Will Groupon survive?
But let’s stay at the merchant level right now. Do the ROI calculations even make sense?
I’m not here to say Groupon will fail. If you’re opening the doors to a new restaurant or other retail establishment, it may be smart to benefit from the marketing exposure Groupon will give you. You may not even have to pray for low redemption rates. It’s all new business when you’re new.
But if you’re established, can or should you count on Groupon’s ROI numbers shared at the NRA show? While walking you through their ROI calculation, they project that 5% of those who redeem will return, and then, if those 5% return once per month for the next year, and spend just slightly more than your original deal, you’ve got a 3:1 return. (And, hey, what if they bring friends?!)
A restaurant marketing panel member said during one of the sessions I attended at the recent National Restaurant Association show in Chicago that her aim was to get more regular customers who pay full price.
Will that ever happen if you’re relying on Groupon as your acquisition marketing partner?
Five percent is not a big percentage. Especially if they were all drawn to your location in the first place by a massive discount. And counting on them spending “slightly more” than the original deal was for is a reach, isn’t it?
And heck, returning once per month for the next year? What’s that metric based on? And can you even predict that? These are deal-seeking-and-redeeming consumers we’re talking about here. And what about the possibility that those seeing your deal are just too far away? A recent deal for my Groupon area (dubbed the Inland Empire in southern California), was 73.6 miles away. I’m not driving 73.6 miles to pay just $10 for $20 worth of pizza. And…and…and…and…
The point here is that retailers (most notably restaurants) have to really do their homework to make certain a “daily deal” is the right thing for their business.
A few related articles that don’t paint the best picture. But it sounds like some folks are worrying less about Groupon as an instant revenue-generator…instead seeing it as a advertising vehicle to get their company’s name out into the marketplace.
- Painfully low retention rates of BOTH buyers and merchants. via David Heinemeyer Hanson.
- Will Groupon make customers more fickle?
- Who gets the real deal with Groupon? (video)
- That Posie’s Bakery & Cafe story I linked to above? It has hit TechCrunch…with video. It’s not a happy story.