Posted March 14, 2011 9:11 am by with 4 comments

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Groupon is certainly a phenomenon but with more and more reports of disgruntled users of the service feeling they have been ‘oversold’ is the service really all its valuation has it cracked up to be?

Fast Company is reporting of a bit of a dust up between a well-known Silcon Valley entrepreneur and Groupon during a SXSW panel.

Sunday’s Groupon panel on theFast Company and PepsiCo stage took an unexpected turn when Travis Kalanick, a longtime Silicon Valley entrepreneur who runs online car service Uber, spoke frankly about his negative experiences as a client of Groupon–and several Groupon staffers in the audience took issue with the story he told.

The bottom line is that Kalanick seemed more than a little upset with how Groupon does business. I’m not sure what he gains by bringing his complaints to the public square (other than some free press) but the following statement says quite a bit about Groupon as a service.

“In marketing, in the stories you tell, you guys are nothing but winning,” Kalanick said. “But there is such a disconnect with operations.” He said that Groupon representatives had promised him primary placement and not delivered, didn’t run the offer on the dates he wanted, handed him a data dump in a clunky Excel spreadsheet, and gave him an initial estimate of proceeds from the offer that was ten times higher than what the group deal actually delivered. “That’s money I spent to put cars on the road that we didn’t need.”

So let’s get this straight. An Internet company does a great job of marketing and then hard closing on sales but their delivery doesn’t meet the sales team promises? This is one of the issues that is the true dark side of the Internet space that has only gotten worse in this terrible economic climate. Everyone is desperate for sales so it’s easy for Groupon sales people to prey on insecurity. There is no better time for a sales effort to concentrate on FUD (fear, uncertainty and doubt). Heck, even self-proclaimed awesome entrepreneurs are taking the bait.

And let’s be fair. Kalanick allowed himself to be ‘closed’ on the deal so he may have to accept that either he (or his team) isn’t paying attention or that groupon was the wrong place to advertise. His case, though, is based on undelivered promises (aka being closed by a sales person looking for a commission) but isn’t the old adage that “If it sounds too good to be true it probably is?”

So how did Groupon respond?

Darren Schwartz, Groupon’s SVP of sales, grabbed a mike in the middle of the panel to respond that Groupon’s hiring a team of merchant managers to improve the oversight process from sales to the completion of an offer.

“The reality is that Travis has identified the same stuff we have,” Schwartz told Fast Companyafterward. “We need to merge our marketing excellence with our operations excellence and get it all to the same level.” They’re rolling out new tools to help local businesses better track their ROI from each offer.

Spoken like a true sales executive! According to Schwartz both sales and operations are excellent and but have just not been properly introduced. Based on many sales situations that I have been in in the Internet space I can tell you that sales and operation probably never talk and just gripe about each other. Disconnect? How about walled gardens in most environments? Anyone who has any experience knows that this talk from Schwartz is spin and it is very likely that at his level on the Groupon corporate totem pole he doesn’t have a clue as to what goes on day to day anyway.

Seeing how Groupon is doing business is interesting because of their attitude. In order to succeed, you need to be confident. The line between confidence and arrogance, however, is one that is razor thin and can be trouble if crossed. The more evidence I see about Groupon is that they have long left that line in the dust and are moving onto to new levels of hubris. Take this quote and the opinion of the Fast Company writer for what it’s worth.

“We want to help them not only understand how to use Groupon,” Schwartz said, “but how to run their business better.” Whoa, I said. Does the local pizza guy who’s been around for 20 years really need you to tell them how to run their business?

I don’t know what will happen to Groupon in the future but the more they act like they know it all the more apparent it becomes that they don’t know much at all. Oh, unless you count closing sales. That they apparently do quite well.

  • Shane

    I for one can’t purchase any local Groupon deals because I live in the sticks, but I still love most of the Groupon’s I’ve purchased. I get all my Groupon deals through, they provide a daily list of all the NATIONAL Groupon deals available for me to buy regardless of where I live.

    One time I made the mistake of buying a Groupon from one of these fools,, seriously was the worst experience of my online purchasing experience. It has been over 2 months and I have yet to receive my order! This merchant may have gone through the same experience as the subject of this article.

  • Agreed… it would be very interesting to see how many of these new accounts are actually posting content on a regular basis. They should look into implementing similar to what Google just did a couple days ago about being able to block certain search results if you find them spam or junk.

  • claireetch

    I baught for christmas two coupons for a great activity. When we tried to take an appointment with the partner, they proposed to realise the activity on thursdays exclusively. The people I had offered the presents to, could not on this day. When I tried to obtain my money back, they accepted to pay half of it. Thank you Groupon!!

  • Groupon is certainly taking lots of heat for lots of reasons, primary among which: Groupon is the hands-down leader in daily local deals. When you’re the category leader, you get your main course of market share and a big side dish of scrutiny with criticism: