Groupon

Business By LoveMeSomeCake615 Updated 18 Jan 2011 , 5:01pm by Cakenicing4u

LoveMeSomeCake615 Posted 13 Jan 2011 , 5:18pm
post #1 of 26

Has anyone ever used Groupon for your business? Thoughts?

25 replies
Annabakescakes Posted 13 Jan 2011 , 5:37pm
post #2 of 26

I never heard of it, but i just watched one of their videos and I don't think it would work for what kind of business I will have. I would be scared that it would work too well and I would have 1000 cake orders in a week! icon_redface.gif There is no way I could anything like that, I will be a custom bakery by appointment only, in my garage. Illegal to hire help, my husband is a good helper, but there is still no way!

jason_kraft Posted 13 Jan 2011 , 6:26pm
post #3 of 26

There was a story about Groupon on NPR a while ago...the vast majority of retailers who tried it said that the only thing it accomplished was losing them a bunch of money, since most people who use Groupon will only take advantage of the posted deal and never return.

This is especially true if you are competing on quality rather than cost. You will be better off aiming your advertising spend at your target market, and most Groupon users are pretty much the opposite of the desired customer demographic for most of us.

AmandaLP Posted 14 Jan 2011 , 2:52am
post #4 of 26

Basically, how Groupon works, for their "daily blast emails:"

Groupon will sell a voucher that gives customers approximately a 50% (or more) discount on the product. Like, a dozen cupcakes that are normally $30 will be $15 for the discount. Groupon then splits the cost between yourself and the company, so you get $7.50 for that dozen.

The issue is that TONS of people buy these coupons, and then want to use them at their convenience. If you do this, make sure to put restrictions on their use (like, requiring 24-48 hours notice, or only allowing their use Monday to Thursday, etc.)

for a story, check out http://missionlocal.org/2010/05/collective-buying-by-groupon-and-others-brings-customers-and-complications/

Also, check out the other group buying networks, they may be a better fit for your business.

LoveMeSomeCake615 Posted 14 Jan 2011 , 3:14am
post #5 of 26

Jason- That's the main concern we had about it.

AmandaLP- Yeah I know how it works, we have been talking with a Groupon rep on the phone about it, but we have some reservations about it. We just wondered if anyone had done it and had a good experience or not so good.

TartletteTreats Posted 14 Jan 2011 , 4:01am
post #6 of 26

Everyone who has done it (as a small business, not a large chain) has advised against it. It is great from the consumer side though!

cs_confections Posted 14 Jan 2011 , 6:03am
post #7 of 26
Quote:
Originally Posted by resmiff2

Everyone who has done it (as a small business, not a large chain) has advised against it. It is great from the consumer side though!




I wouldn't say EVERYONE. I see a number of business offer their deals again. We've been using Groupon (as a consumer) for about a year and also follow all of the national and local copycats. I've seen about 4-5 bakeries use them and they usually are for cupcakes and some have the 24 hour min. order notice.

FromScratchSF Posted 14 Jan 2011 , 6:39am
post #8 of 26

I buy Groupons, I'd never sell thru them, even though they've contacted me several times. I just can't see the upside for me (or other bakeries). I mean, if I was a restaurant or a cafe, I could count on making money on other food or drink ordered by the customer. But for straight cake/cupcakes? Naw, can't see it.

LoveMeSomeCake615 Posted 15 Jan 2011 , 3:13am
post #9 of 26
Quote:
Originally Posted by FromScratchSF

I buy Groupons, I'd never sell thru them, even though they've contacted me several times. I just can't see the upside for me (or other bakeries). I mean, if I was a restaurant or a cafe, I could count on making money on other food or drink ordered by the customer. But for straight cake/cupcakes? Naw, can't see it.


That's pretty much the conclusion we have come to as well.

Cakenicing4u Posted 15 Jan 2011 , 7:18pm
post #10 of 26

I ran a Groupon for my biz a few weeks ago, and I had all the same radical thoughts that you did... What if what if, what if.... JUST DO IT! You don't pay anything to do it, and you get your name out there in front of 15,000+ people in your area!

Yes, they take 50% of what you sell, but it's better than paying them to advertise for you.

I ran a spend $5 for $10 worth of baked goods at Sweet Addictions Bake Shop. I sold 65. About 50% of those were sold to people who were already customers and already had orders placed. The other 50% were bought by people who want to support small businesses and were curious enough to see what I sell. After that, about 50 people have stopped by and said "I didn't buy it, but I never even knew you were here, so I wanted to stop in"

Overall, I may not have made much money off the initial sale, but what I got in advertising was priceless!

LoveMeSomeCake615 Posted 15 Jan 2011 , 7:58pm
post #11 of 26

Yes, I realize you aren't technically paying anything up front for it, but the concern is that you actually lose money on each deal, because not only would we barely break even on the cost of the cupcakes, but it would be a lot of time in the kitchen that we are not paid for at all. And time is money. I can see the value of getting our name out there, and that's why we are considering it. We haven't ruled it out completely, just weighing all the options and trying to make an educated decision.

jason_kraft Posted 15 Jan 2011 , 8:03pm
post #12 of 26
Quote:
Originally Posted by Cakenicing4u

You don't pay anything to do it



I beg to differ...unless you have huge margins all your groupon sales will be below cost, and since there is no cap on the number of people who take advantage of a groupon offer you could end up wiping out weeks or months of profits in a single day.

Quote:
Quote:

and you get your name out there in front of 15,000+ people in your area!



Yes, but those 15,000+ people are among the most price-sensitive customers out there, otherwise they probably wouldn't be using groupon. In my experience these customers take up more than their share of customer service time while providing less than their share of profit.

Cakenicing4u Posted 15 Jan 2011 , 8:05pm
post #13 of 26

I know that time is money, trust me... But name me one other way of advertising to 15,000+ people at one time without spending a lot of money! And, overall, most people come in with a $10 groupon and spend $20+ on cakes or cupcakes etc.. so I feel like I more than made out in the deal! In the end, you have to do what you think is best, but Groupon introduced me to a whole new line of customers, and specifically, a younger more tech savvy group with cash to spend!

jason_kraft Posted 15 Jan 2011 , 8:11pm
post #14 of 26
Quote:
Originally Posted by Cakenicing4u

But name me one other way of advertising to 15,000+ people at one time without spending a lot of money!



By using Facebook ads, Google ads, and networking with venues and wedding planners you can target a much more profitable customer segment for a relatively small amount of money. Quality > quantity, unless you are struggling to meet large fixed overhead costs.

If you add up the true costs of the groupon campaign you will probably be unpleasantly surprised.

Annabakescakes Posted 15 Jan 2011 , 8:37pm
post #15 of 26

I totally agree with Jason on this one. My prices are high enough, but I can't see making any money on this. $20 worth of cupcake for $10, then you only keep $5. How is that good? I thought the idea was to make money?

LoveMeSomeCake615 Posted 15 Jan 2011 , 8:37pm
post #16 of 26
Quote:
Originally Posted by Cakenicing4u

I know that time is money, trust me... But name me one other way of advertising to 15,000+ people at one time without spending a lot of money! And, overall, most people come in with a $10 groupon and spend $20+ on cakes or cupcakes etc.. so I feel like I more than made out in the deal! In the end, you have to do what you think is best, but Groupon introduced me to a whole new line of customers, and specifically, a younger more tech savvy group with cash to spend!




See the problem for us is that we don't have a storefront, or anywhere for people to come in and grab more than they came for. We work out of a private commercial kitchen, and everything we do is a custom order. So unless we can talk the person into ordering more when they call with their Groupon (not likely), that wouldn't happen for us.

Cakenicing4u Posted 15 Jan 2011 , 8:39pm
post #17 of 26

eh, to each his/her own I suppose... I have five other bakeries within spitting distance and I had to differentiate myself... we all FB, we all Google, etc... but only one of us has a retail shop! =) It worked for me and the costs and time input for Groupon were acceptable to me.

cs_confections Posted 15 Jan 2011 , 8:40pm
post #18 of 26
Quote:
Originally Posted by jasonkraft


Yes, but those 15,000+ people are among the most price-sensitive customers out there, otherwise they probably wouldn't be using groupon. In my experience these customers take up more than their share of customer service time while providing less than their share of profit.




And I beg to differ on this. While a portion of the buyers WILL be those who only buy at a discounted rate, there are also plenty who like it to be able to learn about and try new places at a discount...new places that they'll be back to. We've purchased about 40 deals - three expired before we got a chance to use them (our fault), two had terrible customer service, 1 had horrible product - yeah, those we won't be back to. But we've already gone back to several of the other places we had previously purchased deals for and paid full price because we like their product and they treated us well. We don't look at the Groupon amount as our budget to stay under, but look at it as a discount to whatever we want to buy.

I think it could be a good tool if properly utilized - set your cap to what you can handle (and yes, they can set a cap to only sell X amount, just as they don't "tip" or become active until you sell X amount), set your terms to work for you and provide great product and customer service. If you have the ability to upsell, even better.

Yesterday, one of our local copycat deal sites had another cupcake shop. Actually, looks like it's running through the weekend - http://www.dealofthedaysa.com/

LoveMeSomeCake615 Posted 15 Jan 2011 , 8:41pm
post #19 of 26
Quote:
Originally Posted by Annabakescakes

I totally agree with Jason on this one. My prices are high enough, but I can't see making any money on this. $20 worth of cupcake for $10, then you only keep $5. How is that good? I thought the idea was to make money?




Exactly. That's what we thought too, but according to the rep we spoke to, they never intended for it to be a way for businesses to make money off of it. They think of it as advertising and customer acquisition. While that is important, I am just trying to determine if it would even really work that way for our type of business.

Annabakescakes Posted 15 Jan 2011 , 8:55pm
post #20 of 26
Quote:
Originally Posted by CakeMasterSRC

Quote:
Originally Posted by Annabakescakes

I totally agree with Jason on this one. My prices are high enough, but I can't see making any money on this. $20 worth of cupcake for $10, then you only keep $5. How is that good? I thought the idea was to make money?



Exactly. That's what we thought too, but according to the rep we spoke to, they never intended for it to be a way for businesses to make money off of it. They think of it as advertising and customer acquisition. While that is important, I am just trying to determine if it would even really work that way for our type of business.




So, you basically work your A$$ off for nothing to "save" yourself the money of paying for good advertising? Sounds no good to me! Unless you are really hurting for business, you have some volunteers to help out, and advertising in your area is just never going to happen.

LoveMeSomeCake615 Posted 16 Jan 2011 , 1:02am
post #21 of 26
Quote:
Originally Posted by Cakenicing4u

eh, to each his/her own I suppose... I have five other bakeries within spitting distance and I had to differentiate myself... we all FB, we all Google, etc... but only one of us has a retail shop! =) It worked for me and the costs and time input for Groupon were acceptable to me.




I'm glad it worked out for you! Thanks for sharing your experience, I wanted to get some feedback from people who have actually done it, so I appreciate you sharing! thumbs_up.gif We will continue to do research and determine if it's a wise choice for us.

Cakenicing4u Posted 17 Jan 2011 , 8:44pm
post #22 of 26

Also, something to throw out there.. once you run one ad with them, you have the ability to set up your own ad, and the percentages change... set up your own ad and run it to everyone in the database, you get 75% of the sale, and if you have a following (you can follow particular businesses that you like and get alerted when they run ads) if you advertise to only your followers, you get 90% of the cut.

I'm not sure when I will run it again, but I'm sure I will as it grows in our area!

And yes, no harm no foul. I wish I would have had someone else to ask, other than my aggressive marketing pro of a sister who said "DO IT" and tamped down every objection I had. Usually, her instincts are right on target for my business, and it worked for me! Now my competitors are going to run groupons, but ha! I was the first, LOL... and I'm anxious to see what they run so I can decide what I want to run next time.

jason_kraft Posted 17 Jan 2011 , 10:07pm
post #23 of 26
Quote:
Originally Posted by Cakenicing4u

if you have a following (you can follow particular businesses that you like and get alerted when they run ads) if you advertise to only your followers, you get 90% of the cut.



Why would you target a groupon deal to only your followers? Instead of offering a de facto 55% off deal you could use twitter or email to target your existing customer list with a more reasonable offers like 10% off, free cupcakes, or a new flavor.

Kiddiekakes Posted 17 Jan 2011 , 10:19pm
post #24 of 26

Hmm..Sounds interesting but I'm not sure I would want to discount my prices to allow Groupon customers to get a percentage off your product.I think this would attract only the bargain hunter and you run the risk of them never returning...or they might...and you've done a ton of work at half the profit...at any rate..Interesting concept.

LoveMeSomeCake615 Posted 18 Jan 2011 , 1:51am
post #25 of 26
Quote:
Originally Posted by Cakenicing4u

Also, something to throw out there.. once you run one ad with them, you have the ability to set up your own ad, and the percentages change... set up your own ad and run it to everyone in the database, you get 75% of the sale, and if you have a following (you can follow particular businesses that you like and get alerted when they run ads) if you advertise to only your followers, you get 90% of the cut.




Hmm, that's weird, the rep we talked to didn't tell us about that. He mentioned that many people run ads with them again, but he didn't say anything about getting better percentages with subsequent ads.

Cakenicing4u Posted 18 Jan 2011 , 5:01pm
post #26 of 26
Quote:
Originally Posted by cs_confections

Quote:
Originally Posted by jasonkraft


Yes, but those 15,000+ people are among the most price-sensitive customers out there, otherwise they probably wouldn't be using groupon. In my experience these customers take up more than their share of customer service time while providing less than their share of profit.



And I beg to differ on this. While a portion of the buyers WILL be those who only buy at a discounted rate, there are also plenty who like it to be able to learn about and try new places at a discount...new places that they'll be back to. We've purchased about 40 deals - three expired before we got a chance to use them (our fault), two had terrible customer service, 1 had horrible product - yeah, those we won't be back to. But we've already gone back to several of the other places we had previously purchased deals for and paid full price because we like their product and they treated us well. We don't look at the Groupon amount as our budget to stay under, but look at it as a discount to whatever we want to buy.

/





This is exactly how we feel about groupon... It's worth giving them a shot, and I always spend more than the coupon is worth... I've been back several times to one place, one place we won't go back to, and there's other places I just can't wait to try! It's an experiment of sorts. It must be a woman thing that I'd rather try a place with a coupon than without! LOL

Quote by @%username% on %date%

%body%