(emphasis added)

I’m not sure if you are still doing the series on daily deals on TechCrunch.com but I figured some of my experiences as of late.

This is from the perspective of pure user experience, and I have not tried to promote my business on Groupon either. I think you are mostly interested in the business owner side of things, but I figure that I, and maybe others will join in as well, to give you some material for a story.

I also want to clarify that I do not want to bash any of the local businesses here, but facts are facts, and in some cases it is not good practice by the owners. I am not sure whose fault it really is, so I’m not going to try and point fingers, but rather elaborate in the next few paragraphs on my experiences with local businesses, which offered discounts on Groupon.

My first negative encounter with a business that was featured on Groupon was a beer festival here in Houston. They completely overbooked the event, and even though free entrance and a t-shirt were offered, neither was “available” at my arrivaldue to the huge amount of admissions to the event. [ related news story: Houston Beer Fest Outsells Its Venue by 8,000 Tickets; Attendees Furious ] I would consider this somewhat of a success for the business, but bad for the customer who had to pay “full price” for the Groupon but got nothing in return. It was rather disappointing to get such a bad treatment, considering I had to drive over 90 minutes round trip. Luckily a few days later, Groupon stepped up and refunded the purchase price in full, to sooth the unhappy customers, I guess. After all I managed to get out of this deal with not too many expenses on my end. Bad experience No. 1 :(

The second experience was the fault of the manager of a local Quiznos restaurant, for not providing the proper training to his/her employees. Upon arrival with my groupon on my Groupon app, I was told that I can not redeem the Groupon just yet, because the manager didn’t program this into the register yet. Considering that I waited a few days after the deal close, to go redeem my Groupon, I was quiet surprised by this answer. A few days later I left to travel, and was not able to return to the business before I again returned from my travels 5 weeks later. Upon going to the restaurant again, the employee first said that I need to have a physical printout to redeem anything at their locale. I insisted though that a printout is not necessary, since I have all the necessary information on my device, and she can write down all the information in order to redeem my Groupon. After a rather lengthy discussion, she took my information and compared it to a list that she had hidden under the counter. This makes me question, why I was given false information about the Groupon in the first place, and then why I needed to have a discussion in order to get my “price”… I ended up with the punchcard, but wasn’t too happy with the customer experience in general.

My third, rather unpleasant encounter with a business, featured on Groupon, wasn’t really an interaction with the business itself, but rather with an email from Groupon, stating the the business had gone out of business and hence will not be able to offer the Groupon after all. This email arrived rather quickly after I had purchased the Groupon, but I don’t remember the exact timeline anymore. Groupon gave me a full refund, but considering I dished out $99 in the first place, I decided to place my orders rather on the safe side in the future. This decision has changed in the meantime as well (but I will come back to that later).

My latest experience, which happened today wasn’t terrible, considering I got pretty good food, but I am not so sure about the rules that were set. I rather explain: I had a groupon for a local bar & restaurant, and I printed out the coupon out by accident today, and hence I brought it along with me. It was a restaurant where you had to order at the cash register and then someone would bring the food to your table. Sounds okay, nothing bad about the system here. But at the cash register it also had a sign saying that any online coupons, need to be in print (according to Groupon it can be in print or display in one of their various apps) and a gratuity of 18% will be automatically added. It did not mention any of this in the rules, and I understand that tipping is supposed to happen either way, and not on the discounted price, but rather on the original cost of food. Generally I would say that im a rather generous tipper, usually never under 18% and most of the time between 20% and 25%. In locations, where I have to go to the counter to order the food and wait until someone brings it to my table, I usually dont give more than 5 to 10 %. I understand that this business did this “drastic” move to require the gratuity to protect themselves, but it did not state any of this in the rules on Groupon at all. The link to the Groupon can be found at this link: http://www.groupon.com/houston/deals/beaucoup-bar-and-grill

I am rather upset about this kind of practice. Yes I have read in your stories about people who do not tip, or only tip on the discounted price, and I dont think that is fair to the waiter. But simply bringing out food, does not constitue 18% in my opinion. The question now is who is at fault: Groupon for not specifying stricter rules for the customer, that a business can set itself, or the business for making up their own rules, and not being “controlled” by Groupon once the deal has run. I do not plan to contact Groupon regarding this matter, since I was more than satisfied with the food at this restaurant, but I do not condone this kind of forcing of tips.

In total I already redeemed 10 groupons and 2 of those were for a concert/movie, hence not really applicable in the sense of being local businesses. The other 8 experiences were rather positive and I was not treated differently even though I mentioned that I have a groupon right at the beginning. This might look terrible now, since the paragraphs about the “bad” experiences are so long and the good experiences only get a very short paragraph, but if im happy about something, I’ll just enjoy it and recommend it to my friends.

I still have about another 15 groupons left, but have not purchased any groupons in the past 4 weeks, and do not intend to further do business with Groupon. Even though I find it a fantastic idea, the terms for the local businesses are most of the time so bad, that I do not want to hurt them. After all, where am I going to get food/other services, if everything in a radius of 5 miles is out of business??? (Yes, i know that im exaggerating)

Again, I don’t know who exactly to blame, but considering I did the initial business with Groupon, it is my belief, that they should “take care of me” as well. Reading from your previous stories, it might be a problem of the local business not expecting as much publicity and then trying to protect itself but creating these different “barriers” for customers with Groupns.

Anyways, I hope this will help you create future content for your stories, and if you do have some more questions, please feel free to ask me anytime.

Best regards,
Toby Berster

I received this email from Johny Miric of Energy Clinic in Hamburg.

This is a long post, but well worth reading for anyone interested in the workings of Groupon. It shows a long history with Groupon and it does a great job balancing the good and the bad. It also shows some of the broader economic impacts of Groupon on the small business ecosystem.

The email is presented unedited, with the exception of typo fixes and a few changes to adhere to U.S. conventions. (e.g. 2.000 to 2,000)

My summary:

  • The spa used Groupon to fill holes caused by drop in demand while the hotel the spa was in was under renovation.
  • Johny extensively negotiated with Groupon and pushed them for better deals. Although Johny asked me not to publish his commission to Groupon, I can say it’s less than the typical 50/50 split. His prominent location helped with that.
  • Groupon customers pay less, demand more.
  • There was a lot of organizational confusion at Groupon.
  • He aggressively tried to get contact information for followup.
  • He saw lower return rate for Groupon customers than what Groupon stated.
  • Groupon expanded the market of people willing to consider spas in the area.
  • He believes that in the long term, discounts need to go down for it to be sustainable for businesses and for Groupon.
  • Groupon has created a new, lower pricepoint in the mindset of consumers that is hard to change.
  • Increasingly, Groupon customers are tourists. This all but eliminates the chance of repeat business and runs counter to the value proposition that Groupon puts forth to merchants. He believes that Groupon should restrict these purchases.
  • Johny was able to negotiate to keep revenue from unredeemed Groupons. That is generally the case in the U.S. and Canada but is not typical for the rest of the world.

(emphasis in original; emphasis added)

I’m co-founder of Energy Clinic, a wellness center in hotel Atlantic Hamburg

I started using daily deal sites in beginning of 2010, our business was bit on rocky road, mostly due to problems with our hotel where we are situated which was undergoing big renovation and we noticed big drop in business. I was preparing all of us for a tough year.

First we did 2 small deals with Daily Deal, sold all together 50 pcs, than I went with CityDeal (acquired by Groupon few months later).

First deal with Groupon went really well, we sold over 240 pcs and I was very impressed. We are small wellness and usually we sell 20-30 vouchers a month so this was big deal for us.

Regardless good sale my first experience with them was quite mixed, they really showed huge potential, unlike anything else, and I do have lots of experience with Adwords, Facebook Ads etc, but they also showed enormous organizational confusion. I wasn’t sure whether I should continue or not but they were very keen to keep us because we had one of the best addresses in town and we were selling 3-4 times more than any other wellness. This made it easier for me to negotiate and push them a bit to make some changes and I can proudly say that many of major system improvements in early stage were probably coming from my initiative. I used to tell them that they are running a cowboy business, an expression which they used often those times, admitting that their system is far from perfect.

So what were their main mistakes in beginning? I will just name few of them:

  1. Total confusion with codes, sometimes they will issue several vouchers with same codes and we get paid for one only.
  2. Their email confirmation to costumers were not good enough, I insisted to add business address, map etc.
  3. Payments were late, incorrect, didn’t match with codes etc.
  4. After we would sell couple of hundreds vouchers they would provide us list of codes in PDF, totally unusable, so I demanded for excel version.

and many, many other things

All these things by time got improved but the worst for me were the provision [commission] conditions.

In beginning was relatively fine but than on each next deal they would come with higher provision and asking for more discount. Also the fact that they keep money from non-redeemed vouchers was for me unacceptable. By time I manage to get things in some normality and I was able to make profit on each deal which was most important for me because customer return rate, which they claim is really high, was actually very low.

In meantime I upgraded my booking system so I can accept online bookings so each Groupon costumer was directed to make reservation online. This saved us awful lots of time and on long term it paid off really well because I was able to start shooting my own deals to over 2,000 new email addresses 12 months later.

But then came one very upsetting moment which almost made me quit for good. I don’t want to go into details here, I can only say that involved sudden change in the way how they calculate tax and they were covering it as administrative adjustment. They also told me that this will not affect my income because I would get money back from tax office. I checked the whole thing with my accountant and he insured me that this is not the case. After few days of hot discussion with their CEO I manage to get full amount for my deal but I was very careful from that point and I insured them that one more incident like this and I will stop cooperation.

I’m not sure what actually happened there, maybe a forced order coming from USA, so I can’t really say they were trying to cheat us but definitely they could use more sensibility to apply those changes. This was cowboy business on its peak.

Then, to mix things around, I decided to give Groupon a little push by doing something they hate the most, I did a deal with Daily Deal! Oh boy, how that worked. They called for meeting next day and sales person even brought a co-founder to help out. At that point game changed a bit and I was able to bring provision back to some kind of normality. It was not ideal but I knew soon all this craziness with daily deals will settle and merchants will be able to negotiate better deals. My target was Christmas because I knew we can sell tons of vouchers and redeem rate will be very low because most of them will end up as presents, and you know what happens with most of the presents, they just go into the wrong hands :-). It’s just how the voucher game goes during those times.

I have to say that sales representative did really good job and he was taking care a lot about us. He is what sales person should be, making sure that it make sense for both sides. Problem was that many situations were completely out of his hands and he felt few times bit uncomfortable with it but we always manage to find good solutions. Sales people here have double or triple pressure, they have to handle demands from management plus additional control from USA which is even more demanding. At the same time they have to make merchants happy and provide good deal to the users. It’s very hard job and many times I felt I should offer my sales guy a massage before we start talking because he looked finished :-)

After Christmas I went bit slower with deals and decided for every three months pace and not every 6 weeks. Renovations in our hotel were finished so we had more “normal” clients coming in.

So in the end what can I say, Groupon saved our ass when we really needed, they did loads of mistakes, strange maneuvers and many things were simply not transparent but we manage to stick together, probably only because of our sales representative who showed good skills to balance things and find good solutions.

Since this month we have new sales person and will see how that will go. I have put deals on hold for some time, I want to be sure that my business can handle it, but I’m not even sure whether I want to do it at all. Since January I started my own Last Minute deals,www.energyclinic.de/special, it works quite well and it’s filling the holes in our bookings exactly how we want.

I have to say that by being in hotel our situation is bit specific, no matter what, we always can count on business from hotel guests, paying full price. If my business is on the street I don’t think I would ever dare to do 10 deals within 1 year, it would destroy our existing clientele.

The good thing about daily deals is that they expanded all markets. If before Hamburg had 20,000 people going for massage once a month (guessing) now that number is probably 40,000. We got so many people who came first time for wellness treatment. The bad thing is that those kind of people are the biggest complainers, they demand a lot and rarely buy anything else beside their deal. I call them deal hunters. For comparison, our hotel guest who are paying full price almost never complain and they are happy to pay their price. What is also not good is that nowadays it’s almost impossible to sell anything locally if it’s not heavily discounted. This really worries me and I’m thinking of switching my business completely into high level service, targeting top society only and ignore masses. There are people who are willing to pay even 150 € for good massage, deal hunters are not willing to go over 50 €.

One more problem is emerging and these are tourists. I also now have a habit when traveling to another city to buy few deals, specially for restaurants, and save couple of hundred euros on food during my stay. The problem is that very likely I will never come back to those restaurants. I’m noticing more and more tourists booking treatments with us over Groupon. I could say that maybe 5% of all vouchers are coming from people from other cities and countries. This number will only increase once people get more familiar with whole concept.

I think that Groupon should regulate this and maybe put additional charge if you are buying a deal which is not from your city. Their iPhone app have “Now!” option which gives you opportunity to buy coupons and use it instantly. This kind of things will be used heavily by tourists and I don’t think that any business will benefit from those kind of clients.

There is also big difference if you are selling premium service, like massages in 5 star hotel, or you are selling mainstream services like average quality restaurants and wellness. By general rule, Groupon attracts “cheap” clients, these people are not familiar with high class service and they have no intention to ever come back unless you don’t give them another massive deal. It’s one time experience for them so they can tell their friends and family that they did something very unusual.

Because of all this I insisted to make profit on each deal and not just perform massive marketing with very low return rate.

I did all these deals because I had too, our business was jeopardized but my wife hated to give such silly discounts for one of the best massages in the country and I had to persuade her to handle it for some short time until our normal business comes back.

My main suggestion to every merchant out there, if you really want to go with daily deal sites than please invest some money into booking system like Spa Booker or Open Table. Otherwise you will kill yourself with work, your phone line will be fully occupied and, what is the worst thing, you will have no means to get those costumer back because you didn’t collect one single email address and you will have to go back to Groupon and buy traffic again. And this is exactly how I see Groupon at the moment, an email store. I will run maybe 2 deals a year, collect maybe 1.000 new email addresses and if I manage to keep 3% of them as regular clients than I can say it was successful.

A good booking system also helps you to run your own calculations on how much bookings you can take so you can avoid any surprises.

If you are doing deals often make sure that you are making profit on each, don’t just do marketing forever, you will eat your own legs like that.

I hope this will help people to understand more how it works from merchant side. Each story is different and we all have different conditions, I was lucky because we are situated in hotel, wellness business is relatively stable in those places, and I realized very early that booking system is the key and that Groupon is willing to be flexible to keep us, not just because of our premium address but also because of our ability to deal with any amount of sold vouchers. Being very well organized is crucial, otherwise don’t do it.

Also conditions which I pulled from Groupon were very unique. Many, many times Groupon told me not to tell anybody what kind of deal I have.

So why I’m telling all these things now (and actually I didn’t share exact details, we are still business partners and I respect that)?

I think it’s time that we, merchants, say that it’s enough of this crazy discount game and that we put things into healthy perspective. I want to be able to give maybe only 30% discount and I don’t think that any deal site should take more than 25-30% provision. Everything else is unsustainable for us and for Groupon in the end because they will not be able to make enough contracts with high quality merchants.

I always told them that they cannot treat every merchant the same, they have to build certain scheme and adjust provisions according to sales, product quality and discount. I made one for myself and I use it every time I negotiate with them. They always ask for more discount but the point is that in that case only they win while merchants get less money on each coupon. If they want more discount than they should lower down provision. They have to show more flexibility.

So there it is, a love-hate story between Energy Clinic and Groupon. When put all together I can say it was successful and Groupon have been proved as useful marketing channel but only if you put lots of effort, making sure that everything works, make proper calculations and you collect those email addresses. It was definitely a fun ride, we learned a lot, we upgraded our systems for handling higher volumes and I have to say 2010 was our best year ever, in revenue and profit, although in beginning of the year I thought that we might even go out of business considering hotel renovation. But it took awful lots of energy to keep everything going, our staff was on the edge of nerves and strength and I don’t think I want to go through that again.

Dealing with big masses is exhausting, can be very thankless job and it brings tons of problems. I’m not a person who runs away from problems but if I have a choice serving masses or just serve handful of extraordinary clients I would always go for latter. Groupon is not very suitable for high class services, it’s just not in their DNA. Like Google and social media, same thing :-)

I hope one day there will be a deal site for wellness similar to http://www.jetsetter.com, an awesome site for hotel deals.

We will use our experience and new upgraded system to do things on our own now and take Groupon more like a side thing but they have to go down with prices and I encourage every merchant out there to be brave and demand better conditions and don’t just dance on their music which sounds like beautiful symphony because it can turn out into dramatic piece if you are not careful enough.

If we continue with daily deals at this pace we are seriously putting in danger all our markets, no matter whether is wellness, food, entertainment … But I do believe that everything in life gets balanced so will be with daily deal sites. So don’t panic and dig your heels while you negotiate your next deal, let’s put this runaway gorilla in control :-)

For great power you need great responsibility. It’s applicable for both, Groupon and merchants :-)

For comments or questions please contact me over Twitter, @johnyqi.

Johny Miric.

Energy Clinic Hamburg

www.energyclinic.de

Here’s an email I received from Gerald Morrow, marketing manager for Buffaloe Lanes.

(emphasis added)

After reading the article on TechCrunch about Groupon and Posies Cafe, I just wanted to let you know that there are some good things that come out of Groupon for some businesses.

We have run a Groupon twice in 2 years and both times, we have been successful with it.  It has helped drive traffic in our doors and has helped us reach customers we may not have reached.  Now I agree that Groupon is not for everyone and I would find it hard as a coffee shop or a restaurant to make it work because of product costs.  As for Buffaloe Lanes, we are 4 family owned bowling centers and our product is bowling.  From our stand point, we were looking to get people in the doors during our slow time (April – September), when people are not really thinking about bowling because of the weather.  We would rather have people bowling at a discounted rate during this time, then not at all.

Also, since Groupons are purchased mostly by women, we are banking on a majority of our Groupon purchases to be mothers with kids that are looking for something to keep the kids busy during the summer.

Once in the door, we gather information by offering these customers a chance to join or frequent bowler club to receive discounts and specials.  We also make sure the staff is in the mind set to sell our other services, especially birthday party packages.

By no means am I defending Groupon and I could see how something like what happened to Posies Cafe could happen to any business that is not informed and creative with all the on-line marketing options.

Some follow up Q&A:

What was the sales process like with Groupon?

As far as the sales process, it was painless. We had our deal ready to go and once we were in touch with our sales representative, we were able agree on a date to run our deal. Once the deal ran, it spread like wild fire and people started coming in right away (even though it says to wait until the next day), but we honored the Groupon, just for good customer service on our end. Before this deal, Groupon loaned us iPhones to use at our locations for redemption and this was a huge help, especially with people coming in right away.

How much spare capacity do you have during the summer? Was Groupon able to fill it?

Summer for Buffaloe Lanes, like most bowling centers across the country are slow. With the weather being nice and summer leagues not being as big as the fall or winter, the center has to work to get people in the doors. Between all 4 locations, we have a total of 130 bowling lanes waiting to be used, and since the lights are on and the staff is working, we would rather have people come in at half the price, then not at all. In short, we have a lot of spare capacity during the summer season, especially during the days and our Groupon has helped with that, since stay at home moms are looking for things to keep the kids busy.

Our key is that we have other coupons and specials that are not better than the Groupon, but will attract the Groupon customer to come back and join us again during the summer because it really isn’t as expensive as they may have thought. Also, the staff at all of our locations does a great job encouraging every customer to join our frequent bowler club, which in turn adds some of these Groupon customers directly to our e-mail database. Now we can keep them coming back with e-mail coupons and exclusive frequent bowler specials.

Groupon helps to fill our slow time during the summer, but it is just part of our marketing plan. No one thing is going to be the magic answer to drive traffic and sales, but by using Groupon as a portion of our marketing plan, we are able to keep our summers busy compared to years past.

Was the offer restricted to the summer months?

No, our offer had a 6 month window. We ran our offer at the end of April, so that our expiration date would be towards the end of October, just about a week after our local state fair. We wanted to make sure that the Groupons expired before November & December because those month are our extremely busy times with the holidays and the weather being cold. Also by September our fall leagues are back in session and the guaranteed daily income is there again.

Were Groupon customers different from your regulars?

Groupon customers for the most part were just regular customers. Many of them had not ever been in our bowling centers and some had been bowling but not in a very, very long time. Again, our staff impressed them with great customer service and educated them on how bowling is affordable for the family, even without a Groupon. Our goal with Groupon is to get people in and then make them a more frequent customer! Like any promotion to get people into a business, you have to have a plan to make that person become a fan of your business and inform them on a personal level on how your business has something specifically for them. It is all about relationships and Groupon brings in the new customers, but it is the planning and training of the staff that allows for the relationship to grow with
the customer.

Did you see a lot of repeat visitors from the Groupon?

We actually do have a good number of Groupon users come back and join us. Again, it is about educating the customer on your business and building a relationship that keeps them coming back. One thing we have looked into doing with our Groupon customers, is giving them a bounce back offer for using a Groupon. This gives us a second chance to build a relationship with the customer.

We have been successful at booking birthday parties from Groupon customers and even get some league bowlers. Just one or two league bowlers, can make the entire Groupon process well worth our time and discount because it becomes a long term investment.

Did you see a lot of existing customers come in with Groupons?

For Buffaloe Lanes, we have 2 groups of existing customers. Our league bowlers, who bowl in a fall, winter and/or summer league, and receive half-price bowling during their season. The Groupon deal is structured in a way that it is not worth it to them to purchase the deal. The second group is open or casual bowlers. These are people who don’t bowl all the time and just do it for fun and recreation. For them, the Groupon is a good offer but not a great offer, since most of these bowlers are already part of our frequent bowler club and they receive discounts and exclusive offers on a regular basis. Some of them do purchase it and that just brings them in one extra time, since the average casual bowler only comes in once every 6 months. In this aspect, we hope they will have a great time and our staff can encourage them to join us for an upcoming event or special to keep them coming back in on a more frequent basis.

All in all, Groupon worked for us but it has only worked for us because we use it as part of our marketing plan and not as our only means to get customers in the door. Again, the lights are on and the staff is at the bowling center and for us the only way to make money is to hear the pins being knocked down.

Did you have a cap on your deal? If not, did you know you could have one?

We didn’t cap it but did know you could cap it.

It sounds like you initiated the contact to Groupon. Is that correct?

I had started looking into using Groupon before they were ever in the Raleigh area. After months of e-mail and phone conversations with a Groupon representative in Chicago, they finally were working on lauching in the Raleigh market. With that being said, we did initiate the contact with Groupon and ran a deal their first year in the market.

Would you run another Groupon or run a deal with another site?

Yes we will probably run another deal with Groupon because it has been successful and easy for our staff to handle. As for running with another site, we really would rather stick with what is working since the process and everything is something our staff is accustomed to. As for those that say, we should run on other sites to reach more and different people, our school of thought is that there are new people being added to Groupon’s list everyday, so we are reaching new people. For example their list in our area more than tripled during the time in-between our first deal and second deal, which was about a year. Also most people that are looking for deals are registered with all of the sites (Living Social, Twongo…..etc.). So why run on multiple sites and seem desperate to those people that receive these daily deals from all of the other sites. Sometimes less is more and running a deal less frequently and leave people waiting for your next great deal!

Did you do the standard 50/50 split? Did you negotiate the deal?

As far as the negotiating a deal with the Groupon representative, it can be done and I would encourage anyone running a deal with any similar company, to negotiate! It is just like any other form of advertising, where a sales rep want to make a sale and you want to do an ad, but you really don’t like the initial price. There is room to always make a deal, so do your best to make a deal that is acceptable to you and will work for your company. As for our deal, I am not able to go into any kind of details but I can say that we were able to come to an agreeable deal that worked for Buffaloe Lanes and for Groupon.

Keys to success:

  • A high fixed cost, low marginal cost business. The primary costs are rent, power and staff, all of which have to be paid regardless of whether there are people bowling.
  • Deal structured around off peak times. It wasn’t offered in the dead of winter, when it might displace full-priced demand.
  • Aggressive acquisition efforts. Bowlers were encouraged to sign up for email lists, join the frequent bowlers club and were given offers to come back.
Gerald has a great story. A lot of businesses could learn from his example of how to optimize their Groupon runs.

Hello,

Thank you for a wonderfully informative article.  As a photographer I have watched Groupon offer several different photography deals.  The one which others and myself have long criticized is the sixty minute portrait session for $50.  In a large city, we’ve seen 1500 of these sold which points out another problem with Groupon.  The failure to consider the capacity of the merchant providing the service.  Looking at the deal from one view point, it would take the photographer over 9 months of working 40 hour weeks to fulfill the 1500 deals.  That’s assuming they are booked solid for an eight hour day.  But that rarely happens.  There are gaps in the schedule and people show up late.  Next, an hour session, requires prep time and even the barest amount of post production (if only to prepare a disk).  In reality, it will take much longer than 9 months to fulfill all those outstanding obligations.  What happens when the coupon expires and it has not been claimed due to the merchant being oversold?  Either Groupon has to issue a refund or the merchant will honor the coupon past the expiry date.

Now let’s take a look at what the photographer gets.  A friend of mine just offered group photography classes.  So I can use his numbers.  First Groupon wanted a 50% commission off the top. Next, the merchant was responsible for the credit card processing fee which was around 3%.  I’m not sure if Groupon is marking up the credit card processing fee but it would not surprise me.  In the end, my friend received about 47% and Groupon received 53% of which they claim 3% is for credit card processing.

Going back the the portrait photographer, all this means they are working for $23 an hour for the session.  But that does not cover all their expenses, overhead etc.  If the photographer spends any reasonable time on post production (editing photos, color/exposure correction, etc.), it can easily add another hour or two to the job.  Suddenly that $23/hour is $11.50 an hour.  After expenses, the photographer is not even being paid minimum wage (at least in Illinois and perhaps NYC).

Regards,
Howard Kier, Certified Professional Photographer
Magical Moments Photography

Thought this might interest you as an example of local deals gone bad.

If people bought this as pitched – 500 coupons available to “Treat him and the whole family to a game this Father’s Day with today’s offer…”, this 14 lane bowling alley would be smashed. It would be a HORRIBLE customer experience for full-price customers and discount customers. They’re likely to hurt their business with this offer if they get what they asked for.

To your previous point, why would you make an offer like this on a day that you might be already be busy (probably with folks that aren’t price-sensitive)? Looks like Google isn’t any better than Groupon at advising their advertisers in this regard.

Please treat this as anonymous. I work for a company that does business with Groupon, so I’d prefer that my name not be used in reference to these comments.

Keep up the good work on the daily deals space.

We ran 2 Groupons  the first in December for a Wine Dinner at our restaurant.  They are scheduled events so we can control how many guests attend at any time.  The deal was $30 for $65 tax and tip additional.  We sold 202!  Groupon split 60/40 with us.  Nice influx of cash we make a few dollars on the event but this allowed us to introduce many new customers to our restaurant and catering business.  Most were purchased as Christmas Gifts.
The second Groupon we ran was for our restaurant, again 60/40 split (we got 60 for this too)  It ran in early February with expiration date and not available for Valentines Weekend or for our $15 Filet Mignon Tuesday special.  Also this time limited the number sold to 200.  Groupon rep wanted us to run $20 for $40.  We were not comfortable with that since most guests can eat and drink without spending any additional dollars.  We agreed on $15 for $30.  Our concern was the same as most merchants guests will spend the minimum, take a table on a busy night, leave and never return.  I am sure some will never return but most all (that I can recall) have spent well over the $30 and have returned for dinner.
Overall we are very happy with our experience and would consider another Groupon in the future.  Its not for every merchant but great for us.
Happy to share this….
Robyn
Sagra Bistro
Sagra Catering
620 Main Street
Hellertown, PA 18055
484-851-3220

Comments:

  • Note 60/40 split
  • Business lowered Groupon value to encourage more spending
  • Business blacked out key dates

I’ve got about 10 yoga studios across the country who have done daily deals, almost all of them have done Groupon and a few others.

Here are some big takeaways we’ve learned from these service based small businesses:

  1. Better ROI than buying an ad in print. They love it compared to traditional advertising because they know how many units they’ve sold and how many folks to expect will come in.
  2. Learned from their small business owner friends. They’ve started negotiating terms and found workarounds to alleviate the flux.
  3. Converting leads to customers is key to stay in business. They use BizeeBee to track expiration of redeemed daily deal so they can re-engage with them, and we’re currently building more tracking to help them convert leads to customers.

Also here’s an email from one of our users who is a merchant in San Jose who did a deal this past weekend. Got a few more that are more compelling.

What I can tell you so far is that we have sold 425 .The offer ends tonight. We have had about 5 phone calls and 1 person has come to a class.

We did say that they must call to register before coming. This is because we want to steer people into classes and keep numbers down and open new classes if and as necessary. Who knows if people really will call before. We have told the teachers (who are all being very cooperative except for one who is not participating) that they can turn people away if they have not registered in advance. It will be up to the teacher.

Remember, our teacher’s pay an hourly rent regardless of how many students. They will make $3 per student and Yoga Fitness will actually make nothing except the exposure. We really are a different business model. We are relying on our teachers to do some bookkeeping for us as well. They normally show nothing to us as far as their attendance and this will be causing them extra work and possibly unpleasant situations.

It was a big decision for us. I think it can be potentially alienating to our current students but I think the majority will be understanding and supportive.

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