Last month, we reported on a story of a Portland Cafe owner who claims she lost thousands of dollars doing business with popular deal site Groupon. Some people sided with her, others said she mishandled the situation and Groupon said her story wasn’t typical. But is it?
The folks at the Jesse H. Jones Graduate School of Business at Rice University wanted to find out, so they did a small study to see if merchants were generally happy with their Groupon experience. The study, which was reported on by The Wall Street Journal and other sources polled 150 merchants who had placed deals with Groupon.
66% of the respondents said that they did make a profit on the deal but 40% said they wouldn’t do it again. Groupon’s CEO says that number is a tad high. In a recent blog post, CEO Mason said that 97% merchants are interested in being featured again.
Sound like folks are just telling him what he wants to hear or he’s really not in touch with reality, let alone his client base. What the study found was that it was employee satisfaction, not customer satisfaction that shifted the tide from success to “never again.”
Poor tips, too many customers, angry customers (due to lack of product or wait time) are all potential side effects of a Groupon deal. The author of the study, Utpal Dholakia said it was almost a given:
“Because the Groupon customer base is made up of deal-seekers and bargain shoppers, they might not tip as well as an average customer or be willing to purchase beyond the deal.”
This led to the finding that restaurants had the hardest time with Groupon deals, where service business such as spas and salons fared better. The 32% that said they didn’t make a profit from the program reported that customers rarely bought more than the coupon deal and few returned to the business at a later date.
Despite dismal numbers on the merchant end, group deal sites keep popping up and businesses keep making deals. It smacks of a desperate attempt to jump on the trend-wagon and less of a well-thought out marketing move and that is the real crux of the problem.
What do you think of these numbers? Do you think Groupon’s satisfaction and return rate is closer to Mason’s 97% or 60% as the survey says?