Groupon Omaha record & more numbers that’ll make your jaw drop
Screenshot from twitter.com/dannyaway
Yesterday morning I tweeted the above – "Wow. @Groupon's already sold 2,117 groupons today to Pitch Pizzeria. Seems like they're headed for an Omaha record." – after I saw Groupon had sold over 2,000 of their $15 for $30 to Pitch Pizzeria. In the tweet, I also asked "Anyone know the record?"
Fit to the humor of Groupon founder Andrew Mason and the wit of Groupon copy that makes their daily emails fun and interesting to read, @GrouponOmaha provided an enjoyable reply:
Screenshot from twitter.com/grouponomaha
My question, however, was yet to be answered (although I was pretty impressed with that cake sculpture). Another tweet came from Groupon team member Christian Jehling, who said he was responsible for Old Market daily deals. "Spaghetti Works sold almost 5,000," Jehling tweeted. He later tweeted the exact number sold in that deal was 4,538.
Needless to say, I was unaware Omaha had hit this high mark before. With all the buzz that surrounded a possible sale to Google and now an imminent IPO, the question: "Is Groupon really that valuable?" seemed easier to answer: "Yes." In Omaha, Groupon has more than 129,000 email subscribers. In Des Moines, it's more than 72,000. For comparison, the daily print circulation of the Omaha World-Herald is 184,150, and the Des Moines Register is 116,876 (numbers from Wikipedia).
To learn more about the best-selling Groupons in Omaha and Des Moines, I contacted Groupon's spokesperson, Julie Anne Mossler. The following are the stats she sent over, and it's worth noting that the Gap deal was one that ran nationally but it performed especially well in Omaha.
Top Six Deals for Omaha
- 4,538 – $10 for $20 worth of all-you-can-eat pasta, drinks and casual Italian fare at Spaghetti Works
- 3,500 (Sold Out) – $15 for $30 worth of pizza, pasta, drinks and more at Pitch Coal-Fire Pizzeria
- 3,160 – $25 for $50 worth of apparel at Gap
- 3,000 – $15 for $30 worth of Italian cuisine at Vincenzo's Ristorante
- 2,972 – $15 for $30 worth of pizza and grill fare at Oscar's Pizza and Sports Grille
- 2,792 – $10 for $20 worth of Cajun cuisine at Jazz, a Louisiana Kitchen
Facts: Groupon Omaha launched on February 15, 2010. Since beginning to offer daily deals in Omaha, Groupon has saved our more than 129,000 Omaha subscribers more than $5.2 million. Groupon has featured more than 350 local Omaha businesses, selling more than 126,000 Groupons.
Top Six Deals for Des Moines
- 2,704 – $7 for $15 worth of American fare and drinks from Okoboji Grill
- 2,047 – $7 for $15 worth of coffee, sandwiches and more at Smokey Row Coffee House
- 1,138 – $5 for $10 worth of Cold Stone Creamery Ice Cream
- 1,115 – $10 for $25 game card at All Play Des Moines
- 1,007 – $10 for $25 worth of British pub fare and drinks at Royal Mile
- 535 – $30 for Mani-Pedi at Finesse Salon and Spa ($64 value)
Facts: Groupon Des Moines launched on October 25, 2010. Since beginning to offer daily deals in Des Moines, Groupon has saved our more than 72,000 Des Moines subscribers more than $1.2 million. Groupon has featured more than 100 local Des Moines businesses, selling more than 21,000 Groupons.
To learn more about Chicago-based Groupon, visit groupon.com/about
ARCHIVED COMMENTS
Today's Blank Park Zoo Groupon is already in fourth place.
With just these 6 deals the coupon buyers of Groupon-Omaha have sent $147,190 out of state, and into in the pockets of Groupon... where it doesn't help the citizens or community of Omaha.
It's a shame that these businesses had to pay a 50% commission to Groupon, on top of a 50% discount, keeping at best 25% of the value of their goods and services. On top of those commissions, they have to pay taxes, credit card processing fees, so their net revenue will be even less. I doubt any measurable profit was kept from even one of these deals. I would welcome facts/data to the contrary but it seems unlikely that anyone could break even paying workers and lights and lease and B&O all while cooking a pizza for less than 25% of value.
I do hope that one day Groupon explicitly tells its coupon users how much of the face dollar amount is going to the business they patronize.
Groupon is really a simple lesson in supply and demand. They dress it all up with branding and flair, but this is simple supply and demand. Lower prices = more demand. If prices were in line with what consumers were willing to pay, Groupon wouldn't have to syphon advertising revenue out of our communities. That said, I don't think Groupon is good for small businesses. I also think Groupon and the advertiser know many purchases will go unredeemed (unused gift-card phenomenon). However, an organization with relatively fixed costs like our Zoo may be able to use it as an effective marketing tool. Pizzas and nails...good for Groupon? You bet. Good for the pizza and nail joints? Doubt it.
All the arguements mentioned thus far are legit.
Businesses seem to be begging to be featured though. I personally didnt beg (maybe)...but I emailed Groupon a short pitch on why my wonderful CornFinger Mittens should be a featured product during the week before the NU vs Texas game. Christian Jehling responded in something like 2 hours. Once I started running the numbers I got a bit nervous b/c I wasnt seeing a profit. After expressing to Christian my discomfort he asked me some good strategic questions that helped me get creative and sort of jockey a way to get this done. So CF signed the contract. BUT the CornFinger Mittens never came:(f
I plan to try it again this year in fall 2011. But imagine if 5,000 people in Lincoln and Omaha bought the CornFinger deal? Imagine if those 129,000 subscribers saw the text "CornFinger" in the subject line of an email. For a small fish like me, I feel like combing the viral nature of the CornFinger with the power of Groupon would equate to a huge amount of awareness in a relatively short amount of time. Something I have yet to find very realistic in any other medium.
Wow 50% commission. I was curious what it was.
The Blank Park Zoo may have some blacklash from their Groupon deal in that it was for new members only. Even though they said that people probably bought it without realizing and they are going to be major disappointed when it comes time to redeem. Even if they apply it toward their full membership prices. A lot of current members aren't very happy.
Pretty cool stats. By the way, Living Social has an Amazon deal in Chicago running right now that has sold 265,000+ already. I bought it five minutes ago and it has already sold 7,000 since. I really don't know how this makes sense for Amazon. Oh well.
In response to Brian, I totally agree. That being said there are a couple things that obviously bring that 25% number up.
1. I would be interested to know from Groupon, or any of the top vendors there, what the breakage (http://en.wikipedia.org/wiki/Breakage) rate is. It figures to be around 10% if these stats hold up: http://money.howstuffworks.com/personal-finance/budgeting...
2. Most of those vendors are locations that will end up handing you a bill for more than the worth of your gift card at night. Depending on how much additional you spend (and how profitable your business is normally), that is good news. If you leave a good impression and somebody who never came before comes back. Even better.
Again, I agree with what you are saying. Just noting it isn't exactly as bleak as the 25% worst case scenario.
Most of this is basically what John said, but ya know, I like hearing myself talk.
I'd be interested to see what the top deals were based on a percentage of subscribers. I know the Dante Pizzeria groupon sold pretty well, but that was in the early days of their Omaha presence. If they sold say 2,000 when the subscriber base was only, say 50,000, then that points to a very popular deal.
Great article Danny. I especially appreciate the comparison to newspaper subscriptions. Not only are we talking about impressions but getting people in the door to area businesses.
Sweet article Danny, sweeter even the discussion.
While I don't totally disagree with any of above, I'll take a more contrarian view on Groupon, and say that I believe this:
1) A good majority of local businesses that Groupon is exposing are being shown to people who likely do not (or had forgotten) that these places exist in their own community. In many cases people who maybe don't have the 'buy local' mentality of a more progressive community, might begin to slowly realize that there's more to shopping than 'big box' stores and 'chain restaurants.' (a win for community and small businesses as a whole). I also believe that Groupon is a more powerful marketing tool (as many of you have noted) than a tool to make money. Groupon can give many small businesses (i.e @CornFinger) more market reach than most small businesses can ever afford or more buzz than they could ever create themselves (with the lack of a marketing department). Though it might cost them in the short-run, the long-term benefits may be even greater). (Thoughts @Cody?)
2) Though I am an absolute proponent of 'buy local' I will also say that the money that Groupon takes "out-of-state" and "into the pockets of Groupon" is still going into the pockets of 'us.' By that I mean literally the region, the United States and the world. I vehemently disagree with many arbitrary line that are drawn between 'us and them' and believe that it's less black and white than most people often paint it. If the idea is to kick-start the American economy for all of us, $10 spent in Chicago is just as helpful as $10 in Omaha or $10 spent by a Groupon employee. (@Brian, while this is in direct disagreement to your statement, I totally agree on your final paragraph, and think transparency is the best option).
@Bill K, your point #2 is well put. Groupons get people in the door, who usually spend more than the value of the coupon---I had never considered that.
Thanks for the good discussion crew, if it gets more heated we'll have to finish the discussion over half price Pitch pizza...if we can find one of the 3,538 people who can help us pay for it. ;)
Chris-Great addition to the discussion! I will qualify my points above (and should have in my post) that the Groupon special from a start has to be designed smartly (and the Poises owners says this exactly in his post, that he didn't fully think about costs) and its obviously not for every business (I like his point its better for service based businesses where 'more employee time' = 'more sales' i.e. massage places). Its obviously important that business owner truly understand how the discounts will affect their cost structure (this is basic business), but because Groupon is a NEW business model, the cost structures of the Groupon's themselves are not always understood before they execute a deal (I'd bet biz owners get caught up in the hype and hyperbole). Sadly, Poises had to pay the price as a business, and that is sad and unfortunate (thought hopefully his blog post will help prevent other from making the same mistakes. You have to hope that Groupon sales peeps make these issues and concerns clear in their sales pitches to prospective clients.
I think the author (of http://posiescafe.com/wp/?p=316) make solid points, given his situation, and Groupon is not for everyone, but I would also guess for every devastating story out there, there is another story about a business who had its future changed for the better by Groupon's marketing power.
Those subscriber numbers are striking. OK, dazzling.
Also, don't forget that Groupon is selling pay-for-performance. Groupon takes the risk-- if it's not an appealing offer, Groupon doesn't get paid. Big discontinuity from traditional advertising economics. That's why they write such great copy-- their incentives are aligned with the advertiser's.
But Groupon and its tribute acts aren't for everyone.
1. By definition, the offer attracts price shoppers. These are people who come in the door not because of your great everyday value proposition and brand, but because they are saving money. These customers are very hard to retain.
2. The economics are different (no fixed upfront advertising cost), but not always favorable. The merchant gets 25 cents on the dollar. Your margin has got to be very high to avoid getting burned.
3. Or you would have to believe that you make it up on volume.
The traditional brand adoption funnel says that customers go through 5 phases:
* Awareness
* Familiarity
* Trial
* Purchase
* Loyalty
A Daily Deal can make a difference in the first 3 or 4 of these phases, but you pay a high price. There's a real possibility that the people coming through your door are driven exclusively by price, and will never patronize your business at regular prices. You have to hope that a few of them are potentially loyal customers, and you had better knock them out when they come in.
Otherwise you have sacrificed a big chunk of your marketing budget, forgone a lot of profit, and put in a lot of work to attract exactly the wrong customers.
The Daily Deal providers have done a great job of getting merchants and consumers to try the offer. But since it's a tactic most merchants will only use once in a while, it will be interesting to see how sustainable the Daily Deal business is. It's a great fit for certain businesses at certain times targeting certain customers. That doesn't sound like a category that can support more than a few players in Omaha.
It will be very interesting to see which merchants offer a Daily Deal more than once.
I tell you what....when I finally get those 4,000 pairs of wierd CornFinger Mittens in July and I contemplate utilizing Groupon in the fall...I will come back to this post, re-read it, and make damn sure I know what I am getting into. It seems real easy to get Jacked Up on the "hype and hypderbole"...I can see how something like this could be the greatest thing on earth to some but to others it could be the end of them.
I do know for a fact that, as a tiny-small business owner, I will never again drop $800 on an ad in the news paper (I dont care if it goes to 129,000 households)..to only recieve 2 calls. Both of whom didnt buy, or join my facebook page...nothing.
PS. Did we all just set a SiliconPrairieNews record for most comments/significant discussion following a particular story?
Some of this has already been said but...
1) Groupon is a marketing tool. As such, business owners (large and small) should obviously budget for it ahead of time. From my experience with Groupon, they are extremely easy to work with and answer any and all questions I posed (even the stupid ones).
2) Yes, the shoppers coming in with Groupons will be price shoppers and they likely will not return, which is why you upsell them while they are there. For example, I am the Midwest's cheapest woman. I browse LS and Groupon every daggum day to find what I need. In this case, a Brazilian Blowout. Finally a Lincoln salon offered it at a great price and I bought 2. While I was there, the woman colored my hair (for less than a normal cost but more than my groupon) and sold me on a loyalty program that spanned the length of a year. Plus, I had to buy the follow up products. My groupons cost 99 apiece, but she sold me over $400 worth of stuff, which I averaged out to be a good price point per month for hair maintenance. (A skill that Posie biz owners maybe should learn, no offense).
3) Groupon is also about positioning. I not only want to support local businesses, I want to support people who are really hungry for my business, eager to use social media and aren't sticking their heads in the sand when it comes to new techniques. Groupon businesses seem this way to me, at least initially, and I have never been disappointed.
4) I'm waiting for the day when they sell ads on their site, their email lists or within the groupons, you already see it in the side deals. Perhaps the bis owner costs will go down when this happens. Maybe not. I wonder if they'll ever sell their lists....
The end.
Mashable thinks the thrill is gone for local businesses in group buying...
http://mashable.com/2011/01/20/group-buying-local-business/
And Living Social was hacked during yesterday's Amazon deal. Ouch.
Just read this article regarding yesterday's Amazon sale:
http://www.lifeinbeta.org/2011/01/why-living-social-can-s...
Though it is specifically about Amazon/Living Social, I think some of the underlying thoughts go hand and hand with this conversation.
Love the notes regarding the lifetime value of a customer.
Really Interesting post.........Groupon is a very big deal site, so every country lanuched the groupon and I do like the http://grouponclone.contussupport.com.