So now that many of you have tried Groupon over the last two years what are your plans for 2012? Steve and I are privileged to communicate (either in person, through this SFS site or industry bulletin boards) with thousands of cleaners. We’re always amazed at the varied feedback we get on the Groupon strategy.
Frankly, business basics don’t change. The bottom line is simply you cannot try to be the cheapest “Deal” just like being the cheapest in a ValPak would lead you to bankruptcy. Running a deal that is different than everyone else is the answer. (I think Steve’s favorite word is “differentiation”.) Plus limiting the offer to your most profitable demographic is ideal.
Remember that you don’t have to pay Groupon what they request. Like almost everything else today in business- their fees are “negotiable”. (Heck, you get beat up by “price haggling” consumers. Might as well return the favor!) BUT before you pull the Groupon trigger reflect on these issues …
- Groupon has at least 5 to 6 competitors in every major city.
- In the August 30, 2010 issue of Forbes Magazine, Groupon was called the fastest growing company ever. Today? Less than a year later Fortune magazine detailed a study from Rice University that found 80% of Groupon users are first timers and only 20% become repeat customers.
- Additionally 95% of all merchants who use Groupon never repeat the Deal. Hmmm…
Groupon may be the fastest growing business ever AND the fastest to disappear! In a recent blog business forecaster
Dan Pink predicted: “A year from today, two out of these three entities will no longer exist: Groupon, Kodak, Newsweek.” Kodak is gone and who will be next?
So does all this really sound like a business model you want to be involved in? Or would you be better served by getting back to timeless business marketing basics?
Very timely article, Billy.
We were/are in the process of exploring this type of marketing. I’ve done enough research to know that for it to work the right way for us, we need to structure the deal a specfic way. I knew what I wanted to do and contacted them to find out if this is something we could make work. Basically, we were looking to fill the void in these slow months. I wanted the offer to expire by the end of March, that way everyone would be using them over the next two months. I planned to have limited quantity (as I didn’t want us to get slammed and then not be able to fullfill – I heard the horror stories about that)and have it with in a certain mile radius of our zip code.
We wanted to offer our 2 room rate at 50% off. Our strategy was that most people get more then two rooms done so we were sure there would be opporutinites for upselling even on that appointment. In addition, there would be the add-on of protection for those rooms. We were not including stairs, halls etc. as a room. Groupon wanted to run multiple offers two rooms at one rate and 4 rooms at another. Both of their offers were more then 75% off our regular rates. Of that, they were “gracious” to offer us a 60(us)/40(them) split instead of the 50/50. It meant we’d be getting $28 for what we usually charge $150. With gas, travel and paying our tech an hourly rate, we wouldn’t even break even….we’d loose money. Knowing that the average customer doesn’t repeat cleaning again till between 2-5 years, it’s way to long to wait for the ROI on this one! In addition, their terms were that we make the expiration to use it in July, not by the end of March.
With the 4 room offer there was little chance of us really having an opportunity to upsell to try to break even or make money. I countered with offering another service at a discount (tile and grout knowing we could upsell sealer after it was cleaned, or hardwood floor cleaning with a limited square footage, knowing that people have more then that and then would have to pay the regular rate for the rest of it), but we would no more than two rooms of carpeting. I thought they’d come back and do what we wanted, but they wouldn’t. Not even a counter offer. I was really surprised.
Now it is important to view this type of marketing as just that, marketing. I think many view it as a quick way to get money or generate cash flow. I knew going into this that wasn’t the case, but it would generate some immediate cash flow if we structured it the right way. I had to look at it long term and how it would pay off. I determined we would get a much better ROI with our existing marketing efforts and it would still cost us a lot less. (This is why it’s sooooo important for cleaners to track everything! It was an easy decision not to do Groupon once I compared it to the ROI on my other marketing efforts). If a company does do a Groupon type offer, they MUST have a very strong follow up plan in place. They have to be a company that regularly markets to their existing client base. If not these Groupon customers will never remember you in 2 years when they need you again. They’ll just look for the next carpet cleaner offering a Groupon deal. We do aggressively market to our existing customer base, but even with that, Groupon just isn’t the right fit for us. It’s too long to wait for the ROI from the marketing we would be doing to them once they were our customers. The upfront cost of getting them as a customer via Groupon was so much more then our other marketing efforts.
I haven’t yet explored Living Social and the Amazon Deal of the Day but plan too. If we can run the deal we want, then we may give it a shot. I’ll report back!
Hope this inoformation was helpful and other cleaners can benefit from our expereince. I’d love to hear more about the experiences of others.
Meg
Meg, Meg, Meg- Where were you when I was in business? (I know- you weren’t BORN YET!)
Seriously, though- thank you for a great “down-in-the-trenches” analysis. It is so well done we might just “double dip” and run it as another installment of “Meg’s Story”!
Steve
PS Tell John I said hi and that he doesn’t deserve you! 🙂
Steve,
I have started an other dispatch to you, but is is a work in progress. As you can tell, I’m busy doing my marketing as this is the time of year. I hope to send something your way soon.
Feel free to use this as a Meg’s Story. I also just posted about the exciting things happening for us with the My Flooring Warranty Program offered by John Mapes. You may decide to feature that too once you see it!
Meg
Hi!
This a great article about Groupon!
My experience with Groupon has been rather profitable. We ran a deal back I November and sold over 600. The deal was for 4 rooms. This offer was for our basic maintenance package.
They only allotted us the basic 50/50 split but we operate on a unique method through which we are able to fix our costs (outside of gas)
The interesting thing is that on most jobs we see at least $40 extra. This comes from a staircase, additional rooms, protectant and other possible add ons.
The main problem we face is most of these customers are first timers. That being said they expect the world for the pittance that they paid for a voucher for our services. It’s great getting these customers to try our services but I don’t think they quite understand that there is no one size fits all package for carpet cleaning at this rate… Sure I can get per stains out and remove odor but that’s not included in the value of the coupon…. I’ve seen customers attempt to substitute a room for a stair case even though the coupon states it doesn’t allow that… There is clearly a lot of hassle involved in dealing with this type of customer. I can honestly understand why companies do not repeat their deal run. The statistics will show you that once you run a Groupon you hurt your reputation. These customers are quick to complain… Beware of these yelpers… To be honest I advise not having a yelp period!
My honest advice… While I have enjoyed revenues from Groupon ( $12,000 off coupon sales / $48,000 off of up sells) It is not for every business model. If you pay employees by the hour this is not for you. Believe it or not there is a lot of potential to make money. The coupon sales are just a small part of it… Customer retention is around 15%. I don’t care what any rep tells you… These are deal hunting customers! They will purchase your deal and wait for the next one like a bunch of vultures. This can be said about any deal site however.
The most common complaint among customers is scheduling and not being able to get through on the phone. I have seen many reviews for lots of companies to support this. The fix… Do it right and only allow online scheduling. This has increased my efficiency tremendously!! Plus you capture their email and this allows you some inexpensive marketing :-)!
Meg- although I do not know you, I have browsed your site and can tell your company is first class! I suggest you look into “The Big Deal” on Angie’s List. I feel the cater to a higher class of customer. Also I would get with LivingSocial about that 2 room special but ask them to put it on their Amazon site. They run a bunch of experimental deals on the Amazon site and try also have a better customer base. I love dealing with LivingSocial customers, they seem to be some of the nicer more understanding crowd. I’d love to chat with you about any deals you may be interested in running and I can help by offering insight as well as some of my contacts. If you’d like to chat just ask me to shoot you an email.
For myself I have found that every deal I do is a learning experience. For every deal providing the best possible customer experience is key. My online scheduling is convenient and easy! Also the online system sends out confirmation emails the day before the appt, I call as well. Then I call the day after the appointment to check on the quality of the work. I have found customers just want to be heard and what better way than to voice their opinions to the owner. The next cool thing the online system does is request for a review! I love hearing everything customers have to say, this really helps me find way to improve…
Hope I didn’t just ramble lol but I love business!
Wow, J- between you and Meg Big Billy Yeadon and I just may be out of a job! This “sharing interchange” between the two of you is EXACTLY what Jon-Don is trying to do with this website. No one of us has all the answers- but all of your experiences from down in the trenches are extremely valuable.
So what do I have to do to entice you to a SFS seminar? You are exactly the sort of SFS member we are looking for! 🙂
Thanks again,
Steve Toburen
PS I’d like to know more about your online scheduling system. And thanks in advance for sharing. After all, my favorite saying is, “We’re all in this together!” And so we are …
Hey Steve!
If your coming to Houston or San Antonio… I am as good as there :-D!
I use GenBook for all of my scheduling solutions. It really works! I can view my schedule on my iPhones calendar because Genbook allows me to subscribe to the calendar so I constantly have access to all this information. I also get customers emails and all information when the schedule. I basically nudge them to do everything online for their convenience and it has made my business so much more efficient. They have a free 30 day trial and after that its only $19.95 per month for a 1 person business or $39.95 per month for multiple technicians. It’s really awesome!
J,
I would love the opportunity to chat with you more about this. Thanks so much for the offer. I wasn’t able to find your contact information on the site, so you must have hidden it when you created your account. Please email me at [email protected] or call me 215-343-6450 so we can talk.
I did get a bit further with the Living Social people and I had already asked them about Amazon before you suggested it, so that is in the works and I’m waiting to hear back from them to see if they want to go with what I proposed. Apparently we are rated something special on Angies list (got over 3 “A” ratings) and they’ve called me to get me to accept some super status award, but I didn’t know they also offered deals like this. I think you are right and they may be a better fit for us. I’d love to know about your experience with that program.
Hope to hear from you soon!
Meg