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Has anyone used a Groupon to advertise their business?

I'm really interested in hearing first-hand about the experience of using a Groupon offer to attract customers. On one hand it seems like a great new tool for customer acquisition-- but it also seems like a small business could get crushed by the demand. (What happens when 1,000 people show up with Groupon's in their hand?) Given the relative newness of Groupon, I don't expect there are many clear examples floating around yet, but it would be valuable to hear from someone.
Post type: question
1/31/11 at 3:03 pm
Peter Morse
Co-owner
Member Since: 4/8/09
Posts: 26
The James Store
Granville, OH
18 replies so far Add Your Reply
I've been reading more and more 'cautionary tales' about these daily-deal type services. Here's the latest I've seen (specifically about Living Social, but also mentions Groupon and Yelp Daily Deals):

http://bit.ly/eJ6aA0

It seems like the best advice is, as always, 'buyer beware!' and know in advance what you hpoe to get out of such a promotion (and what you'll be sacrificing in return.)
2/3/11 at 2:31 pm
Bryce Glass
Member Since: 7/5/09
Posts: 61
Manta Media Inc.
Columbus, OH
Manta Staff

Wow-- that's a pretty descriptive article about one business owner's experience with a Living Social coupon. Seems like I've heard these types of stories before, and a common theme is that the business owner didn't really understand the details of how these coupons work (amount charged by Living Social, limits to coupon sold, etc.)

One interesting piece was how the coupon actually may have hurt the businesses' 5-star rating on Yelp. With the influx of internet-savvy, demanding, coupon-bearing new customers, quality of service went down and they amassed some negative reviews. Collateral damage.

I'd love to hear some success stories, too...
2/3/11 at 2:49 pm
Peter Morse
Co-owner
Member Since: 4/8/09
Posts: 26
The James Store
Granville, OH
None of my clients have made the Groupon leap yet, but I have spoken with multiple local firms (mainly companies offering Groupons that I, myself, have purchased) about their experience. The general consensus seems to be that if the company was new or offering a new product/service, it was a great way to jump start their customer/prospect base at a good cost per sale. If the company was more established or promoting an established offering, the groupon helped to expand their sales but maybe didn't necessarily expand the overall customer base ongoing. I think the latter group seems to have a "wait and see" mentality now.
2/13/11 at 9:51 pm
Kristy Campbell
Member Since: 11/15/10
Posts: 7
Department M
Dublin
I read a short article in Entrepreneur magazine (March 2011, p. 61) that gave some examples of both positive & negative experience aspects of one retailer's experience. To summarize:
  • Positive: on the day of the Groupon, traffic to website spiked to 10X normal levels & sold 157 "$25 for $50 worth of merchandise" coupons
  • Negative: the copy on the Groupon was rushed and, thus, was wrong (consignment store referred to as "secondhand shop")
  • Negative: retailer only kept ~25% of the transaction... and the credit card fee for each customer's Groupon purchase is deducted from retailer's share
  • Negative: wanted to do smaller amount, but felt pressured to do the "$25 for $50" level
The article states that 66% of Groupon promotions make money while 32% lose it. They also conclude that Groupons seem to work better for new businesses that need to find new customers. Older businesses often are just giving discounts to existing customers.
2/21/11 at 12:09 pm
Peter Morse
Co-owner
Member Since: 4/8/09
Posts: 26
The James Store
Granville, OH
I own a small, intimate, 34-seat, fine dinging restaurant called The Short Story Brasserie in Granville, OH (www.TheShortStoryRestaurant.com). We do very little traditional advertising and nearly no discounting. I have a strong resume in technology and online analytics and feel like I would qualify as "net savvy" both from an online marketing and a technological perspective. After much research, speculation, and high drama I decided to run a GroupOn offer. I have to admit it still sounds ridiculous to do so for a fine dining restaurant but I did it. And here is why:

Our need:
We were coming off the heels of a tough year with lower and "as expected" revenue. We are in the toughest business, in the toughest segment of that business, in the worst economy in 80 years. Q1 is always tough and I new that the Q1 of 2011 would be definitive. I feel the economy is coming around but cash flow would be key to long-term success so putting people in the seats would be imperative even if it meant discounting.

My plan:
Traditional advertising is a waste of money. I can't track it. It's expensive. It's antiquated. I wanted something with broad reach that I could track. If I could couple that with a PPC (pay per click) type of program that would be huge. Everything pointed to GroupOn.

Recon:
I singed up for GroupOn and watched it for several weeks. I took note of how many were sold for anything that was near to what our offer would be. We are 30 minutes outside of the Columbus Metro area so we knew our total sales would be less. I guessed at the delta.

The Promise:
After some research I called them. If I had to distill GroupOn's message down to the core, the promise they are making is to drive traffic to your store (assuming their is demand for your product). Everything else is up to you. We have an average of 4.6 out of 5 stars on several review sites so we assumed we would fair well.

The Pitch:
-215,000 Local Columbus Subscribers in Central Oho
-Average 2.2 people redeem a GroupOn
-They limit 1 GroupOn per Table unless 5 or more guests and then you can use 2
-Personalized Deals
-We were strongly encouraged to offer a 50% discount. We knew this going in. They were emphatic that this is what made the difference, "The Deal"
-Redemption Rate Average 80-85%
-We would have control of the fine print
-They created all the marketing copy
-They would let me cap sales at a reasonable level
-They would let me configure the offer period i.e. 6 months, 12 months etc (I chose 6 months because my focus was Q1)
-They gave me comps for "like" business and their success stories
-There would be a spike of traffic upfront - 20-25 redemption in the first few weeks, consistent traffic following and a spike at the end (people rushing in before expiration date)
-They would let us require a reservation for a GroupOn to manage traffic
-The demographics are inline with our target audience. Their primary audience: educated, professional women 25-55, with medium to higher income.
-GroupOn keeps 1/2 of the sale price of your GroupOn

The Fear:
-Nothing but cheap, difficult people would buy the GroupOn and make our life miserable
-With only 34 seats we would be overwhelmed with people that refused to make a reservation
-People would try to circumvent the rules and use multiple GroupOn
-We would lose money on every deal
-They would crowd out regular paying customers
-They would be horrible tippers and really cause staffing issues
-Customers would try to use them during special events that would do not accept special offers
-All our current customers would buy the GroupOn and we would essentially give away revenue for the first half of the year for nothing

My Strategy:
The whole point of running a promotion like this is REMARKETING. I took every precaution we could to throttle the traffic by forcing reservations. I put a special section on our website dedicated to welcoming new GroupOn customers. I made sure to welcome them and reiterate "The Deal" to help avoid confusion or incorrect expectations. I created a tracking list to capture all metrics of the visit: number of customers per GroupOn, what their check amount was, their tip, whether or not they were already a customer, and whether or no they filled out an email contact card. I instructed the staff to include a complimentary dessert offer with their bill to encourage a revisit within a month. I made sure our staff asked for the contact card to be filled out.

Interestingly, GroupOn, gives you a complete download of everyone that bought the coupon. Although they don't give you the holy grail, i.e. the email address, they do give you some demographic data if the people chose to share it. They also give you a heat map, the count sold by zip code which was very, very good data for future marketing. We were actually surprised at the concentrations in certain areas. If fact we were shocked.

The Sale:
http://www.groupon.com/columbus/deals/t ... -brasserie

We ran the sale in mid January. We sold 744 GroupOns that day. We had capped it at 1000.

The Reality:
People immediately started coming in. We have filled the empty seats in January and February. We are 1 month into the campaign. Overall, the experience has been positive. I calculated the break-even point prior to launch. From the customers that have redeemed thus far I can say that we have lost money on very few. We did have a couple disappointed people that purchased GroupOns for Valentines day (which is excluded). We were able to successfully throttle the flow of guests with our reservation system. Overall I would say, 1/3 of the customers spent generously, 1/3 were average spenders, 1/3 were maximizing their value and were definitely below our normal check average. The exact same can be said for their tipping habits. Overall, the average is acceptable.

The Net:
They have lived up to their promise: to bring people in. Once they are in it is our job to win GroupOn’s customers over. We have put everything we can in place to make that a reality. It can be overwhelming but you must have an operation in place to handle it. I am firm believer that we will win a fair amount of these 744 customers over to long-term customers. Another segment may never return but they will share their experience with someone else. A good portion of customers probably won't be back but we gave them everything we could and we hope they had a great experience. That is the reality of any marketing promotion.

The Bottom Line:
It's not cheap. But with all the tools in place, with the right offer, this can be wildly successful for a small business. I can absolutely guarantee that you could spend 2, 3 or 4 or more times with traditional advertising and you will not get any where near the volume of traffic they can deliver. I can take comfort in the fact that we don't normally discount but I feel that a good portion of their audience is not your typical discount shopper. They are indeed educated, they have money, they like nice things in life. They are not ignorant, cheap, and mean.

Things to consider:
We've run direct email campaigns before. The last had a penetration of 85k emails. It cost $2300. The open rate is notoriously low. The conversion rates even lower. I don't have direct metrics from GroupOn but I can guarantee their open rate on those emails is WAY above average. Having access to their 213k subscriber base is huge. Just think of the impressions you are getting even from people that don't buy your GroupOn. The cost is well worth it. Take into consideration that I assumed we would get exposed to their entire list of 213k. That was in my calculation and decision process but after the fact I pressed my rep to confirm and he admitted I probably only reached 85% of that list. They have technology that sends out multiple offers in a discreet geographic region. I assume that they use this as a hedge for an "unknown" new client who they fear may not sell enough GroupOns to meet their goals for the day.

The copy on the ad is over the top. They claim that is their schtick. I asked them to change some of it. They wouldn’t I sat back and took the ride.

Disclaimer: Results are not typical. :)

James Housteau
The Short Story Brasserie
www.TheShortStoryRestaurant.com
Granville, OH
740-587-0281
2/23/11 at 11:50 pm
James Housteau
Owner
Member Since: 1/31/11
Posts: 1
The Short Story
Granville, OH
Hi James
I used Groupon and the one thing that I suggest you do is put a cap on the number you want to sell. The person you work with will try to convince you that the number you pick is way to small no matter what number you pick. I said unless I can cap my sales at 50 I can not move foward. They made me a side deal and it worked very well for my type of business. I do massage therapy. For your type of business you would probably try to cap sales at 100 or 150. I am not familiar with your business. The last point I will make in my type of business I have good and bad things to say about the expierence the main thing for me was it has been very hard to get the Groupon people to rebook after paying $30.00 they do not want to pay $65.00 even though this is a very good price. Good luck!
Charles
3/1/11 at 5:01 pm
Charles Dane
Licensed Massage Therapist
Member Since: 9/23/10
Posts: 1
Charles Dane Massage Therapy
Savannah, GA
I have not used as a Business, but I do use it as a consumer. I agree with the advice to be sure to know what you want out of it. Your offer should be crafted to help you do what you want you want done. Are you trying to build awareness, increase traffic on a slow day or time or move slow inventory? Think about the kind of offer you would be likely to find attractive and go from there.
3/1/11 at 5:11 pm
Joyce Byington-Clark
Director of Sales
Member Since: 2/17/11
Posts: 1
Drm, LLC
Yorktown, VA
Tried to list our business there but they said they had way to many listings and would not list never got a call back i was offering a 1000.00 discount on all roofs i guess that was not enough
3/1/11 at 5:39 pm
Tim Ehlers
602-478-3320
Member Since: 2/6/11
Posts: 6
Jack The Roofer
Phoenix, AZ
We have just finished our first deal with Living Social. We were very discouraged to use Groupon by reviews and other people so we decided to go with Living Social who were a little smaller and had better customer service. We started off with a plan to book slowly and try to put most of the "new" clients into a time when we are traditionally slow. This in our case is mid-week. I think if you are going to this you have to a have a plan. We were told that on average one third of buyers try to call up and book immediately. We had a $45 dollar deal for a one hour massage or facial, normally priced at $100.00. After running the deal we hit over 400 which was my goal. We were fortunate because some folks actually bought additional services not even offered as part of the deal. Don't know yet if we will make money on this or just break even but I am hopeful that the extra publicity will be helpful in the long run. Good lock to you and just remember to be prepared.
3/2/11 at 3:44 am
sandy s.
Owner
Member Since: 2/2/11
Posts: 2
Turning Heads Salon & Day Spa
New York City, NY
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