Why I hate Groupon!

January 31, 2013 update: Yesterday LivingSocial, Groupon’s main competitor, announced a 2012 $650 million loss.

This post has brewing inside me for a couple of months now. I think it started when I heard that Groupon had turned down a $6 billion buyout offer from Google. I couldn’t see how these guys could turn down $6 billion. Maybe they had other ideas for company – a grand vision to jump-start humanity and right the world’s wrongs. I doubt it. Were not talking about Twitter or Facebook, here. Groupon is a damn coupon company.

Now here’s why I hate Groupon.

Groupon sucks!

1. Groupon is all about consumption. “We want you to buy and buy now.” It doesn’t make a difference what it is … just get out there and buy it. This model is just so archaic that in a time where conservation and sustainability, not endless consumption, should be in the front of our minds – Groupon is about the just the opposite. There’s even a Groupon Now mobile app to reminds us we’re hungry and bored. Where will it end?

2. Not only is Groupon about consumption, they don’t care what they fling at you. They are non-discriminatory carnival barkers. In a world of the Long Tail and focused marketing, where we expect not to be bombarded but by irrelevant advertising – Groupon’s all about it. I’m fifty-two years old and I don’t want to marketed diapers. Been there and done that. My data is flying all over the place – grab some of it and tell me about things that might matter to me. I have to manage enough information as it is … don’t spam me.

3. Groupon is a one night stand for businesses. Now I know I shouldn’t feel sorry for the lemmings out there masquerading as business owners – but I kind of do. How can you not be mesmerized by the all attention and media fawning Groupon’s been getting. “If I don’t jump on I’ll miss the a chance to be part of the “second coming.” If a merchant is lucky, a Groupon promotion will bring in a surge of traffic. The business better be ready to handle this influx. If they’re not, not only will they not get repeat business – they’ll get negative word of mouth.

And speaking of repeat business. Will all these new customers want to come back if they’re not getting 50% off? Hard to say. And what sort of future communication will there be with these customers. If the merchant doesn’t a have a follow-up loyalty program in place, there won’t be any. Groupon doesn’t offer one. Maybe these are a couple of reasons, according to several independent reports – as much as 40% of businesses that use Groupon once, don’t use it again. I’m sure there’s conflicting reports otherwise, depending on who you talked to – but having it even surface as much as it has, raises concerns.

4. And finally, the last reason (at least for the purpose of this piece) really isn’t Groupon’s fault, but I have to say it anyway. I’m so over hearing about next “great thing,” “the killer app,” and company that will change our lives once and for all and lead us into enlightenment. Why isn’t it that we can’t all just like, well … what we each want to like. Why is it that we have to always be alerted of the next “crusade to the cliff.” I haven’t grown a tail and a pointy nose and my eyesight’s fine (at least with my glasses). Groupon is a coupon company. It may wear a pretty dress  and a nice pair of shoes … but it’s still a coupon company.

If I could click my heals and wake up in my “Perfect World” … it world be a world where we reward giving, not consuming … and the businesses I patronize understand that. It would be where we could enjoy our journey with less, not more … where conservation and conversation are the priority, not an afterthought.

I love Twitter and what it’s meant to the world and specifically to me. I’m not a big fan of Facebook – but I can’t help but give it kudos for being part solution to the healing of some of the earth’s ills. And it’s bad enough we have Foursquare. But at least I can see some potential in it. But Groupon.

Oh, gotta go, just got an offer for half off on a tanning session. Wonder how much time I have left?

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A successful blog post is when the comment flow provides more insight than the post itself. Please comment and add to the flow.

If you like this post please feel free to Tweet away. I can be found on Twitter at @clayforsberg.

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Update:  March 23, 2011 (5:00 pm)

It seems since I wrote this post – there’s been a lot of Groupon news. It’s not good. Seems like I’m not the only one that feels as I do. According to TechCrunch Groupon’s revenue in February 2011 fell 30% to $62 million And if that wasn’t enough, their President and COO,. Rob Solomon, has decided to part ways with the company. Hmmm!

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21 thoughts on “Why I hate Groupon!

  1. Groupon is clearly all about their own interests with zero retention rate. Clearly their business model won’t last long. In fact, one of my ‘groupon stores’ requires 25 followers, we’re at 21. Who’s to say they’ll even agree to run your promotion to their network if it doesn’t make them the most money?

    I’d like to introduce this unique website http://www.MeetABusiness.com, which has been in the works for about a year with 2 other business partners. We do not charge businesses an arm and a leg to offer group coupons, like all the rest of the group coupon sites do. Ours doesn’t charge them anything except for the $9.95 monthly membership fee and a small extra fee if they want to purchase a deal of the day, week, or month, but the first 6 months are free, plus they get all of the other posting and searching benefits offered by the site, which the other group coupon sites don’t offer, such as business resource posting & searching, jobs posting & searching, events posting & searching, networking, and blog posting. The deal of the day feature I think could help you eliminate the ‘expiry’ issue you had with Groupon. Plus you’ll get a free long term backlink in our directory.We have over 300,000 business listings nationwide to date. Again, we are a low-cost alternative (at the moment we’re a “no cost” alternative because we’re free for 6 months) to all of the other group coupon sites that everyone complains are really bad for businesses, because they take so much of the pie from businesses.If you have any additional thoughts, comments or suggestions for the site, we are all ears.

  2. Hi Clay, I am in the restaurant business and here’s my 2 cents. I like your post for a very specific reason and I quote, “Will all these new customers want to come back if they’re not getting 50% off?.” No, almost none of these customers come back if they don’t get the same 50% off, unless, the product (the menu/dish the chef/location/time of business) for the restaurant has a strategic advantage and offers that value to customers. If a restaurant has USP, it should offer that value to customers rather than use discounting.

    Groupon is a discounting tool to be used by businesses to market their product to spread awareness or to enable new customers try out their product.
    Many restaurants do offer combo value prices and frequent dining punch cards where repeat customers are rewarded the extra drink/dessert/meal after a certain number of visits by a customer. As a business model, these costs are already taken care of by the restaurants. The restaurant has ensured the customer has already bought 5 coffees or 5 pizza slices, so the restaurant can give away the 6th one to reward the customer. Here, the discounting tool (about 10-16%) helps the business and there are repeat customers.

    You are correct when you say, the Groupon sale costs the merchant upwards of 70%. When a restaurant signs up with Groupon, they agree for Groupon to offer a certain number of coupons to be validated, when bought by customers. For example, Groupon offers coupons worth $20 for $10. The customer pays only $10 for the coupon. They then bring in their coupons to have them redeemed for a 50% off on their purchase. The restaurant then collects only half of the money ($5) for each coupon redeemed from Groupon, as, Groupon takes the other half as their costs.
    In essence, a restaurant selling food for $20, Groupon reimburses the restaurant only $5. Now, if this outlet is franchised, the restaurant has to pay the franchisee fee, about 10% of the sale ($20) to the franchisor. The restaurant is left with $3 or only 15% of the sale money.

    Here are a few pointers about the Groupon/discounting scheme.

    1. Receiving 15% of sales, does not help restaurants in recovering even basic food cost.
    2. Most (over 90%) discount customers don’t come back unless they get a discount again.
    3. The customer’s perception of value about the restaurant is not on the actual product (food and service) but, on the amount of discount they receive.
    4. The restaurant has incurred an irrecoverable cost that it tries to recover, by repeating the same failed attempts; spending on marketing/ promotions/ discounting. This invariably becomes a vicious cycle.
    5. Some restaurants lower the quality of food/service and are soon out of business.

    I love marketing, but marketing a restaurant has to be very specific, that it enhances the value of the product (food and service) in the consumer’s mind. Restaurants are part of the hospitality business, wherein consumers pay for both, the food as well as good service. In marketing terminology, it is a combination of both a tangible and an intangible product. When a customer pays for great food and experiences great hospitality, the experience is embedded in an emotional part of consumers mind. This is a key part of our business. I would use a discounting tool only in very specific marketing situations and would rather use the money to provide better training to staff, enhance quality of product or service to customers. Word of mouth is the best form of advertising.

  3. Hey Clay,
    The things that really disappoints me is the “one night stand” aspect of it. I would love to see a company like groupon actually help local business become more efficient. To some degree yelp accomplishes this, at least to the degree that I can see what is in my local area. However, I would like wider window into local businesses than yelp provides…what are your prices (?), what promotions are you running currently (?), can I order online and pick up in the store(?). This is what groupon should be…a logistics system that gives a small business the reach and functionality of something like bestbuy.com.

    Instead, as you note, its just a one-off promotional trick…

    1. Greg, what you stated is exactly where the problem lies. And it’s not just a Groupon issue either. Any retail lead generation promotional campaign will run into the same problems. What happens when the influx comes and how do you convert these people into return customers.

      Groupon is not set up to do this. Influx management is a customer service and production function, one that would probably involve outside consultation. Customer revisitation involves the same as well as a well thought out 1:1 marketing effort (on that I’m working on and have been for four years).

      Groupon over-scaled. They’re too big. Maybe they could role out a pilot program in a couple smaller markets, but I don’t think they have the expertise to pull it off. Plus we’re not even talking about the other issues I brought up. Their business model does not seem to prioritize the well being of the businesses they supposedly serve.

  4. Pingback: The New Thrifty
  5. Clay – I like your perspective on Groupon and (I’m assuming), all of the other group buying sites that have popped up in response to Groupon’s success.

    My perspective comes from being a baby boomer who looking to keep up a healthy, balanced lifestyle, who is writing a blog that focuses on group buying, discounts, and upscale sales of all sorts, called The New Thrifty. There are many times I have mixed emotions about all the consumption and I don’t go anywhere near the incredible swarm of mommy bloggers who are obsessed with grocery coupons, who court sponsorships and swag and put themselves firmly in the pocket of the Disney’s and junk food manufacturers. But that’s a whole nother topic…

    Often the deals of the day (and I aggregate the major group buying discounts daily) don’t come up to my standards. How many laser whitenings, and pizzas can you take? By following them all, you can see how often their ad sales teams fail,offering the same deal for more than one day or across several cities. The market may be getting saturated.

    My analogy is that following the daily deal purveyors offers the same “thrill” as mining for sapphires. You come up with a lot of dreck before you hit on the half off membership to the Philadelphia Academy of Art or the Chicago Historical Society, or hey, $4 movie tickets (reg $11). Writing the blog has been an education for me and I’m not all that pleased with some of what I’ve found.

    1. Thanks for the perspective Karen of one who’s actually in the group buying world. You bring up a very interesting point. There seems to be a lack of thought into the macro feel of the overall Groupon experience. It seems like they just turn their reps loose to sign-up whomever they can. And if they have an open day – then they throw in a national account.

      My first year out of college I had the opportunity to spend a lot time with a good friend of mine who was setting a barter network. Much attention was put into the future makeup of the network once it was set up. There was only a certain amount fine dining restaurants, a certain amount of clothiers, etc. They were essentially mapping out an entire consumption experience based on barter. And since Terry lived entirely off of barter points (that was his compensation) the experience was personal. This is something obviously not being done at Groupon.

      Wonderful comment. Make sure this isn’t the only time I here from you 🙂

  6. Maybe I shouldn’t comment I things I don’t fully understand. The whole “coupon” thing is only just beginning to take root here in Australia and I only know about Groupon from what I hear in social media. That having been said I can’t see why you have decided to single out this company in particular for its involvement in conspicous consumption. The whole global economy is geared towards consumption. From what I understand Groupon just offers a few discounts along the way.

    Businesses of all sorts, local and global, are going to be shut down as a result of trends in technology and new businesses will emerge in their plece. Groupon might be one of those trends or it might be a short-lived fad.

    1. Thanks for the comment Paul. You make a good point: Why did I pick on Groupon? Well, maybe it’s because it’s because they’re by far the biggest of this new coupon wave. I agree with you that the world is geared towards consumption. But that doesn’t mean I have to like it.

      My idea of responsible marketing, is marketing that benefits both the consumer and the business. I don’t see a whole lot of benefit to the consumer in any type of shotgun marketing. I believe responsible marketing is such that respects the consumers time and attention as well as “just saving them a couple of bucks.” I believe you do this through 1:1 marketing, not pushing any product they can get their hands on like Groupon does.

      The second part of the responsible marketing equation, is that it has benefit the business. I do not believe this is case with Groupon. A sudden influx on traffic, which often the business is not prepared for, seldom translates into lasting customers. All that normally happens is discount shoppers will come in for cheap deals never to be seen again. And these discounts aren’t cheap for the merchant, often costing them upwards of 70% of the purchase price.

      I don’t know if I hate Groupon, or just hate what they represent … a discount, “cheapest vendor on block,” business model. In my “Perfect World,” I want to do business with those companies that know me and value my attention and time as well as my money. And believe it or not, I think there’s a whole lot of people feel the same.

      Great comment though Paul. It got me thinking.

      1. Clay, I agree with you sentiments entirely. I tend not to like big business for the same reason people dislike “big goverment”. I would rather see a range a facebooks for people to choose from rather than one big one. Some might say this in inefficent and that in this example we’re best served by one big Facebook linking us all together. However, this gives that company enormous monopoly power that probably can only be mitigated by a range of competitors. I’m wondering if your current distaste for Groupon lies somewhere in this analysis.

        In time, if you’re right about what people value we’ll see businesses emerge that cater to these tastes. Personally, I think discussions on forums like this will only hasten that time.

        1. Interesting you brought Facebook in this discussion. While not hating them, its preoccupation with trying to be everything for everyone is extremely distasteful to me. When a firm, or even a person for that fact, goes down this path – they end up doing a poor job at everything. To effectively tackle any issue, even marketing, we have to take it down as individual as possible, rather than trying to solve it from an aggregate perspective.

          This is why I believe the future of marketing will lie in focusing on local – and not from a consumption but also being “good corporate citizens.” A company that shows they are part of the community and truly care about it and the individual plights of its residents will succeed.

          This is where I believe the opportunities in business lie … not in the “larger than large,” “too big fail,” corporate monoliths that much of the business world chooses to emulate.

  7. Hi Clay,
    Saw this linked on Twitter… You’re not alone. I still see Groupon offers pass by in my FB and Twitter streams, but ignore them b/c I just don’t want that company to have any of my money, even if they’re “saving” me money.

    Why? Because they are hurting communities– I don’t want to think of small business owners as “lemmings…” most of them are just doing the best that they can… but if they use Groupon that certainly doesn’t help them contend against that reputation.

    I wrote a brief fantasy story about it here: http://www.briancrouch.com/2011/01/a-groupon-tale/

    1. The more I think about it, maybe I was too hard with the lemmings description. But gosh, we have to break this “me too” approach to small business marketing. If it means offending a couple people, to get them to open their eyes … then so be it.

      Concerning your other point, supporting local business – I didn’t even think about it from that angle. But I should have. I’m even starting a loyalty marketing firm which focuses on locally owned businesses rather than chains. Everything is about supporting local business whenever possible. Three times the money spent locally stays in the community versus in chain stores owned elsewhere.

      I could go another rant, but I’m going to save it for a different post. Thanks for the comment Brian – I look forward to more from you down the road.

  8. Thanks Clay. I enjoy reading REAL commentary on Internet events, and yours is as real as it gets!
    Groupon (in my view) did us Google fans a favor in not accepting the offer and I hope it taught Google a lesson.
    The shotgun approach (or the splatter test) is wasteful.. but it’s only a matter of time before they combine that available data on us.. and start to send more targeted (but STILL unwelcome) spam our way.
    I have a Utopian vision of my own, and I daresay it would be much more appreciated by the cyber world than this present system.
    p.s. I know.. link isn’t working.. yet.

    1. You know Tim, I never thought about the Google angle, but your right. I’m a big Google fan myself (almost as big as Apple :-)) and it would have sucked to have to bail out of gmail and change all my email addresses. Keep me posted on your Utopia project. Thanks for the input.

    1. Thanks Kristen. It’s interesting that the “one night stand” connotation kind of just came out without much thought. That phrase has also been retweeted several times to describe the post. I guess you never know what’s going hit peoples’ nerves.

      1. the ‘one night stand’ really read to me too.,
        I copied that one down, I am currently in a
        disagreement with head office of which I am a franchisee. They would like to run a groupon and I am deadset against it, I will use that saying as an argument, thanks

        1. Diane – I wish you luck. Thanks for the props. I don’t think you want to put your franchise in the discount loop. No good will come from it.

          I believe the way to go is good old fashion service. Check out my post on that. “The death of a salesman” – http://bit.ly/9ulB6B

          1. @Diane I am with Clay. My post earlier, explains how it does not work out for the business. In addition, the marketing techniques in this scheme are not intelligent. The cost incurred to bring in customers with deep discounting, does not bring back repeat customers as intended.
            Deep discounting is used in specific situations such as;
            1. The product/business is new/a luxury product and the discount tool is used to bring in new customers to try the product or, spread awareness.
            2. Deep discounting is used in Revenue Management of intangible products like airline tickets and hotel room bookings. This pricing technique helps achieve break-even faster and increase profitability as demand increases.
            3. Done intentionally to chase away competition. (Pricing Leadership)
            4. Done to ‘create a barrier to entry’ for “new players” in the market.

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