the groupon experiment

If you follow my blog, then odds are you already follow us on twitter and facebook, so you'll know today was our 2nd bat at running a Groupon coupon. I had commented throughout the day and got a lot of feedback about what my experience with it was and I wanted to share. I have also read a lot of negative comments on Groupon so I wanted to share some thoughts about that too.

I'll start though, with the disclaimer. No one from Groupon has asked me to write, I am not an expert on, well, anything really, and by no way is my word law. My experience and business is based and has grown on trial and error, and lately a lot of book reading. I don't have a masters in baking nor do I in business management. It's just me, Pam.

Our first Groupon was run about a year ago and was one of the first in the Winnipeg market. It went well. We tracked everything we could really, the date they redeemed, what else was purchased. Other than that not a lot of info could be derived from it. I can't say I know how many people are ordering cakes now because they bought a Groupon, but if I had to guess, I would say very few. Our promo is 50% off a dozen cupcakes, with a little list of restrictions and rules. We've been up for about 10 hours and we're over 500. We capped it at 1000, so we're well on our way. Last years coupons were good for one year and we're just at about 50% redemption. This one will be good for 6 months only. Those are the bones of it, now onto the feelings...

Groupon has gone from a pretty fun-feeling advertising/marketing group, to one that is taking quite a bit of flack. I've been forwarded countless links to articles written online about Groupon and how they're hurting small biz, how people have fallen to ruin because of it and how it's just a plain old bad idea. These articles have made me think quite a bit, thus the need to write. I feel as though I also need to defend myself for running the promo, so I wanted to share how I came to doing it. They received media attention twice earlier this year, once for a poorly timed/badly tasting ad they ran during the Superbowl (really poor taste guys) and then later when Google tried to buy them for like, $3 million and they said NO. Not the wisest decision.
(again, just my humble opinions).
My approach to advertising is to proceed with great caution. I don't run ads in magazines, I don't use billboards, bus stops or ads on the radio. My theory is, I need to know that this money spent will result in an action, the action being people coming in and buying things from me. I could run an ad in a magazine, and I would need to make it trackable (like adding a "mention this add an receive 10% off!) kind of thing to know what that ad is bringing in for me. Otherwise how do you know? I really don't do those kinds of advertising's though because they are SO expensive. I don't have cash. I need to make decisions that are smart and worth my time and energy and the little money I can invest. The other thing for us is that we are already pretty busy. Good thing and bad thing, but mostly good. So when we advertise, it's pointed and intentional. I know who can take the extra pressure and where we can apply it at the shop. Example...I can't run an ad or promo for custom cakes. Siew-Chiing and I decorate and we are at our max each weekend. Adding a discounted promo to this area would literally kill me. I also know what I can afford to discount. Mathing is not my strong point, but I have a good calculator so we get by. (Jenn, along with being a master baker is also a whiz at long division. True story.) So I know what it costs us to make a dozen cupcakes. This is key. You cannot discount something that will end up costing you more in the end. That's bad for everyone. Mostly you.

Here are some of the pros and cons and how I think groupon can work for us (and other small biz's) based on the articles and negative comments I've heard about groupon in general. Bottom line, though, it's not for everyone. Especially very specific jobs and business's that are based in custom things and have few resources (like family members who can ice cupcakes)...
Timing- September brings fewer walk in customers to the shop and people are busy with their back to school routines and evening classes that start up again. Wedding season is slowing down and our order book is slim. It is timely for us to run this right now. You have to know how much more business you can take on, how it will impact your day and how it will impact your staff's days.
Product-You can't discount until you know the worth behind the item. What is your discount truly worth? What is your product worth? We chose cupcakes with great intention, and we will not lose money on this promo because of it.
Customers- If I had to guess, I would put my regular customers at about 30-50% of the make-up of who bought the groupon. The other 50% are the couponers. The discount seekers, the ones wanting great deals. They will be new to us and hitting up this demographic may or may not lead to repeat business. Our product is not cheap. It's not an everyday kind of item either (in terms of birthdays and wedding cakes). But through great service we can widen our base to include these new guys and turn them into new regulars. If not, and if they've bought this simply because of the deal, that's fine too. Winnipeg is notorious for bargains and our goal thru groupon is exposure. The grouponers have to literally come to my store to get my product. They must step foot in here, and that's big. We are in a neighborhood that is notorious for bad parking, specific boutiques and art galleries. This is not the mall. I hope to win them over with our quaint little shop and have them bring their friends back to show off the little gem they found downtown.

Discounting your product often is a bad move, and has to be done carefully. People don't trust when discounts are deep and often, they will wonder why they should pay the full price on a regular visit. It also leads to the cheapening of your product. So we do them, but infrequently.

So I will keep you posted, dear readers. Mind you, this kind of thing takes time, years really, I'll continue to analyse it and comment on it. Small businesses are often built around a person loving something they're doing and not a business degree in entreprenuralism (is that even a major?) And like I said above, I don't hold a commerce degree nor will I ever. I'm a baker. I will share what I can and what I have learned to all you other crafty folk so you don't make the mistakes I have and we can all grow together. Aww...warm fuzzies.

Thanks for reading. And if you're new to my blog because of the groupon, please know I'm not always this long winded :) I added pictures just for you.


Anonymous said...

Thanks Pammy. This is awesome. And if you are new to this blog through groupon, she's lying. She is long-winded, but oh so clever.

Hollie Pollard said...

Well I just had to leave a comment because well of the picture of the Scrabble cake..my favorite game. I do use Groupon on occasion here in Toronto, and I write about money but you know what it is not a deal unless you would buy a cake or cupcakes anyways for that event.