Tuesday, August 31, 2010

Running with Groupon Scissors

There I was, sitting next to the window and putting together some thoughts for a client proposal when, thanks to the magic of Tweetdeck, this came in from @kerrierio:

"U know what I love? Trying to book my @groupons & being told by the redeeming company that MY schedule is 2busy when they can't accommodate." 

This was all sorts of comically bad customer service.  Admittedly, I was not a proverbial fly on the telephone wall during that conversation and poor @kerrierieo was limited to 140 characters to vent.  Still, it was enough for me to comment this back to her:

"good grief.... bad service which shows they aren't doing good planning when they do these groupon deals!"

The e-ink had barely dried on this post and this post from last week and yet again, I'm presented with the frailty and the tragedy of the human condition: we love the bright shiny things but we don't fully think things through when we grab for them.  

We're in the rush for the business equivalent of lipo, boob jobs, facelifts, quick weight loss plans so that more people will like us and want to be like us.  Not only have we been running with social media scissors, we've been running with scissors.  Period.  We're needlessly throwing caution to the wind.

Just because a dress is on sale at Bloomingdale's doesn't mean you should buy it.  It might not be your size.  It might not flatter your natural coloring.  It may be too short.  Similarly, just because you can do a group discount offer, doesn't mean you should.  Just because the Gap Groupon offer went like gangbusters, doesn't mean the same will happen for you.  It might and I certainly wish for everyone's success but there's no guarantee that it will.

Even if you have the same level of volume, it also doesn't mean that you can afford the volume of Gap's Groupon.  And by afford, I mean not only the offer itself but also the operational changeup switcheroos you'll likely have to do to withstand the spike in demand.  It's an indirect cost of doing an offer which has to be calculated just like you've got to calculate the direct cost of the offer (fees to Groupon, half of the sales to Groupon and other terms of the deal).  

Remember this post from early August?  My point then was that group buying discounts that drive incremental foot traffic and, hopefully, repeat visits are like the Deal or No Deal game show.  We keep "opening the case" because we want to beat the bank.  But there comes a point in time where we "jump the shark" by opening too many cases resulting in losses and tweets from nice people like @kerrierieo.

And as I said then, the peer pressure we feel as business owners because our competitors are doing group discount offers is palpable.  We let panic take the place of process and we forget to understand our capacity, our inventory, how our current customers may be affected by the influx of new customers, how we introduce ourselves to new customers who've redeemed the offer, ways we try to retain the new customers who've redeemed the offer and so on.

Beating the bank in Deal or No Deal can be done just like beating the house in Las Vegas can be done.  People have done it before and people will do it in the future.  My point is that we should understand the risk reward ratio of the group discount, understand our tolerances, understand our limits and then craft the offer tied to for example: days of the week, hours of the day, staff members trying to build a book or what have you.

A cautionary note: these last couple of posts are by no means advocating an analysis/paralysis way of doing business.  Certainly, all business models are predicated on accepting some level of risk (competition, pricing, features, etc.) when one goes to market.  The material point here is that social media excitement notwithstanding, there is some benefit to letting cooler heads prevail and being surgical with how we market our products, services, businesses, etc.

What say you?  I'd love to hear your feedback!  And hang out with us on Facebook!


Parissa Behnia
Idea Chef



  1. I love this piece. The title is perfect. And you make excellent points about some of the real costs of "deals" to those participating in the offers.

    As my mother always said, "You won't be laughing when someone loses an eye." Those who think they'll be laughing all the way to the bank by participating in these deals without sufficient planning may well suffer the consequences of running with Groupon scissors.

  2. Thanks for the positive feedback, Erin! Greatly appreciated!

  3. Cooler heads will prevail and cut through all the clutter, thus recognize some of the classic marketing tools still work and build customer retention. Just ask Nordstroms.

  4. Thank you Jim! I guess I haven't had enough of the Nordstrom's Kool Aid. I recognize their customer approach is different but not enough to make it my #1 shopping destination. Also, in this economy, people are increasingly price sensitive so it will be interesting to see how Nordstrom weathers this storm.