Isn't the entire point of Groupon that one merchant per location gets their day in the sun --- and all the exposure that it brings?
I assume Groupon still takes 50% of the revenue like they do with their deal of the day. Since you're not enjoying traffic by being the deal of the day, I'm not sure why any sane businessperson would accept this type of split on what is a normal e-coupon.
This is addressed at the bottom of the linked page:
What does it cost?
Groupon Store: There's no upfront cost. For promoted deals you get 70% of each Groupon sold. For non-promoted deals you get 90% of each Groupon.
Deal of the Day: No upfront fee, you keep 50% of each Groupon sold.
Was it widely known that Groupon's cut on deal of the day is 50%? I thought there was some to-do a few weeks back about them wanting 100% of Groupon proceeds for some cafe.
You can be sure they have tested the concept for a few months now and they have entered enough numbers on excel spreadsheets before launching this. So to answer your question, it will dilute the deal of a the day buzz, but it will increase revenue.
My only guess is that they have so many merchants waiting in the queue that this is an avenue for these merchants to get their deal out.
The only problem is that for the people buying the groupons. I only try to limit myself to 1 a week since that it all that I can afford right now. If more groupons are available, I probably wouldn't buy more unless it was a killer deal.
But the assumption is that you're more likely to find something of utmost worthiness to spend your money on than before.
I don't have a particular schedule for my Groupon purchases, but if I see something convenient (that I would have bought anyway) or cool (that I wouldn't have bought except for the Groupon -- window purchases, basically,) I buy them.
This means that in the past month or so, I bought a Groupon for Baltimore Coffee & Tea, which means I got my $34.95 a pound Kona coffee for roughly $17, and flying lessons, which is something I've pondered before, but never pulled the trigger on.
Half off is a fine motivator.
I'd be happy to spend more money with Groupon if there were more interesting offers being presented, and upping the quantity of those offers is likely to increase the odds of that happening.
Wonder what the cut Groupon makes on these, doubt it can be 50ish percent like the deal of the days are. This company almost has a license to print money, I wonder how long it can last.
I'm bullish on the category. Scalable advertising which actually works for small businesses is, and should be, a license to print money. I might grumble at the $1,500 I paid Google this month but if they told me they had $15,000 of traffic on my keywords I'd happily max out my credit card for a few days.
Take a look at the yellow pages: it's unsexy, it works, it is a multi-billion dollar industry.
According to the site, Groupon will take 30% if the deal is promoted (which seems to include email/Facebook/Twitter advertising) and 10% if not. It's not entirely clear if you can pick any deal to be promoted (after approval by them), or if that option will be throttled somewhat.
This is a huge, huge deal for services businesses. Just making it dead simple to collect revenue online is a win for them. "Send out an email to your mailing list about $10 off massages, get $500 in your bank account almost immediately, service the customers who come in with printed coupons."
Back of envelope math: $60 massage, $50 with coupon, $45 revenue for merchant. Works outstandingly well -- even before you account for the inevitable breakage.
I agree with you that this can be a great channel for local businesses who want to sell online.
However, I see a couple of potential issues with this approach.
1) Merchants can offer probably a 5 - 10 % discount (acquisition costs shifted to discounts), but beyond that I doubt if can be sustained. Margins in most local businesses are not that big. So, it'd be hard for a restaurant to do a 50% discounted deal for like a month or so.
2) Another potential problem of this approach - how many users will check each individual merchants store ? People flock to Groupon because there's a new deal every day. Or in other words, the novelty factor keeps things fresh and keeps people coming back. If a merchant is offering the same deal for 6 months via the store, it might not be a big draw for users. This will be completely contrary to the notion of scarcity and novelty that make groupon's a deal a day model so successful.
I just signed up for an account to poke around. On their "create a deal page" they taunt merchants not to goof around with their discounts and to offer 50% or more off. Pretty annoying.
I run a service based business (computer repair) and that's exactly what I was thinking - I can offer a 50% discount and it's still almost all profit. But I wonder if this is us only or works in other countries (must check), and how many people in my town of 8000 have ever heard of groupon.
Um it is great that you get access to their massive mailing list and site traffic, but you can't do $10 and you are forgetting about the fees (30-50% of revenue). So you have a $60, selling for $30 * 300 sales = 9,000 (2,700 is kept by them for the 30% fee). You get $6,300 for something that normally makes you $18,000... It is still a great deal because you get 300 new customers who hopefully love the service and return... All companies like this tell the service business to TAKE it out of their marketing budget. Not to consider it as a easy way to make a TON of profit. Many make little to nothing or loose money on the deals. It is advertising to a very captive market that may come again.
16 comments
[ 6.5 ms ] story [ 44.6 ms ] threadI assume Groupon still takes 50% of the revenue like they do with their deal of the day. Since you're not enjoying traffic by being the deal of the day, I'm not sure why any sane businessperson would accept this type of split on what is a normal e-coupon.
Edit:I found the link.
http://www.facebook.com/note.php?note_id=443354298928&id...
When the customer pays less than $10, Groupon takes 100%.
The only problem is that for the people buying the groupons. I only try to limit myself to 1 a week since that it all that I can afford right now. If more groupons are available, I probably wouldn't buy more unless it was a killer deal.
I don't have a particular schedule for my Groupon purchases, but if I see something convenient (that I would have bought anyway) or cool (that I wouldn't have bought except for the Groupon -- window purchases, basically,) I buy them.
This means that in the past month or so, I bought a Groupon for Baltimore Coffee & Tea, which means I got my $34.95 a pound Kona coffee for roughly $17, and flying lessons, which is something I've pondered before, but never pulled the trigger on.
Half off is a fine motivator.
I'd be happy to spend more money with Groupon if there were more interesting offers being presented, and upping the quantity of those offers is likely to increase the odds of that happening.
Take a look at the yellow pages: it's unsexy, it works, it is a multi-billion dollar industry.
Back of envelope math: $60 massage, $50 with coupon, $45 revenue for merchant. Works outstandingly well -- even before you account for the inevitable breakage.
However, I see a couple of potential issues with this approach.
1) Merchants can offer probably a 5 - 10 % discount (acquisition costs shifted to discounts), but beyond that I doubt if can be sustained. Margins in most local businesses are not that big. So, it'd be hard for a restaurant to do a 50% discounted deal for like a month or so.
2) Another potential problem of this approach - how many users will check each individual merchants store ? People flock to Groupon because there's a new deal every day. Or in other words, the novelty factor keeps things fresh and keeps people coming back. If a merchant is offering the same deal for 6 months via the store, it might not be a big draw for users. This will be completely contrary to the notion of scarcity and novelty that make groupon's a deal a day model so successful.