I apologize for the poor audio quality in the video. Yes, I know I should have put a mic on her, but this was shot with a point-and-shoot digital camera without an external mic jack.
The TechCrunch story has biggest takeaways. Here are my other notes from the video. The number in brackets refers to the video segment in which the comment was made.
Why Groupon?
- [1] She signed up for Groupon because a pizzeria across the street had run a Groupon and a friend who worked at Posies said that the pizza place had been busy since the Groupon.
The deal launch
- [1] In Jessie’s case, Groupon was an anti-yield management play. Because Groupon dictates the scheduling of a deal, her deal started about the same as another local event. It added more demand at a time of peak demand versus providing customers when the business was otherwise empty. Between the two events, there was a line out the door the whole weekend.
- [2] She didn’t make any effort to get people to follow her on Twitter and Facebook.
Existing versus new customers
- [1] She had no real way of tracking existing versus new customers.
- [1] She didn’t advertise the Groupon to Facebook or Twitter followers.
- [2] She had no way of tracking if Groupon customers came back and paid full price.
Customer quality
- [1] Customers abused the system with some buying more than one deal in violation of the terms. Others printed multiple copies and tried redeeming them. Sometimes it was easier to take the loss than fight with customers in line.
- [1] Groupon told her that something like 98% spent more than the value of the Groupon. “You think maybe like $5 above the value, not like 10 cents.” In her experience, customers tried to get as close to the $13 mark as possible.
- [1] One customer tried to use three Groupons at once. She said, “What are you going to get for $39? Do you want the whole shop? And they were really offended.”
- [1] “Most people took a trek here. This is definitely a neighborhood shop. People don’t come here from other parts of town just to get coffee.” … [2] “They would come and want to spend all of the money at once because they wanted a deal and not because they wanted to make this a regular spot.”
- [3] “Even though we’d gotten some good customers, we had a lot of really bad customers that exploited the system, were rude to the staff, didn’t tip the staff at all.”
Reputation
- [2] Groupon customers lowered her ratings on Yelp. “Things did not look good for Posie’s on Yelp after doing a Groupon.”
Interactions with the Groupon team
- [1] She was advised by her sales rep that they didn’t usually do small amounts like $5 and that consumers responded best to deals that were 50% off.
- [1] Groupon initially asked for 100% of the sale value, which Jessie said she couldn’t do. After negotiation, email from her rep said “I gave this some more thought. Understanding that your business in newer, I decided to split the revenue with you. So, you’ll be getting $3 of the $6 we charge the customers. Also, we incur a standard credit card processing fee of 2.5%. So your check will actually be for half the revenue less the cc fee (it only comes to 15 cents per transaction) This should make this campaign even better for your business.” Note that Groupon is charging the merchant credit card fees even on the portion of the transaction it keeps.
- [1] Groupon’s merchant training was a video link. It provided advice to bulk up on staff, but not when typical peaks occurred. (At the start of a deal and right at the end before promotional value expires.)
- [2] Groupon did not provide any guidance on laws about expiration of Groupons. “The onus of responsibility shouldn’t be entirely on this little business that doesn’t know the laws in the first place.”
- [2] Groupon recently called her to ask if she wanted to run a Groupon. She suggested that he Google “Posies Cafe.” The rep responded a few hours later with “A simple Google search showed that I’m an idiot. I’m really sorry.”
- [3] Her rep didn’t tell her about the ability to cap the deal.
- [3] In interactions with Groupon CEO Andrew Mason: “This isn’t a newspaper ad where most people know how to do that. You’ve revolutionized marketing. So nobody knows the parameters unless you tell them. No one told me the parameters.”
- [3] Her Groupon rep told her that she could only do one Groupon in the life of the business.
Reaction from other businesses to her blog post
- [4] “A lot of them had had similar experiences. What was the saddest part of it for me was that this had had happened to a lot of businesses but because no one had ever said anything we all just assumed (and myself included) we just assumed we were bad business people. That we just didn’t know what we were doing. If everyone loves Groupon so much, we must be wrong.”
- [4] “In all honesty, relative to a lot of these people, I didn’t lose as much as most of these people. We did lose $10,000 hard cost.
Other
- [2] “There is no risk on anybody’s part except the business. In the product that you give away, the follow up with customers who are upset. It’s all in us, even though we only get a very small fragment [of the regular price].”
- [2] A longtime customer her encouraged her to write the blog post after hearing about the economics of the Groupon deal.
- [3] “I think it’s helpful for people to know that you’re not actually giving someone $6, you’re giving someone $3 in our case.”
- [3] “I feel like it’s a corrupt business model. My husband refers to it like locusts. They’re going to go through and tap all of these business until they can’t survive anymore.”
- [4] “Our most successful advertising is through Facebook. And that’s free. Even offering deals through Facebook, which is also free.”
