Memo to Groupon: Best cheapo deals have a premium tag

Reminds me of debenhams

The big problem with JC Penney, and one that Johnson has thus far been powerless to stop, is that over the years it had fostered consumer dependence on deals. The company offered 20 to 30 different prices for the same product in the course of a year, but always a deal. Always on sale. In fact, Johnson told investors that most of JC Penney's merchandise was being sold at discounts of 50 per cent or more.

Same thing at debenhams. There's a sale on pretty much every day, there's maybe 1-2 weeks a season without any sales on, and during those periods the store is empty. Personally I couldn't stand it, mostly because even on sale the clothes were the same quality as peacocks at double the price (that's the sale price not the original tag)

USP - the clue is in the acronym

Yup, we're talking Unique Selling Proposition.

The thing you have that nobody else has. The problem with discounts or Groupon is that giving people money off something is not unique. As a consequence you can't really build a success story on it - there'll always be someone else who can do it a little cheaper or for a little longer.

Groupon turning you good customers into unsustainable tyre kickers!

I have seen the Groupon (and other Voucher type sellers) type effect with local businesses, once a business appears on Groupon the clients tend to value the products and services the business sells less.

The good clients paying sustainable prices object to paying over the odds - sometimes they even feel cheated by the business using Groupon - selling cheaper deals to Groupon clients (and not them as they have been loyal).

The typical Groupon client is only loyal to a deal, not Groupon and not the business selling services through it - want to shift boxes fast with very low margin - Then Groupon is for you - Desperate for cash (ignoring long-term profit and just covering variable costs) - Then Groupon is for you.

Want to be still trading in 3 years time profitably - then reconsider the voucher deal route as the main route to winning new business - the clients have no affinity to you and just want a deal.

Back in the day, when IBM sold PCs,

I might have this wrong, but I understand that you could negotiate to buy IBM PCs at EIGHTY PER CENT discount if you haggled, but it was a $1000 PC priced at $5000, or whichever. So with the discount, you got to pay just $1000, for a class of computer that you could buy elsewhere for just $1000 - only without being the smart negotiator that got the terrific discount.

the irony with the heroin analogy

Is that heroin is one of the few things that would be worth promoting on Groupon.

The USP of physical addiction would keep customers coming back long after the deal ended.

Freeloaders follow the bargains

Groupon expects business to discount their prices by 50% of which Group keeps approximately half and only pays the rest out in staggered amounts. So the business is supposed to provide the same service for 25% of the full price which they might not receive all of for months. Then these freeloaders descend like a swarm of locusts and disappear as quickly when the deal is gone. Is it any wonder so many go under?

About the only kind of business which can sustain this model are "service" ones, e.g. beauticians where the full price totally made up and there are low overheads to worry about. Oh so the eyebrow waxing was €60 and now its €30 - bargain!

For restaurants or businesses selling actually goods it is commercial suicide.

I've seen at least one restaurant locally killed by these coupons and I wouldn't be surprised if there were a few more. Businesses that want to survive would be better off printing some 50% off flyers or advertising a set menu deal on a board outside their door. It's the same deal to consumers but the business gets to keep all the money and gets it instantly.