is groupon right for your business - from paul cubbon for think! vcm webinar march 2011

8/6/2019 Is Groupon Right for Your Business - From Paul Cubbon for Think! VCM Webinar March 2011

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WWW .THINKSOCIALMEDIA.COM

SOCIAL MEDIA WORKSHOP

WEBINAR BROUGHT TO YOU BY:

Is GroupOn good for your business?

Paul Cubbon Webinar March 9th 2011

[email protected]

www.blogs.ubc.ca/paulcubbon/

Speaker notes in each slide provide reference links and more resources


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Less than $15 to the salon for 1.5 hrs?!

Follow the money. Consumer pays Groupon $29 for

$130value

Salon gets $14.50 from Group-on;

installments over ~4 months

Salon costs include staff, product,

rent, utilities etc.

Some costs fixed, some variable

BUT, a loss maker on the single

transaction

SO, WHAT HAPPENSNEXT?


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What happens next?

IF Groupon customer is a NEW customer shecould:

Return to buy at full price;

Only return when deep discounts are offered;

Influence other consumers, positive/negative

Impact staff morale, positive/negative

Impact customer service, positive/negative

Think Lifetime Customer Value in differentscenarios

Variations with upside

If2 people consume $40, Pivogets $25 & possible repeat

Expiring inventory; plus timecontrolled entry slots - $11 vs. $0

Groupon Gap deal Aug 19th 2010 - $25

for $50 value

441,000 groupons

sold = $11m+

First national deal

for local model

Mutually attractive

advertising?


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Academic study 1

Harvard: Is Groupon good for retailers? Jan10th 2011

Working paper: To Groupon or not toGroupon? http://www.hbs.edu/research/pdf/11-063.pdf

Key themes

Price discrimination

Advertising benefit

Structured approach to questions businessesshould ask before deciding

Academic Study 2Rice University, Fall 2010

150Groupon businesses in 19 cities (6/09-8/10)66% profitable; 32% unprofitable.

Restaurants were the most unprofitable category,describing Groupon customers as "entitled," poortippers, and definitely not repeat customers.

Spas, on the other hand, were the most profitable

(though their Groupon-using customers were still badtippers).

42% said they would not use Groupon again

Recommendations include: selective, partialoffers, designed to link to repeat behaviour.

Living Social

Competition


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Jan 19th 2011: Living Social Sells >1

million Amazon coupons: $13m+Like Gap Groupon

A national, mass advertising play

For Amazon, a $15 discount off of normal basket.

Swarmjam

More competitors. Barriers to entry?


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eConsultancy view

Group buying and the new customeracquisition lie Jan 20th 2011

eConsultancy cont.

Patricia Robles:

Experiments with higher price, higher

margin itemsExample:Fashion start-up

Average consumer spend = $500

Grouponis -$150 at $50 cost to consumer

Run in multiple cities Fall 2010

Net from consumer on purchase = $350

Company also gets $25 from Group-on, in 3staggered installments.

So far, only ~10% redeemed

Intent is to follow-up with custom messaging togain repeat purchase and leverage word of mouth


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Tourism Operator Groupon example

Offer: $27 for 2 adult passes& voucher for product from gift

store Equals50% off the retail rate (plus cc process ing fee)

Offer delivered to 113 800 Grouponmembers

39 000 opened the offer

543 bought the offer

Operator was paid $13.50 per voucher sold (~25% of normalprice)

390 vouchers redeemed (= $19 value per voucher earned)

150 unclaimed (and not yet expired) Grouponvisitors brought a total of 85 (full) paying guests with

them

Grouponvisitors spent an extra $1450 total in the gift store

WHAT Qs WILL YOU ASK TO ASSESS IF THIS IS A GOOD RESULT?

Business strategy and potential role for

deep price discounts? STEP BACK

Why offer discounted pricing at all?

How does it fit your business model for Customer acquisition

Retention

Revenue growth ..or short-term cash management? Margin management and profitability?

What are the long-term as well as short-termimplications?

Will deep discounting be the new norm in yourcategory?

Can you WIN with this tool?

Will you start a price war?

The cocaine

analogy

High-low

pricing is

devastating

to the

consumers

opinion

of your

brand.


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Demand peaks and valleys

A

B

C

The last scenario is what you should be trying to achieve with any price discounting. But for it

to work, your core offering, the brand experience and perceived benefit has to superior

to the next discounting competitor.

Example of seasonality

IF price discounting, alternative

choices to Groupon, etc

Coupons in

existing

media

Loyalty

cards

Fundraiserbooks

Direct

promotion

Should Groupon have accepted Googles $6

billion offer?

Google

Offers

News

leaked

Jan 20th 2011


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Why we invested in Groupon

the power of data

VC Greylock explains investment as a focus on

the data and potential to customize offerings

Techcrunchinterview, Jan 11th,2011.

What might happen in the next year? Volume of deals continues to increase, raising consumer

expectations for deep discounts as the norm.

Aggregators of discounts help consumers sort throughthe deals. (MS Bing March 2011 announcement)

More extreme deals will be offered by those trying tostand-out on low price.

At some point, the sale price becomes the list price.

Each operator should press pause until it has its ownthought through strategy.

Focus on value-add differentiators.

http://bit.ly/eVpfZdeConsultancyMarch, 2011


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What this means for tourism operators

Near in vs. long-haul market One time vs. repeat business model

Low vs. high margin

Hotels and accommodation

Bars/restaurants/retail

Spas/beauty/gyms

Adventure/experience/outdoor operators

Takeaways

What is your marketing strategy?

Where does price discounting fit into this? (if at all.)

Work through margin as well as revenue implications.

Look at longer-term as well as short-term:

Financial

brand

Can you customize to improve effectiveness?

Partial discounts

Time controlled

Linking to subsequent behaviour

Leveraging social media during and after usage.

If you decide to price-discount, is Groupon (or a similaraggregator) your best choice?

Q&A

Questions?

Comments?

is groupon right for your business - from paul cubbon for think! vcm webinar march 2011

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