Tell HN: Our experience with Groupon • Hacker News Board

Re: Tell HN: Our experience with Groupon

#71

Post by robertjordan » Wed, Jun 15, 2011, 12:53 AM UTC

joeguilmette wrote: post #17

patio11 wrote: post #2

Thank you for writing this. Edit to add value: "Same-day" special + email list of people with confirmed willingness to pay money and get pushed out of a perfectly good airplane = a win. Presumably your costs are pretty much fixed after making the decision to do a jump, so you could hit that mailing list with a special promotion multiple times per year. It's a Tuesday, congratulations, have 20% off if we push you out…

Thats exactly what we do! Basically run our own Groupons. Send out an email with a link to a hidden page on our site that will be up for a week. We generally do it in the winter just before Christmas. Lots of sales as gifts, and since it's winter they will wait a few months to jump which will raise breakage, and hence the margin.

Do you guys have someone in house to run your groupons? This seems like a good service for a start up to offer.

Re: Tell HN: Our experience with Groupon

#72

Post by joeguilmette » Wed, Jun 15, 2011, 1:09 AM UTC

robertjordan wrote: post #71

joeguilmette wrote: post #17

Earlier quoted context omitted.

Thats exactly what we do! Basically run our own Groupons. Send out an email with a link to a hidden page on our site that will be up for a week. We generally do it in the winter just before Christmas. Lots of sales as gifts, and since it's winter they will wait a few months to jump which will raise breakage, and hence the margin.

Do you guys have someone in house to run your groupons? This seems like a good service for a start up to offer.

It does, but we're talking about less and less revenue. Ho much of that 25% are you going to ask for?

Re: Tell HN: Our experience with Groupon

#73

Post by arctangent » Wed, Jun 15, 2011, 1:18 AM UTC

From the way you have described your business it seems like you are one of the high-markup enterprises that will (always) benefit from getting large numbers of customers through the door, even at a much lower price than you normally charge.

(I'm not making a judgement on your pricing, just pointing out the obvious.)

Re: Tell HN: Our experience with Groupon

#74

Post by biot » Wed, Jun 15, 2011, 1:53 AM UTC

pbreit wrote: post #54

neovive wrote: post #35

Very interesting. Most of the Groupon customer stories I have read thus far are from lower-margin merchants such as restaurants. Since Groupon customers likely skip the upsells (wine, appetizers and desserts), restaurants seem to be less positive about their experience in general. They need to focus more on converting Groupons into returning (full price) customers to generate positive returns.

Restaurants have very high gross margins (food is only about 30% of a restaurant's costs) which is why Groupons can actually be really good for them. It is absolutely critical for restaurants to fill seats.

For every $100 of food you sell in a Groupon deal for $50, Groupon gives you $25. At 30% margin, the food costs $30. Every Groupon deal a restaurant does puts them deeper in the hole at those margins.

Re: Tell HN: Our experience with Groupon

#75

Post by Duff » Wed, Jun 15, 2011, 2:33 AM UTC

pbreit wrote: post #54

neovive wrote: post #35

Very interesting. Most of the Groupon customer stories I have read thus far are from lower-margin merchants such as restaurants. Since Groupon customers likely skip the upsells (wine, appetizers and desserts), restaurants seem to be less positive about their experience in general. They need to focus more on converting Groupons into returning (full price) customers to generate positive returns.

Restaurants have very high gross margins (food is only about 30% of a restaurant's costs) which is why Groupons can actually be really good for them. It is absolutely critical for restaurants to fill seats.

Huh? Restaurants typically have razor thin margins. And that's including front of house staff who are mostly paid directly by the customer!

Re: Tell HN: Our experience with Groupon

#76

Post by Duff » Wed, Jun 15, 2011, 2:36 AM UTC

pbreit wrote: post #55

riams wrote: post #20

How high was cannibalization, i.e. existing customers using the Groupon deal instead of paying full price?

Since when is it a bad idea to give discounts to existing customers?

You give regulars perks, not cash. If you give them a discount on something, it should be a discount that can convert to additional spending.

If you run Groupons often, you're like one of those restaurants that put a 20% off coupon in those coupon magazines.... you're reducing the customer's spending expectations by 20%!

Re: Tell HN: Our experience with Groupon

#77

Post by Duff » Wed, Jun 15, 2011, 2:39 AM UTC

pbreit wrote: post #61

Amen to hear a voice of reason among all the complainers. Groupon is just another tool available to business owners and when properly used can contribute to the bottom line. No one ever said running a business was easy. No one ever said your vendors should do all your work for you. And it's completely insane that people are now complaining about too many customers? Holy cow what is this world coming to! That said, I…

The complainers are getting alot of attention because the company itself is a scam.

Re: Tell HN: Our experience with Groupon

#78

Post by pbreit » Wed, Jun 15, 2011, 2:47 AM UTC

biot wrote: post #74

pbreit wrote: post #54

Earlier quoted context omitted.

Restaurants have very high gross margins (food is only about 30% of a restaurant's costs) which is why Groupons can actually be really good for them. It is absolutely critical for restaurants to fill seats.

For every $100 of food you sell in a Groupon deal for $50, Groupon gives you $25. At 30% margin, the food costs $30. Every Groupon deal a restaurant does puts them deeper in the hole at those margins.

But then you only have to get to $110 to break-even.

Regarding margins, it's the gross margins that are high. That's correct that overall profit margins are thin but gross margins are more important when discussing incremental business.

Re: Tell HN: Our experience with Groupon

#79

Post by pbreit » Wed, Jun 15, 2011, 2:52 AM UTC

joeguilmette wrote: post #66

pbreit wrote: post #55

Earlier quoted context omitted.

Since when is it a bad idea to give discounts to existing customers?

It's a bad idea to give a discount to someone who was already going to buy your product at full price. It's an even worse idea to sell them a product and get 25% the revenue you would otherwise.

I agree that it's better to be more thoughtful in how you handle existing customers and it's even worse spending 75% to give a 50% discount, however I don't think it's necessary to hide Groupons from existing customers. We encouraged all our customers to participate in our daily deals and spread the word. The customers appreciate it and we get more business.

Re: Tell HN: Our experience with Groupon

#80

Post by biot » Wed, Jun 15, 2011, 3:10 AM UTC

pbreit wrote: post #78

biot wrote: post #74

Earlier quoted context omitted.

For every $100 of food you sell in a Groupon deal for $50, Groupon gives you $25. At 30% margin, the food costs $30. Every Groupon deal a restaurant does puts them deeper in the hole at those margins.

But then you only have to get to $110 to break-even. Regarding margins, it's the gross margins that are high. That's correct that overall profit margins are thin but gross margins are more important when discussing incremental business.

Perhaps you're misunderstanding. Let's say there's a Groupon "$100 of food at ABC Restaurant for $50". You pay $50 for the deal to Groupon. Groupon takes half of that as their commission, leaving the restaurant with $25. Now the restaurant has to provide you with $100 of food for the $25 that Groupon gave them.

If the cost of goods are 30%, that $100 in food costs them $30. They're only getting $25 for it. My slide rule tells me that's a $5 loss per customer. The restaurant hopes to make it up on drinks and such, but that $5 loss is only cost of goods and doesn't include staff, rent, and other overhead. It also doesn't factor in the fact that people who came to your restaurant only because they could get cheap food don't tend to be big spenders.

I'm sure you've seen this: http://posiescafe.com/wp/?p=316