A friend and colleague of mine had an experience using Groupon, a company that sells discounted coupons online to your store, that went horribly wrong. Bob Phibbs, the Retail Doctor, did a Case Study on his blog. (Go ahead and read it… I’ll wait)
In a nutshell, Kim made an incredible offer that sold in far greater quantities than anyone expected and will end up costing her tons more money than she will recoup in new business.
It is a cautionary tale about discounting that Bob Phibbs so eloquently points out. There are so many lessons that could be learned from this, but I want to bring up something that stuck out like a sore thumb, especially in light of all the comments made by Groupon supporters (plants?) putting all of the blame on Kim.
Yes, Kim made mistakes, but the company did nothing to help her.
Kim’s first mistake was to make such a big offer with so little restrictions. But the people at Groupon allowed it to happen. They had the power to say, “Hey Kim, you might want to re-think this.” But they didn’t. They knew they would sell a lot of coupons and make a lot of money with the offer Kim was making.
The second problem happened when the coupon sales took off. Kim noticed the problem, asked Groupon to halt sales and they refused. They told her it was her mistake and she had to live with the consequences. Of course they didn’t want to halt sales. They were making a mint.
Your Actions Give You Away
Look at the signals Groupon sent through their actions to Kim, and subsequently everyone who knows Kim.
First signal… By not helping Kim write up a proper offer, they said that the almighty dollar was far more important to them than the success of the client.
Second signal… By not halting the process in the middle when it was known by all parties that something was wrong, they said that the profit from this one transaction was worth more than any repeat business could generate. They certainly weren’t going to get repeat business from Kim after treating her that way.
More importantly, you can pretty much infer from this encounter that they already know their model is not good for their clients and don’t expect repeat business, so they are willing to do whatever possible to maximize their own return on what they believe is their one and only shot with you.
Bad News Travels Fast
Between Bob’s blog and Kim’s telling everyone she knows about this experience, Groupon is getting a lot of negative publicity and people are seeing from their actions what Groupon truly believes. Their actions speak loudly of their credibility (or lack thereof).
Do you ever have customers who don’t shop with you “the right way”? Do you ever have customers that make mistakes? Do you ever have customers that want to make changes half way through? Do you help them get it right or do you let them fail just so that you can keep the sale?
How you treat your customers when things go wrong speaks loudly to them and their friends of who you are and what you believe. Groupon showed it’s true colors. What are yours?
No matter what business you're in, if you're in it for the long haul you have to be looking at every transaction as a relationship-builder, too. Not only do you want the sale, but you also want/need the referral. And I believe the referral is a bigger deal in the long run. Groupon didn't show that to me in this scenario.
Good analysis, especially after reading through the feedback to Bob Phibb's post. I saw your name half way down and think that these two points are very strong indicators of a supplier's attitude.
Thanks for the shout out Phil! I absolutely believe Groupon will prove to be far worse than Wal-mart was in the 90's to Main Streets. Why? Because of the breathless coverage swirling around those who use them. That's why that one post has become a series of 11 on the dangers of discounting, Grouponing and the rest. Desperate retailers looking for a Groupon magic bullet have to realize the key to success takes a long time, focus and a clear idea of who your profitable market is and isn't. Just like you've done for so many years Phil.