Groupon Ghetto
This is a gem from our archives. Originally posted April 1, 2012. –Alex
Have you used a Groupon lately? For anything from oil changes to restaurants to pole dancing classes, Groupon and its ilk have set a new paradigm in couponing. The breakthrough marketing tactic has also raised some thorny customer service and business relations issues.
My family uses Groupons occasionally–mostly for restaurants. The results and satisfaction have been mixed. On one occasion, we purchased a Groupon to an upscale restaurant and were treated to a magnificent meal, quality service and a desire to return (though we were dismayed that another customer was allowed to flout the dress code by wearing sweat pants, it didn’t ruin the overall meal).
However, on most occasions as soon as we whip out that piece of computer-printed paper, the waiter sniffs imperceptibly and says “Oh, you’re a Groupon..”
“Well, actually, no, we’re human beings and paying customers,” is the reply I wish I had the nerve to utter. Instead I nod, almost embarrassed.
I realized in that moment I had just been shown the door to…the Groupon Ghetto.
Case in point, last night: Groupon in hand, my wife and I had a date night reservation at a local restaurant that features an adventurous menu of French cuisine. Our Groupon entitled us to an hors d’oeurve, two entrees and two glasses of wine–price maximums for each item were listed. I think it was roughly a two for one deal cost-wise. I was very interested in several things on the menu (which were well within the price range set by the Groupon deal) and was prepared to order when I saw a notice at the bottom of the menu (paraphrasing):
“Groupon users may order items from the right side of the menu only.”
I was crestfallen. Was I a second-class citizen because I used a Groupon?
I’m almost certain that wasn’t the restaurant’s intent–likely the items on the left side of the page were more expensive to prepare and to have the ingredients on hand for potentially hundreds of diners at any one time could devastate profitability. Yet, I still felt that rather than being enticed into becoming a new customer I was instead being asked to take my coupon-cutting ways and enjoy them in second class. I know the restaurant doesn’t want people to feel that way, but perception is reality–and that notice on the menu was an instant bummer. That is a public relations problem.
Setting aside Groupon’s dubious advertising decisions, the backlash of late is being felt by customers and businesses alike. Case in point, a restaurant in St. Louis:
After accepting Groupon coupons for nearly six months, Clara Moore, the general manager and chef at Local Harvest Café & Catering, had almost forgotten about the 3,500 customers who’d jumped on the deal.
Until the last few weeks, that is, when hundreds of those people came rushing in.
After running the staff ragged, pissing off the regulars, cleaning the restaurant out of all but four items on the menu and posting several negative Yelp reviews about their experiences, the Groupon masses left Local Harvest stunned and exhausted. Moore could only say, or rather Tweet, one thing: “Sorry, we won’t be doing Groupon again, guaranteed!”
There’s even a hashtag and website for people who have had bad experiences: #GrouponHell.
On the flip side, I’ve read tales of Groupon users who don’t quite get that just because their meal may be half-off the price, they still need to tip waiters and waitresses for the full price of the meal. That kind of thing certainly puts restaurant staff in a less receptive mood for Groupon users. There’s also the issue of users waiting until the last week of the deal before redeeming it–something that can absolutely throw a restaurant into a tailspin when hundreds–even thousands–of Groupon customers show up practically all at once.
This may be a purely academic discussion, as some posit the Groupon business model will ultimately fail:
While Groupon has seen incredible growth since its infant days in 2008, it is highly unlikely to keep pace in the years to come. The primary reason for this is competition. When current CEO Andrew Mason thought of the idea for Groupon, there was little to no business entities in the arena. Now, there are more than 500 sites worldwide, with over 100 in the United States. Yes, Groupon has penetrated markets in South America, Europe, and the Middle East, but what have they done to distinguish themselves? What is unique about the service they provide? What do they offer that no other company can? The answer is – nothing.
[UPDATED FROM ORIGINAL POST: Groupon's fourth quarter earnings may bear this out.]
Anyway, back to the question. Do Groupon users get stuck in a ghetto of second class service? Perhaps at some places they do. Our service last night was excellent, and indeed it usually is when we use a Groupon. But too often it feels a little like we’re being ghettoized–as if we’re really not wanted. I would consider that it’s all in my head except for that notice in the menu last night directing me to the Groupon Ghetto.
How about you? What kind of experiences–good or bad–have you had with Groupon or similar services? Are you a businessperson who has used a coupon deal? We want to hear from you, too. The comments section awaits–no Groupon required!
Alex has earned a reputation for success and ingenuity from his more than twenty years experience in public relations, journalism, marketing and broadcasting. His career has spanned several industries including healthcare, television, non-profit organizations and higher education.
His work in the news media included positions as an editor, journalist, radio talk show host and vice president of Kansas City Public Television.
He founded AlexanderG Public Relations, LLC in January 2010. AlexanderG PR is a member agency of PRConsultants Group, a collaborative made up of senior-level PR experts in every major market in the United States.
Alex wrote the bestselling crowdfunding ebook and audiobook "Kickstarter Success Secrets" and is also the award-winning author of several works of fiction, including the popular mystery novels "Pilate's Cross," "Pilate's Key," and "Pilate's Ghost," available wherever ebooks and paperbacks are sold.
If you don’t want shoddy customer service, stop using Groupon. Simple.
It is the lazy way for businesses to market, and almost always attracts cheapskates that ruin the experience for everyone, including full paying customers. Businesses that participate in Groupons often see their rating on Yelp drop a star. And surveys have shown that the vast majority of businesses don’t see repeat customers.
All for what? To save a few bucks? Sorry, but, I value my time more.
Sadly, your experiences coincide with the announcement this past weekend that Groupon will have beyond shoddy Q1 results as a public company. Why? Because of the executive team’s decision to erroneously “forget” to set aside enough revenue for customer refunds (as in cases like yours).
Groupon was great way back when and I’ve had some incredible experiences from using the service (like getting to see William Shatner’s show at a steep discount in great seats). But there’s a reason they’re failing — business owners are willing to give us 50-70% of their revenue in order to get butts in seats, and they fail to plan for the volume. Wen searches for Groupon nightmares from business owners? A fruitful search. While it’s always caveat emptor — and on both sides — it seems to me that a critical education element is lacking on Groupon’s part to ensure that everyone has a great experience using their marketplace.
Just ran into this this past weekend. I have a consignment shop where I am a regular and have a very friendly relationship as a consumer. I purchased two groupon-like coupons (halfoffdeals) at 15 for 30 dollars of merchandise and asked if I could use both since it didn’t specify that I couldn’t on the coupon. The co-owner acted as though I’d requested her firstborn. “We couldn’t possibly give away 60 dollars worth of clothes!” Her logic is faulty, as I will return tonight and use the other coupon. So they will indeed give away $60 in clothing. But her insensed attitude made the rest of my visit uncomfortable.
My work with small businesses has led me to have the Groupon discussion. Most, but not all, balk at the steep discounts they have to place on their products. They want volume but they don’t want to discount to get it. When I talk to them about driving that volume I ask them what it is they want to achieve:
1) Do they want to have a spike in sales and/or clear out inventory?
2) Do they want to have a great launch of a new product or service?
3) Or do they want to generate long-term business growth?
Questions one and two are perfect for Groupon. Those are short term events and can typically handle the one time discount and volume spike. In this case it is about moving units/services quickly and not building long term growth. If it is point three, then the business is better off to move on.
Businesses that want to give a steep discount to drive volume need to plan for that volume. Part of their poor experience with Groupon is their own fault if they run out of product or were caught unawares about how many people can actually show up. Businesses that treat potential customers like second class citizens because they made a conscious effort to take advantage of their discounted prices… well those businesses probably treat most of their customers that way. They just used the Groupon opportunity to show it in the open.
As far as Groupon not performing well as a company, that comes from not planning ahead for when there is competition in the marketplace. If they want to succeed they should add a valuable service like helping businesses learn how to use volume blitzes, discounts, and other driving traffic tactics to build long term growth. Then again, I don’t really want them as competitors, so I should just stay quiet.
Erika–So true. I think they could help themselves immensely by doing what you suggest: educate the public about the proper use of the Groupon/expectations and also make sure businesses know what to expect in both best cas and worst case scenarios. However I don’t see the ghetto going away anytime soon…
That is too bad to hear, both that Groupon is failing in the customer returns (bad planning) and that the businesses themselves are going in unprepared and uneducated. My business, at the time, used Groupon and we were thrilled with the response and the new customers. Was it expensive? Yes. We looked at the cost as a marketing expense, and in that regard we got our money’s worth. We had a great Groupon representative who answered our questions and gave us some good advice/tips for getting the most out our money without putting ourselves into any kind of volume danger, but still making the offer attractive.
As far as the customer service goes, we were always excited when we got a groupon! For us it meant someone liked us enough to spend some money before even setting foot in our store – that is a big deal. And I know we build business and repeat customers from it. It’s sad to see other companies not seeing it the same way, and treating their customers poorly. Gross.
Ally: This is where Erika’s point about educating the businesses comes in. You’re right, their logic is faulty, and they inadvertently treated a regular customer poorly. Not what they had in mind when the bought in to Groupon, I’m sure.
P.S. to Erika–the fact that you used a Groupon to see the Legend That is Bill Shatner is one of the coolest things I have ever heard. You rock.
Erroin: Excellent points. Groupon should hire you to be their customer liaison. I think that if businesses limit the number of Groupons to a reasonable amount that could be properly handled if they all came in at once, perhaps the experience may be worth it–particularly in cases #1 and #2. Clearly #3 (longterm growth) is just not a good fit for a Groupon.
Rebecca- GREAT to hear a positive story about Groupon usage from a businessperson. Clearly if all businesses took your approach Groupon Ghettos wouldn’t exist. Gross indeed!
I think at some level the relative unsophistication of many small business owners — who start a business because they’re passionate about a product or service, not because they’re passionate about marketing or accounting — coupled with the Groupon sales rep experience, creates issues.
Restaurants are among the most common/popular Groupons, but have the greatest issues scaling to meet demand in short time periods. Stuff like half-price tickets to an event are much easier to scale and deliver — a local sporting team did $5 tickets to a single event held in a Really Really Big Venue. They’ll have to scale up the will-call staffing, but otherwise? They already had a humongous venue, and it’s all incremental revenue/community visibility.
There are a number of ways that Groupon could potentially help restaurants deal with the structural issues they have fulfilling deals, from better explaining how to cap deals, or setting up a system to allow rolling expirations. Whether it’s lack of corporate will or lack of sales will (which are often linked), hard to say.
Agreed, Julie! I’ve experienced some of the same issues with my PR practice and small business owners (inexperienced about what PR is and what it costs, etc.), so it’s incumbent upon me to explain it from the get-go. Some prospective clients never call back after I lay out general fees for service and practical budgets. Groupon should do the same–particularly with restaurants. Cap and scale education is crucial.
Hilarious. Posted something just like this a few weeks ago (http://www.jasonyormark.com/2012/03/01/have-you-been-a-victim-of-grouponitude/). Totally get what you’ve experienced. Businesses fail to realize that using a Groupon is a loss leader in an attempt to attract new customers long term. But if you don’t give them a reason to come back, why even use Groupon to begin with?
Groupon and the like are a dying breed. The market has been exhausted, and it can only work in moderation. They may survive, but I predict they will be downsizing in no time.
Jason–great comment and your post is hilarious. Thanks for sharing.
Incredible. Just last month I wrote “Without exception, these stories are tales of the fundamental failure of the deal site (or at least their sales reps) to respect and communicate honestly with their merchant partners.” (http://yul.dealspark.ca/more-than-sales-what-a-deal-site-can-be/)
We’re having a moderate success with our deal-site venture, but one thing’s for certain, I would never chase a contract that in the end would be a lose-lose-lose… business loses their shirt, clients lose their experience, and the deal site loses reputation. Groupon and similar enterprises have got to stop incentivating their reps to land any deal they can rather than only the deals that are good for the consumer and the partner.
Marty–so true. If they are making deals without considering the effects on the client, then they’re ultimately screwing themselves in the process. Shame.
We offered a Groupon deal for our airbrush tanning salon last September. it was my first winter season in the store and I wanted to make sure we would stay busy until our very busy spring and summer seasons kicked in. Things started out fine and we actually had some referrals and cross selling. Most Groupon clients seemed to come in with a chip on their shoulder (as though they expect you to treat them poorly), they do not tip, they no show and they don’t want to hear anything about following the actual terms stated on the certificate they purchased. Then came the people who held on to the Groupon until the end. They wanted to come in multiple times in a week just to utilize their package. No matter if they are going to end up orange or are simply waisting their and our time. The phone calls were very nasty and we even had threats from people to write false reviews about us if we didn’t continue to allow them to utilize the Groupon promo value after expiration.
Overall, this was a very stressful and negative experience. I would like to be positive and say we will see about 10% return clients from Groupon. But honestly, people came in telling me they had no intent of ever paying full price. I felt like I was running a “people of Walmart” campaign. In the end, we ad one nasty Groupon user spread false reviews with flat out lies all over the internet. But our prior 100% positive reviews will eventually outweigh that. Business owners – plan on getting less than 10% to actually come back and pay your prices and plan on growing some very thick skin. Over half of the Groupon users did not want to abide by the terms, were very rude and did not tip. I will take my chances on spending up from advertising dollars to attract customers that are willing to pay the value of our service. I have stopped buying Groupons for myself now as I feel for the business owners.
Speaking as a former Restaurant Manager who was NOT involved in the decision to market with Groupon, I can attest to the fact that everyone’s experience (staff, customers & managers) went into the toilet each time we did a promotion (and that was 3 separate times over one summer last year!)
While a tiny number of people became regulars and were just thrilled, most of the people coming in the door had SUCH an attitude. My experience seems too similar to Chris’s experience for it to be coincidence!
I worked at an ethnic food place, and people would come in ignorant of the menu or style of cooking, asking for American food, and being miffed that all we had was curry. CLEARLY they had no interest in us as a company. They were just wanting a cheap meal.
Often, our servers weren’t tipped AT ALL and if they were, it was usually based on the much lower price. Customers were unwilling to abide by the terms of the promotion (past expiration dates, for items not eligible and on and on and on).
We had one in particular who violated the terms of the offer by bringing in some 4 coupons (supposed to only be able to buy one per customer) and then complained by email, phone, yelp and anyway he could when we denied him and asked that he pay for what he we had already made and prepared for him.
WORST of all, I think this type of marketing creates a distorted sense of the ACTUAL value of a product. Case in point: there were a few families that would only come in if we were running a promotion. They always came in print-out in hand and raving about the food. If they had paid full price for their meal EVEN ONCE I might have softened, but since their “love” for the food never translated into real customer loyalty, I admit I dreaded them.
Thanks for your informed insights, Chris & Cynthia!
It might interest everyone reading that Groupon Customer Service has contacted me via Twitter, asking for more information about my experience. Stay tuned…
Well, Groupon Customer Service emailed me and asked which restaurant it was that violated their policies, saying they would also call and “educate me” about Groupon’s policies. Well, I emailed the name of the restaurant and never got a call back. Hmm.