12 Volt : Groupon & Its Imitators
You want a traffic jam up front. But you can get a traffic jam in the bay…April 2012 By Brett Solomon
Groupon and its competitors can be a double-edged sword. There is no doubt that Groupon can generate sales and traffic. However, we can compare it to your shop's tablesaw. It is a handy and powerful tool, but if you don't know what you are doing you can lose fingers quickly.
Another Groupon analogy that really works is you and your staff making a big pot of soup but only armed to eat it with a fork. You and your staff work really hard eating it but don't really get anywhere. It's a lot of labor without a lot of profit. Undercharging for labor is a surefire way to busywork your staff while reducing morale. On the other hand, Groupon, like a tablesaw or a soup ladle is a specific tool. If you use it tactically, it can help boost your sales and traffic, especially during those slow times.
Groupon Case Studies
Spencer Richardson is the owner of Distinctive Ride in Wasilla, Alaska. Because of Alaska's limited roadlighting, HID headlights are the norm. Richardson has become known as the man to see when it comes to retrofitting lights with a more powerful, and ultimately, safer option.
"Overall I had a good experience with Groupon but I do have a few gripes. With my HID promotion, all went relatively well. We actually sold 318 units and we are a small market to begin with. The pricing was $100 for the Groupon and we received about $58 per unit. Because of our distance, our dealings with Groupon were not with an in-person rep but all over the phone. That led to a little customer confusion on 'dual beam' vs. 'single beam' HID conversions.
"For instance, a 2002 Chevy Silverado takes three single beam kits to do the high, low and fog light. Many customers thought that if they had a Groupon that said 'dual beam' they could get their highs and lows done. We weren't explicit enough with what exactly it came with. Our next Groupon will say '1 HID kit' and not mention dual or single beam."
Richardson also was a little annoyed about having other 12-volt dealers pile on around the same time period. "Groupon hit up some other retailers in our area and we are a small market to begin with. One of their Groupon promotions overlapped our promotion. Luckily it was not for HIDs, but still. It was actually for remote starts for $190 installed including a security bypass." Once you put that low price into customers minds, it is tough for another retailer to undo the 'damage' by trying to sell on quality.
Chris Hilbert is the manager of Sound Decisions in Racine, Wisc. He notes some things that he has learned about Groupon: "First off, don't run an ad on a Sunday if no one is going to be manning the phones! My answering machine and email Monday morning was swamped with people with questions.
"My first attempt with Groupon was with a remote start. We sold 158 Compustar units and as of now, a month later, we have completed 85 of them. When the people would come in with their Groupon, I would explain to them that they will get a remote start just like the Groupon says. But, if the car needed a bypass, it would be an additional $30. I told them we can also make the button lock or unlock the doors for an additional $25. No hard sell, and the customer could always get the work done in the future, but it would cost more. Why not do it now while the dashboard is apart?"
Hilbert is also passing along a stroke of brilliance. "We explained to customers about the anti-grind feature and it would be an additional $15. Most went for it."
Sound Decision's brilliance (or what some might call audacity) is applaudable. After all, it is extra wiring to the starter solenoid that lesser shops also would not hook up for the bare bones pricing structure.
Hilbert notes, "I had to try the remote start Groupon because of our unusually warm winter. Although it comes with its headaches, especially customers who will cancel appointments and reschedule whenever they like because they already paid, it was better than having rolling days off for the installers. Everyone kept working. Down the road, I am looking to try a promotion with window tint and another with a back-up camera. Because of the metrics showing the majority of people who purchased the deal were female, the back-up camera might be a great fit."
Hilbert notes he received half of the Groupon money a week after the deal went live, a month later he got another 25 percent, and now he is waiting on the last check that calculates any returns or refunds.
Alarms Etc. Groupon Experiments
You can't do a story about Groupon without mentioning Joe Cassidy. He manages three locations of Alarms Etc. in Florida. Although some industry wags have given him the moniker 'King of Groupon,' the truth is Joe has the gravitas to be one of the pioneers of the service. He quickly figured out its pitfalls and his learning trajectory is skyrocketing.
Here Joe talks about his first forays into Groupon back in 2011: "One of the first Groupon ads we ran was for window tint in our Lakeland market. It was OK. We did about 109 sales. We estimated a dead breakeven on payroll and product costs versus our 'cut' from Groupon, with the possibility of a mild profit of maybe $10 per vehicle. However we 'upsell' the customer and add on products. And we've estimated within 90 days of the Groupon (its redemption window) that we've been able to add on an average of $30 per ticket. Of course, this means that on our most recent Groupon promos, we made approximately $4,360+ in NET profit after all expenses with ZERO dollars in customer acquisition costs."
After the Lakeland experiment, Cassidy decided to test the waters in November in Tampa—Alarm Etc.'s first location. It is actually their smallest location but it is on a main drag. They sold a record-setting 250 window tinting jobs.
"Think about that. We sold $25,000 in tint in less than 48 hours. Even with Groupon's split it's not a terrible place to be. It allows us to stay steady with work and have zero down time as we space these Groupon customers out over a three-month period. Plus, it is the off season for tint, so this keeps my tinters busy. Our net profit, assuming the same metrics/upsells as our most recent promotion, in the Lakeland market will be approximately $10,000 in raw profit dollars. Not too shabby as supplemental income during the 'off season' for a product. Plus I like having new, more affluent clientele visiting our stores right before the holiday shopping season."
Just recently, Cassidy tried his latest experiment that he categorizes as a fail, but not on the fault of Alarms Etc. This time we can place the blame on Groupon and chalk it up as a learning experience. The Groupon deal offered the customer three options: a $99 deck-and-four, an amp and two subs for $149, or two 7" headrest screens for $399.
Cassidy notes, "The sales were pitiful. We did one radio and one subwoofer system unlike other promos we have ran. The main problem is the general and vague descriptions Groupon gave to the consumers. We could not get directly involved in helping create the ad copy."
After all, how did the customer know the stuff was not B-Stock or really outdated? That is not Alarm Etc.'s style, but the customer does not know that. "We could not give model numbers without violating MAP. We also feel all of our best Groupon promo sales present the customer with only one option, not three choices. Sometimes if you present the customer with too many choices they choose none."
However, all is not lost. Cassidy notes, "Groupon got the name of Alarms Etc. out there for mere pennies for me. Do you know the kind of money I would have to spend for radio or print advertising to reach that many eyeballs? The exposure is huge."
One can just hope that the company's name will stick in the consumer's mind long after the promo is complete. I love it when the hard working guys in our industry can find the positives. For a multi-billion dollar company that Cassidy notes "is structured, seemingly, to fly by the seat of their pants," providing the ability to leverage the exposure they offer is extraordinary. Sure is cheaper than sending a postcard to everyone in Lakeland, Fla.!
Alarms Etc. has learned how to use Groupon to its advantage, helping to get its name out there for all of its services.