Groupon: The Infinite Buffet

Back in June, I got the barbershop for which I write a monthly newsletter on Groupon (as I wrote about here). The goal was to increase permanent customers by about 20% by getting them in the door on a good deal. A deal for which we were losing money.

Did we achieve that goal? We think so. Pretty close, at least.

I've been trying to figure out what these are for months. They look like the lovechild of a hamburger and a cupcake.

I talked to our stylists a few months after the Groupon was issued, thinking their reaction to the whole experience would be quite good. After all, even though people weren’t paying for haircuts, they would still tip, so the stylist’s tips should have increased proportionately with the rise in traffic.

Not the case, though. Apparently a lot of people who use Groupon are simply cheap. They skate from deal to deal and don’t pay a penny more than they have to.

Groupon tries to discourage this by allowing stores to report customers who don’t tip when they should. I like this idea, and when we issue our next Groupon, we’ll report a lot more customers.

But this whole process made me realize that as clever as Groupon is, it allows all customers–not just the really cheap ones–to accumulate deals without becoming loyal to any one business. Think about the number of massage places you see on Groupon, the number of Mexican restaurants. You could buy at least one Groupon every month for those types of places. Instead of becoming part of that 20% that businesses are hoping for, you just treat Groupon as an infinite buffet.

There is an exception to this rule that makes Groupon pretty important for your business, and for capitalism in general: If you sell a superior service or product, you win at the Groupon game. Sure, your customers may go to 6 different Mexican restaurants, but if you wow them with flavor, service, and atmosphere and the others don’t, you win. You get a permanent customer.

So take heed, businesses. If you want to retain that 20%, make sure your product or service is really damn good. This may seem obvious, but in a Groupon world, it’s more important than ever before.

Daily Quickie: I’ve entered my romantic comedy script, Scripted, in Amazon Studio’s script contest. Feel free to check out my script page to download the script, review it, and even offer feedback.

14 thoughts on “Groupon: The Infinite Buffet”

  1. Hmm, those things remind me of this Spongebob Squarepants episode where Spongebob makes rainbow colored burgers and calls them Pretty Patties.

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  2. I just figured what those colorful waffle-like sandwiches are. MACAROONS!

    True. Businesses need to step up to their A game to keep customers and gain new customers.

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  3. I’d consider myself the common Groupon user, and here are my thoughts. Most of us do use Groupon as an infinite buffet most of the time. Because Groupon is valuable to a business you’re invested in, I went into my Groupon account to document my purchase and usage. Here is a breakdown of the 13 Groupons I’ve purchased:

    Places I already know/like/have visited (e.g., Mangia Italiano): 6
    Places I’ve been meaning to try/visit, where the Groupon has prompted me to actually go there (e.g., Franco): 3
    Places that were completely new to me (Black Bear Bakery): 1
    Services I needed anyway (e.g., discount for a florist for my wedding): 3

    For me, about 50% of the time, I already enjoy the place from which I’m purchasing a Groupon, and it just prompts me to go an extra time/brings it to the front of my mind. Another 25% of the time, Groupon reminds me that I’ve wanted to go to a place and gives me a reason to go. (Sadly, I haven’t visited any of those places again…but not because they weren’t good.) Another 25% of the time, I think, “Oh yeah, I’ve been meaning to get this service,” and I do. Rarely do I find a random new place and go there.

    Groupon itself may actually be an inhibitor to businesses retaining new customers. There’s always a new deal to be had, a new place to try. It almost feels like a bad deal to pay full, normal price for anything anymore.

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    • “It almost feels like a bad deal to pay full, normal price for anything anymore.”

      Bingo.

      To be fair, Groupon didn’t create that paradox. If you go to the grocery store, it’s tough to ignore all those bright yellow “on sale” flags. I feel bad paying full price for an item I regularly use, knowing that it might be on sale the next time I go to the store.

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    • I haven’t used Groupon, but I am a subscriber of Living Social. Living Social sends you one email per day, with a different deal each day. You purchase an item/service for 50-90% off. (Mine have all been 50% off.) You then receive a voucher by email, which you present at the restaurant/store/venue. I’m guessing Groupon is similar to this?

      For the three purchases that I’ve made so far, they fall into three of the same categories that you listed above, Trevor.

      -Places I already know/like/have visited: Las Fuentes Mexican Restaurant
      -Places I’ve been meaning to try/visit, where Living Social has prompted me to actually go: Jilly’s Cupcake Bar
      -Places that were completely new to me: Wolf Sanctuary

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      • Yes, Groupon is almost identical to Living Social–it just has a bigger subscriber base. Have you returned to any of the places you’ve been meaning to try or were new to you after you tried them with the coupon?

        Perhaps more importantly: There’s a wolf sanctuary here? Do you get to play with the wolves?

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        • I’ve only purchased 3 coupons so far, and I actually haven’t used any of them yet – so I’ll have to let you know if I return to the place that I’ve been meaning to try (Jilly’s) and the place that was new to me (Wolf Sanctuary). Since I’ve been to Las Fuentes before, I’m sure that I’ll continue to go there, whether I have a coupon or not!

          Yes, there’s a Wolf Sanctuary here! I didn’t know about it either. My friend suggested that a group of us go – so that was actually my first “deal” on Living Social. It’s out in Eureka. https://www.wildcanidcenter.org

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  4. Great post. I’m a newer user of Groupon, as they’ve just recently become available in my area. My usage thus far has consisted of:

    Restaurant–I wouldn’t have gone there otherwise, I enjoyed it, tipped 20% on the full bill and will likely be back.

    Pilates–This one has been huge because I have had to go to the studio multiple times. I think the instructor is great, I can feel the benefit and each time I go I’m tempted to sign up well beyond my Groupon.

    Gap & Body Shop–Retail really benefits from a Groupon, I think, because I’ve spent both of these and spent beyond the Groupon. I was already loyal to Gap but Body Shop has gained my loyalty because their product is so good.

    Pedicure/Manicure–I haven’t used it yet, but I was pleasantly surprised to see the price list. This place is less expensive than my usual choices and the salon looks really nice. I’ll be interested to see how good the service is.

    I agree with you–if your product/service is superior, you will win more customers. However, some people will just keep using the best deal without loyalty.

    Okay, long enough post from me. I’m so glad you entered the script! Good luck!

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    • You have a really good point about retail (a point that could apply to restaurants too): If you spend more than the Groupon, the store does actually benefit.

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  5. Real brief business lesson (form someone learning on the fly):
    My company’s primary measures are on Growth (slaes increase over last year). We measure profitability as a supporting secondary measurement. So we can be highly profitable, but unless we grow the business, we don’t get a very good bonus.

    For example, if in 2009, Widgets cost $5 per unit to make and I charge $10. My goal is 5% growth 2008’s sales total ($4,750), which means I need to $5,000 in sales. When I make my goal, I sell 500 widgets make $2,500 in profit.

    Say, I make my goal on the nose.

    In 2010, my company wants 6% growth, making the 2010 sales goal $5,300. But I got really good at making these things last year, and my cost per unit went down from $5 to $3. I still want $10 per unit. If I sell ths same 500 widgets, and make $5,000 total I don’t make my growth goal. Actually, I had 0% Growth. BUT my profit went from $2,500 to $3,500.

    I figure, most companies have similar goals of growth over increased profitability (unless they have reached a capacity limitation). If I have profits like that, I can either pay myself/employees more, or reinvest them to increase my total sales dollars.

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  6. Those hamburger/cupcake love-children are “Bath Bombs” by Lush. According to the website, you are to, “Welcome them into your bathwater and surrender your naked bodies into their fragrant clutches.” Selections limited. For more details, please visit a retailer near you. (Help! I have succumbed to holiday consumerism).

    Reply

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