using Groupon then you have to ensure a few things, for your own commercial safety:
  • Assume every sale has to make a profit somehow so that if those customers don't come back you're not in loss.
  • Allow e-bookings only unless you have a huge staff on the phone - don't allow the phone to stop your business taking place.
  • Consider whether your product is right for the discounted approach. One hairdresser who offered £150 cuts was disappointed by the customers she gained when offering them for £36 - inevitably it was a completely different market.
  • Time limit the offer and put a ceiling on how many vouchers Groupon can sell for you. Don't end up contractually obliged to sell too many items at a loss, or overstretch your existing staff.

There was a case in the newspapers only a few weeks ago of a cake maker who claimed she had been all but sent bust by a Groupon offer because she had to take on extra staff to fulfil the orders, sending every sale into loss. If she'd considered that fourth point first, she would have been fine.
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