Groupon is the latest social media tool for those marketing dollars being pulled out of the Yellow Pages. (I told you almost a year ago that the Yellow Pages are dead– they just refuse to admit it!)
If you follow the industry discussion forums (and you should!) you’ll see a huge disparity of opinions on carpet cleaners using Groupon. Some love it- some don’t.
For the uninitiated Groupon, is a web-based company that offers daily coupons to consumers on products and services. Here is the way Groupon explains it:
“What is Groupon? Each day, Groupon features an unbeatable deal on the best stuff to do, see, eat, and buy in your city. By promising businesses a minimum number of customers, we get discounts you won’t find anywhere else. We call it ‘collective buying power’!”
Now for the cleaning industry this “unbeatable deal” often is an offer like “3 rooms of carpet cleaning (normally $79.00) now only $49.50!” The cleaning company states how many customers must purchase before they will honor the offer. To keep up the excitement Groupon maintains a “running live balance” during the day’s offer and lets people know “when the deal is on”. Groupon keeps half of the 49.50 and you receive less than 25.00 for the whole job! Hmmmm, see if this “deal” could work for you …
PROS:
a) This offer may bring in 200 (Or more!) customers and that means an infusion of 5000.00 plus into your bank account. During the slow times of the year this could be huge help to your company. b) Your Groupon promotion will also put you in front of 200 new potential Cheerleaders that will tell their neighbors about your wonderful service. Then you can clean the neighbor’s homes for full price or even at the 49.50 amount (your gross just doubled!) as Groupon does not get a cut on this business. Even in the homes you booked through Groupon you’ll have the chance to add on other profitable “up-sell services”. (And you’ll keep ALL this money since Groupon only gets a cut of the original 49.50.)
So for a new company Groupon-offers may give you a quick “jump start” when you have few or no customers to begin with. (This reminds me of the venerable industry “free room offer.”) NOTE: Regardless of which offer you decide to do, don’t forget to schedule the jobs geographically to minimize drive time.
CONS:
My biggest “con” for Groupon is the same as my first “pro” above! (Hear me out!) a) “This offer may bring in 200 customers” so it may very well overwhelm you! What if 500 customers sign up for the offer? (I’ve heard some areas will have over 2,000 homeowners sign up!) If you are a solo owner-operator and you can clean 6 “3-room Groupons” a day even 500 jobs will take you 4 1/2 months! So are your Groupon customers going to happily wait 4 months or more for what they have already paid for? I doubt it! And it gets worse …
IF you are banging out six jobs a day how will you have time to sell and/or perform any high profit add-on services? More importantly, how will you create Cheerleaders running through each home with an average cleaning time of less than one hour? NOTE: Remember that the danger with social media sites such as Yelp is that people are very quick to complain online and these unhappy customer’s griping can quickly go viral which could destroy your company! Seriously!
While Groupon is the big dog in this field, many imitators are jumping in. For example, Angies List has “The Big Deal.” Groupon definitely has the big numbers right now. But I feel Angies List has a better demographic than Groupon since customers pay a yearly fee to join Angies List. This “pay to play” tactic tends to filter out the cheaper clientele. The other benefit of using Angies List is that they only ask 28% instead of 50% of the offer with Groupon. This almost doubles the amount the cleaner keeps. On 500 jobs this would put more than 10,000 extra bucks in your pocket. That could make a huge difference.
As with any new idea, Groupon now has many competitors. Check out this link to see a list at TechCrunch- Deals Galore, Competitors Abound: A Primer On Groupon-Like Startups Is all this a fad? Well, Google recently tried to buy Groupon for somewhere north of 3 billion dollars! This tells me that these programs may be around for a while. Just like with carpet cleaners, the marketing program that differentiates themselves from the pack will win.
To get another perspective on these sites check out Laura Ries blog on the subject: Ries’ Pieces: Coupons, Groupon and Cocaine
Laura comes from a good marketing background as her father Al Ries is the coauthor of the marketing classic Positioning and many other books over the past four decades.
As I write this blog I’m frankly still ambivalent on Groupon. You must analyze if Groupon will work within the framework of your company. I’d appreciate your comments and/or experiences below. As Steve Toburen always says, “We’re all in this together.”
Bill Yeadon
Hey Bill,
Great article. I would say it’s right on how this whole Groupon deal works.
I did the Groupon deal in the Dallas area when Groupon was young. As a matter of fact I was one of the first…possibly THE first do have a carpet cleaning Groupon in the Dallas area. This was November of 2009 and I was able to cut a better deal than the 50% that Groupon does now. I heard about Groupon on the news and jumped at it. Anyone who knows me knows that I am always looking for new ways to market my business.
Anyway, I did the deal for 3 rooms $79.00 up to 150 square feet per room. We sold just under 100 of them…which is low by todays standards. The deal isn’t really all that great of a deal now as some cleaners are doing the $49.00 3 rooms or better.
The Groupon deal really jump started my business. The first deal we completed ended up being $650.00 because we were able to clean more rooms and some tile. To keep this long story short, we were able to up sell over half of the Groupon deals and made out pretty well after all was said and done. The Groupon expires 6 months after the deal starts. We had customers calling to use their Groupons up the last day. I was surprised at how many people actually waited that long to redeem them.
The biggest Pro out of all of this was just how many people clicked my website and scheduled jobs with us without buying a Groupon. Like Billy said…we got to keep all that money and Groupon didn’t get a cut.
Groupon is a huge risk. I am watching a guy in the Sacramento area as his deal is running and he had sold 520 Groupons the last I looked. And for some reason, you have 4 days to buy his deal instead of 1. That’s a new change. I hope he can handle the work!
Like any huge risk, there can be a huge benefit. It was a benefit for my company and I’ve actually been waiting over 6 months to get into another deal. Problem is, my deal isn’t as appealing as it used to be so the lower priced guy gets in before me. Maybe that’s for the best?
Good luck if you end up running a deal. My suggestion is to figure out what is the absolute lowest price you can do a job for and then double that price for the Groupon (So Groupon can get their cut). If they run the deal, great! If not, no harm no foul.
Remember, there is always the Groupon store…which is a whole other article. Right Bill?
Thanks for listening,
Brian Robison
http://www.NetworkHomeServices.com
Wow, Brian. I think my job here may be in jeopardy with you writing an analysis like this! Thank you for your down-in-the-trenches advice.
Steve
PS Folks, if you wanna Make More Money you really need to get to know Mr. Robison. (Only one “n”!) You can find him at his coincidentlly named Make More Money Room on the http://www.MikeyBoard.com discussion forum. Why not visit Brian and learn from him too?
At SFS we don’t want you to ONLY “drink our Koolaid”. You need to learn from everyone and then come back here and share it with our little “band of brothers”.
Thanks Steve. No problem at all.
the link is
http://www.mikeysboard.com
You missed the “S”
That was good reading! Groupon I think has really negatively affected the carpet cleaning market here in Sacramento, Ca. Groupon has flooded the market with these cheap carpet cleaning deals at the cost of good cleaning businesses. I was lucky to sell my equipment before winter hit and fell that there is no market left until Groupon figures out what they’ve done. I think within a year or so the word of poor cleaning services from Groupon will surface and hopeful the market will recover. I just wonder how the product supplier are surviving without us buying their products to clean with because this has to be affecting them just the same as us service providers are affected. I waiting it out before I get back in.
We offered a Groupon when we first opened our doors and we got overwhelmed. We sold nearly 800 of them. For the most part clients were understanding that we had to schedule them up to a month or more in advance. The down side to being this busy with such a little amount of return is that the cost to do all the jobs gets eaten up in the first part of doing the work and unless your add ons start to kick in then as you start wrapping up the deals then you are running on fumes financially to run a very full schedule. If I were to do a Groupon again, I would limit the jobs to a reasonable number or to about 150% of the number that I wanted to schedule in a months time. This way they will trickle in over the next couple of months and allow me to still have room in the schedule to do call in and referral jobs at a higher price point. Great discussion and important to think through.
Thanks, Jason! It appears that in many markets the “bloom is off the rose” on Groupon with both consumers and businesses. As everyone says use caution.
Steve
PS IF you still want to do this type of marketing deal there are many options out there that demand a much lower percentage than Groupon.
Well let me get in on this old conversation. I live in Huntsville Alabama and Groupon has (currently) only three carpet cleaners on board in this area. The reason is obvious, Groupon requires that you drastically reduce your price and then they take 50% of the reduced price in the Groupon deal.
I am doing it so I am one of the three. As Bill Yeadon noted there are pros and cons. The cons are obvious, NO profit. But if you look at it solely as a marketing vehicle then it becomes a pro. If you expect to make money from the Groupon, forget it! It is hard to upsell these folks because they have the Groupon mindset. But if you do quality work then you can get great reviews. I have only 5-star reviews. The real secret is in taking advantage of the restrictions you can setup on your deal.
For example, I limit Groupon customers to only be allowed to book Monday through Wednesday mornings from 9 to 12 noon. I also limit how far I will travel in the city. I tell Groupon buyers that the Groupon only covers a basic clean and heavily soiled areas will require additional cost (but I don’t do this way the bait and switch guys do). I also tell them that it does not cover pet stains and odors (it is amazing how many people from Groupon call me with pet issues. I simply tell them to read the Groupon deal more thoroughly).
I added these restrictions after I got burned early on. I have gotten burned but learned. What’s cool is that many people call me BEFORE they purchase the Groupon (they found me via the Groupon site) and ask me about the deal. I always tell them to forget the Groupon and then I quote them a fair price to work with me directly. They want my service because of my reviews. I give a higher price than the Groupon but “throw in” a few value items for them. I even tell some of them that Groupon takes 50% and they are always shocked and then only want to pay me directly.
If you are like me and don’t have a big advertising budget then Groupon can get your phone to ring. I get a call or two every day from Groupon folks. Some pay me directly and some buy the Groupon. I look it at as “physical advertising” more than “paid advertising.” Not the greatest but I get referrals and repeat customers. The repeat customers call me directly. So, I will keep it a bit longer.
Tony
Kleaneasy Carpet Cleaning, Huntsville Alabama