Why Groupon And It’s Clones Won’t Last
Group buying attracts the wrong customer–not only the ones who won’t tip, but the ones who won’t come back, the ones who can’t afford the product at full price, the ones who already know the business and would come anyway but now get half off.
Restaurants know the difference between a customer who will never come back and a customer who comes for the bargains Neither is the best customer. but you need the second, and not the first. The first is useful only to get rid of inventory that doesn’t move. The second is a way of maximizing the return on a fixed cost (rent, staff, utilities).
I guarantee the group on sales people don’t educate the small businessmen on this. But believe me, after one experiment with a Groupon, they figure it out. Not many kinds of businesses can afford a regular practice of offering 50% off. I guarantee the group buying people don’t educate the small businessmen on this. But believe me, after one experiment with a Groupon, they figure it out. Not many kinds of businesses can afford a regular practice of Groupon.
I predict that the following will happen:
1.local businesses will be confronted by a confusing array of group buying “marketing” opportunities
2.consumers will begin assigning the daily emails to a folder they never check
3.salespeople on the ground will have a more and more difficult time meeting their goals
4.the companies will have enormous churn and management/training issues with the sales force
5.there will be an implosion heard around the world as the mergers and acquisitions happen in an effort to buy market share.