60% of businesses who try groupon like it enough and may use it again?
That's great for client acquisition for most types of businesses.
67% of businesses who ran a promotion made a profit during that promotion? That's great.
Lots of times you run promotions at restaurants to make less of a loss. Every day you have a restaurant, your interest on the loan you took to buy your equipment, every day you pay rent, you're in the hole. Every your kitchen is open and staffed you're in a hole if those seats done fill, but you're in less of a hole than if you stay closed (as long as you have some customers). Some restaurants open on Monday and Tuesday to lose less money then they would if they were open only Wed-Sun. Some restaurants make money every day they're open. Many do not. Most "live" for the busy Thurs-Sun afternoon.
This article/statistic keeps coming up: I think it shows how well groupon works.
33% of businesses lost money during the promotion, 40% of businesses didn't like using the service/had a bad experience. What are the numbers for the restaurants prior 3 weeks?
Those numbers are not bad at all.
The fact that this quip still has plenty of currency a century later indicates just how exposed the advertising business really is.
From an advertiser's perspective, Groupon's pitch is really compelling. Instead of spending money on traditional media-buys to generate some interest and a few sales, spend the same money generating a lot of actual sales, and call it a day.
Keep in mind that when that study was done (June 2009), Groupon was 9 months old. Since then, Groupon has expanded to dozens of countries and hundreds of cities, raised over $1B, hired thousands of employees, and refined its processes a zillion-fold.
It's no secret in the company that our long term success is based on a) customers having great experiences, and b) merchants getting a return on the cost of their discount and fees to us. Everything is viewed through those two values. Deals are scheduled so that customers are always delighted (e.g. so there aren't 4 steakhouses in one week), and sized so that merchants don't get raped by the economics (e.g. if a typical bill at a restaurant is $100, then the deal might be $60 for $30. Also, quantity is estimated based on the merchant's capacity as well so that merchants don't get overwhelmed and customers still get a good experience. In the video for the recent Japanese new year debacle (http://news.ycombinator.com/item?id=2111609), Andrew mentions that deal sizing and scaling is already done in some markets and in response to the Japan incident, will now be done in all markets to ensure the experience continues to be good for everyone. Short-term profit maximization isn't what builds lasting businesses, and the execs here know it.
With something growing as ridiculously fast as Groupon, data get stale fast. It's like if you found a study from 2006 where someone complained that they couldn't find anyone they knew on Facebook.
It's always wise to take a company's numbers with a grain of sale, but with a fast growing company, the numbers they selectively release are usually the best you're going to get.
This rainbows and unicorns thing isn't the reality from what I'm getting.
Specifically, it will attract a lot of customers, but runs the risk of reducing customer perception of the value of your product. Sounds like a good match if bargain-seekers are your target market -- your promotion ends, and you're still among the best deals.
But it sounds like a terrible thing if you're selling the equivalent of a Lexus or Acura in your market -- luxury products defined by the perception of their extreme worth/status.
I have used it to buy stuff at high end clothes stores (well Gap - but anything other than $3 black T shirts is high end for me!). If I ever needed more clothes I might go back to Gap, it did get me to go into a store I wouldn't have entered and was probably cheaper and more effective than them putting their name on a yacht race.
If everyone who heard about it on the internet could afford a Lamborghini, no movie star would own one, no matter how fast it went.
Distributors will normally set a hefty markup to cover the costs of goods not moving. If you have a semi-guarantee that they would move, that markup can be lowered.
Using it purely for advertising / marketing seems secondary and questionable to me.
Summary:
(1) Marketing tactics are not always effective. Groupon is a marketing tactic, and like other marketing efforts, it is not fullproof.
(2) If you give 50% off to customer and 25% to Groupon, you may not make money.
How they managed that is the real secret and I would be extremely interested in that story.
But, they really need a better team helping clients make their decisions on whether to use Groupon. While this article I thought offered little in the way of a "dirty secret" and wasn't particularly different than others on the topic, it shows a PR problem endemic to Groupon. This definitely needs to be fixed to ensure the long term success of Groupon, which I guess will be include a Yelplike/Yellow Book service.
People have a strong tendency to blame others for their problems and this case is no different. Groupon and its "disloyal" customers are an easy scapegoat for the business' own problems.
Groupon just brings customers in, they don't magically make the business better.
When analyzing the effectiveness of Groupon we should be most concerned with how well businesses with a good product or service did using Groupon.
Also, Groupon offering deals in towns (not just cities) would be great for us non-city dwellers.
But it sounds like an honest business, and I hope I find a deal I like.
I would like to add that I would also like to short Groupon.
I'll let you guys draw out the parallels, I have some roti canai to nibble on.
