The 10 Hidden Costs of Daily Deals

THE 10 HIDDEN COSTS DAILY DEALS OF I. THE WAVE > Customers rush in right after they buy their deals. This first wave of customers leaves your staff angry, your regular customers annoyed, and your new customers disappointed with their first experience. And then it happens all over again right before your coupon expires. → TIN 5 PEOPLE WHO BUY YOUR DEAL WILL REDEEM IT IN THE FIRST MONTH GROUPON TELLS MERCHANTS TO PREPARE BY ADDING: 5x Full-Time Employee 10 x Phone Line Website Separate Email Address to Handle Online Discussion Boards Inventory Capacity 2. CANNIBALIZATION > Groupon can't target deals to new customers, so you'll end up giving big discounts to folks who would have other- wise spent full price. There's nothing smart about that. 69% OF DAILY DEAL BUYERS ARE NOT NEW CUSTOMERS Not new customers RESTAURANT 63% FASHION 80% RETAILER Customers who would have visited and paid full price without a deal RESTAURANT 52% FASHION 60% RETAILER 3. REDUCED THROUGHPUT → Efficiency matters in any business. The more time your staff spends dealing with extra devices and paper lists, the less time they're spending delivering customers a great experience. If you sell 2000 deals that's 6000 minutes or It takes 3 EXTRA MINUTES to accept and verify a Groupon 100 HOURS OF ADDITIONAL LABOR At $10 per hour that's $1000 10 in hidden labor costs 10 4. REPUTATION DAMAGE NON-GROUPON CUSTOMERS (3.71) > On Yelp, Groupon custom- ers rate merchants nearly an entire star lower than non-Groupon customers. GROUPON CUSTOMERS (2.98) The total revenue lost for every star a merchant loses on Yelp, according 0 70 to a study done by Harvard Business School. 5. STAFF TRAINING COSTS → Here is just some of what Groupon suggests you do to prepare: THE NUMBER OF STEPS YOU NEED TO COVER WHEN TRAINING YOUR STAFF BE- FORE RUNNING A GROUPON. 1. Train staff how to input Groupon codes into the online redemption system, POS, or gather information using the Groupon Redemption Worksheet. 2. Schedule double the number of employees as there are phone lines for reception on the day of your feature. 3. Staff all employees for the first day your feature is valid and 85%-90% the entire week after. 8. Instruct staff to present Groupon customer with a bill that includes the pre-Groupon amount (circled) and then subtract the Groupon amount on the receipt. 4. Have a person dedicated to answering the Groupon discussion board (and all social networks if your company is active on those channels) on the day of the feature. 9. Reinforce to reception staff to gather as much contact info as possible, so you can remarket to these customers. 5. Train staff to ask for the customer's Groupon number at the time of reservation. 10. Distribute copies of the "What You Need To Know" flier. 6. Instruct your staff to ask about rebooking. 7. Consider an incentive for customers who book follow-up appoint- ments/reservations on the spot. 11. Meet with all staff and set objectives for the Groupon promotion. 6. DISPLACEMENT OF EXISTING CUSTOMERS → Already loyal customers are pushed aside by discount customers who take their seats. You've just angered / your most important customers and prioritized people who are unlikely to return to your business. 7. TERRIBLE TIPS 9%% THE EFFECTIVE TIP IF A DAILY DEAL BUYER ONLY 970 TIPS ON THE DISCOUNTED AMOUNT. 8. THE FRAUD → Merchants are often too busy to properly account for each daily deal they receive. Customers can easily make and re-use copies of their original coupons. There are even websites that tell people exactly how to 'cheat Groupon.' 9. RUINED SEO → Your daily deal may be over, but your Groupon will live on forever! Every time someone Googles your business, they'll see your old Groupon front and center. 10. LEGAL LIABILITY → Did you know that Groupons never expire? That means you'll need to keep a list of eligible deals forever. Do you really want to deal with Groupon customers five years after you run your deal? WHAT DO MERCHANTS THINK? It was effing ridiculous.we barely broke even. We were slammed. We were wiped out. Without doubt, the worst busi- ness decision I have made..i's been an absolute nightmare. - MEGAN TWILEGAR, PISTILS NURSERY - RACHEL BROWN, NEED A CAKE BAKERY We probably made money and we still wouldn't do it again because it was such a nightmare. ? ETHAN POWELL, EaT SAY NO TO DAILY DEALS. SAY HELLO TO WOMPLY. WOMPLY PUTS MERCHANTS FIRST Daily deals are bad for your business. Womply offers merchants the simplest loyalty program ever without the economic or operational costs associated with Groupon. Before you consider a daily deal, learn more at womply.com/merchants WE'RE HIRING We're leading the charge in local loyalty and helping merchants grow sustainably. We're hiring developers and account executives at womply.com/jobs womply SOURCES http://maxbeatty.com/blog/2010/04/-groupon/how-to-cheat http://www.forrester.com/rb/Research/myths_and_truths_about_daily_deals/qhd/60930/U2?src=RSS_28cm_mmc=Forrester-_-RSS-_-Document-_-23 http://www.xconomy.com/boston/2011/04/14/cannibalization-breakage-and-exposure-calculating-the-value-of-a-groupon/2/ http://trueler.com/2010/12/19/groupon-tax-tips-gratuity-delivery http://thesocialpath.typepad.com/.a/6a00e0099496db8833015435b638cf970c-pi http://www.technologyreview.com/blog/arxiv/27150/ http://arxiv.org/abs/1109.1530 http://www.thedailybeast.com/cheats/2011/11/22/bakery-terrorized-by-groupon-deal.html http://wweek.com/portland/article-17852-cheat_local_html http://www.huffingtonpost.com/2011/06/10/groupon-merchants_n_874896.html http://ny.eater.com/tags/groupon 000000 O000000