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Groupon Gone Wrong: One Customer’s Sad Tale



You rarely hear people complaining about having too much business, but when that business arrives in the form of 1,000 Groupon Coupons it can be a huge headache for everyone involved.

Jessie Burke runs a small cafe in Portland and she decided to try the group deal service in hopes of getting some new customers. What she got was an endless stream of people who came for the deal and probably never returned after that.

In a recent blog post that has gone more viral than the author had hoped, Burke says that working with Groupon was the biggest business mistake she’s ever made. She takes full responsibility for her choices but still outed the company for two policies which may or may not be true.

The coupon deal was $13 worth of food for $6. What a bargain. According to Burke, the Groupon sales rep said that on deals under $10, Groupon gets 100% of the profit and the client gets the advertising. Huh? She and the sales rep came to a 50/50 agreement but the real problem came in the fact that there was no cap on the deal. To her surprise, more than 1,000 deals were sold (wow) putting her well into the hole after deducting her costs. $8,000 in the hole, says Burke.

BusinessInsider published a letter of response written by Groupon CEO Andrew Mason that states that the company does indeed have caps for deals. And because they’ve experienced this problem before, they have a set of materials to help train customers before they set up a Groupon deal.

Since the complaint made it around the web, people have commented on Burke’s post saying they’ve had similar experiences, like a spa that couldn’t handle the number of people they had to book, but many blame her for making a bad deal.

One comment suggests that losing money is part of promotion and that’s an interesting thought. I always assumed that companies took a financial hit when setting up a Groupon coupon and chalked it up to advertising costs. The idea that Gap makes a profit even when offering 50% off is bothersome. On the other hand, I also assumed that there was a cap on these deals. A cap makes sense from both a financial and marketing standpoint. The financial reason is obvious, but from a marketing standpoint, limiting a deal makes it more urgent and interesting. Only 10 left! Don’t wait.

In Burke’s defense, I wouldn’t expect 1,000 people to buy a deal for a local cafe, either. And I am surprised by the high commission that Groupon takes off the top. Gotta wonder how flexible that is because it sounds like a little pushback might have earner her a better deal.

What I take away from all of this is that you’ve got to fight for everything. Upon reading both sides of the story, it seems that she could have said you get 25% and we cap the deal at 500. That, or I walk away. Groupon doesn’t lose anything on that deal, so I imagine they would have taken her up on the offer.

Does Groupon ever publish a Groupon coupon for Groupon — 50% off commission on all deals over $10. But hurry, this offer is only good if you call within the next ten minutes.

  • http://pedometer-watches.net Seb

    Hi Cynthia, what a coincidence. This morning on the BBC program Click, they featured Groupon. I had never heard of it before. As I used to be in the restaurant business ( got out last year after more than 20 years ) I could see all kinds of people showing up with coupons. I used to send coupons out either in the mail or the newspaper. That way I had control over the area I was sending the coupons to and the number of coupons. Everybody coming in the door with a coupon would be a nightmare, and you are right , most will not return unless they have a coupon. Coupons can be great, but from a business point of view they can be tough to deal with. I think the couponing thing probably really got going with the Entertainment Books, 30 or more years ago.

  • http://www.webdesignhouston.com Alish Houston

    Well, I use to send out the coupons as newsletter or e-mail and it is really easy to manage. But when they are in large numbers, uff don’t say anything :-( because they are hard to handle it out. But some how I need to manage it out.
    Nice article. :)

  • jon

    $8000 for 1000 customers. Retail business owners that “get it” know that it is their job to keep these customers coming back. Issue them another coupon that you keep 100% of the profit if you believe they won’t return unless they have one. Figure out some other way to entice them to return. These same business owners will pay $10K for a yellow page ad which provides no real ROI tracking. Remember, you are getting actual customers to come into your business and try you out. To say they won’t return unless they have a coupon means you aren’t doing a good job of showing them the value of your product or service. The cost to get 1000 customers in this case is $8000. $8/person. That is an advertising expense. If the business owner can’t afford to advertise then they should question whether they are in over their head in the first place.

    I do, however, agree that the business owner and Groupon should have agreed on a “cap” prior to campaign launch.

  • kathy

    When a biz approaches Groupon, Groupon makes it clear of the under $10 guidelines. There is no pressure of a biz signing up for it, so quit complaining! And I’m sure they did end up getting people who are now regulars.

  • Melanie Withey

    My husband purchased a coupon for a 1 hour massage to the Upper Level Spa in San Diego, CA. My appoinytment was for 1:30pm on Tuesday , September 21, 2010. I called the Spa on Monday the 20th at 3 pm, when I found it impossible ot mae the appointment due to a Job interview that came up on the 20th.

    The spa owner was very rude and answered her phone by stating: “you did not call me 24 hours in advance(I actually called 22 hours in advance) and I wIll not honor your Groupon after tomorrow at 1:30!. ” THERE WAS NEVER A HELLO, MAY I HELP YOU, just a basic GO TO HELL.

    This woman is totally rude, and she is providing me with a relaxing massage. That was totally forgotten, as she was making me so anxious and definitely not feeling welcome at her business. I would never refer these people out to a friernd or enemy.

    We would like our money returned for a service we did not receive.

    Melanie and J. Patrick Withey
    coupon # 6752825-0-1
    pwithey@live.com
    San Diego, CA