Groupon Responds: Too much of a good thing?

> I thought this bit was a bit condescending, and starts the response off on a sarcastic note:

I didn't read that as sarcastic or condescending, but maybe it's because I already spent time watching all the Groupon site videos? There vibe is pretty friendly, lighthearted, and helpful - I bet there actually was a cupcake place that ran out as a notable experience, and that's why they write about it.

> he problem is not so much that they can't satisfy the demand (though there is some of that in some cases) but that it's a cost sink that didn't generate the promised increase in "regular" customers.

This is true, yes. I think a business owner should look at their desired customer base - the bagel shop it's a great play, because everyone buys quick food, and maybe Groupon users can shift to buying their bagels. For a slightly formal upscale cafe like Posies, you're trying to capture people's "sit down at an expensive environment" [1] time, which seems like it wouldn't convert as well long term. Groupon users might do it once for the experience, but people generally budget much less time and money for formal relaxing experiences, so you'd have a harder time displacing it.

[1] http://posiescafe.com/wp/?page_id=76 - Their coffee is compares reasonably to Starbucks at $2 to $3 a cup, their sandwiches around $9... they've got wines and beers from $3 to $7 per glass. I think this puts them in a tough spot where they're both upmarket/a slight luxury in most people's eyes, but still don't have crazy profit margins like an ultra-premium place.

My analysis:

I think Groupon is good for businesses that do high volume that want to replace people's regular common routine (a sandwich, hot dog, drink, whatever), low cost businesses that the Groupon demographic would keep using (inexpensive nail salons), and for places with no marginal cost (Chelsea Piers for instance, museums, other places where all the expenses are operating the place and there's no significant space constraints). I think slightly upmarket, not quick places would be one of the worst performers in Groupon if they couldn't at least break even on the Groupons.

How many thousands of companies have spent a combined hundreds of millions of dollars on Google AdWords and not ever made their money back?

That isn't Google's fault and this isn't Groupon's.

It certainly isn't Groupon's fault - but if merchants regularly have negative ROI on this sort of scheme Groupon's days would be numbered...

Smart of them to respond quickly and swiftly, but the core issue of this specific case wasn't addressed. A naive business owner was aggressively sold into a plan that wasn't sustainable for their business, and by all accounts wasn't aware of the cap system which Andrew says "has always been Groupon policy to allow merchants" to have.

So the PR responses read wells to people who have already decided Groupon did no wrong here, re-enforces to businesses that there is a model that could work for them, but does nothing to address people who found the whole thing unsettling/distasteful.

To me, it sounds like the salesman in the middle is at fault here - it was probably near the end of the months and he needed his sales for commission, so pushed this through knowing that it may hurt the business in the end.

It shows that Groupon overall isn't a bad idea but that they need to improve their pre- and after-sales care with customers.