Volume 13, Issue 6 - November/December 2011

Ideas That Work
sales tips

The Scoop on Groupon
by Penny Stacey

Groupon has grown in popularity in its short three years in existence, along with a host of other similar websites and services with a similar concept. In recent months, AGRR™ magazine has seen auto glass retailers all over the nation begin to market their services through such programs. Are programs such as Groupon effective, though?

“[Groupon] is essentially a community-based promotional program, where a group of people combine their buying resources to implement and activate a deal with a local vendor,” says Patric Fransko, chief operating officer for Zola Distributing company, a window film supply company that has experience with Groupon. “The vendor has the ability to set the number of people who have to take advantage of the offer in order to activate it. So they may say 50 people have to take advantage of the offer before it becomes activated. So essentially what they’ve done is ensured themselves if, that coupon were to be activated, they have at least 50 customers, because the customers have to pay Groupon at the time of saying, ‘yeah, we’re in on the deal.’“

Cascade Auto Glass, based in Vancouver, Wash., has participated in several of these, including a local program called “Portland Perks” and the “Deal of the Day” through the Fox 26 TV station in Medford, Ore.

In one such case, Cascade offered a deal in which the customer would be required to spend $30 through the program, and in return would receive a $100 gas card when he purchased a windshield replacement from the company. The company also has issued promotions in which the customer would pay $30 to receive $100 toward a windshield replacement, along with three $10 gift certificates to a local Mexican restaurant.

“We thought we’d try it out,” says Cascade vice president Paul Sharkey.

How Groupon Works (An Example)
If your normal price is ..................................$65
And you offer discount price to Groupon........$40
Groupon gets half as fee..............................$20
And you get...............................................$20
Amount lost from a normal sale is...................$45

Sharkey says, however, it might be too early to determine if it’s worked as a marketing strategy. “It might take a while to shake out,” he says.

Rafael Garcia of Southwest Auto Glass in El Paso, Texas, says his company was resistant to using such programs initially, but recently decided to try out the method.

“As a matter of principle it’s not something we’ve done, and offering discounts isn’t something we’ve done, but in the current economic climate I’ve had to re-evaluate that,” he says. “It’s an investment, though; it’s a matter of making impressions.”

Southwest participated in a program called “Seize the Deal,” which is available throughout the United States. In the deal, customers would pay $25 to receive $50 toward repair or replacement service from the company.

“I think the redemption rate was higher than other types of advertising,” says Garcia.

One drawback is the cost involved. While in some cases the deals are free, most sites take a portion or percentage of what a company sells through them.

“[Some of these] take a good chunk of what you sell, so you’ve got to add that into the costs,” says Sharkey.

“Groupon is great for getting customers, but it doesn’t really make you any money,” adds a representative of Delta Glass in Denver, who preferred not to be identified. His company offered a Groupon this fall.

Garcia points out that in some cases, however, such pricing and percentages can be negotiated. Likewise, he suggests auto glass companies considering such modes of advertising look at them long-term.

“What I would suggest to people is to look at it more as an investment,” he says. “The redemption rates are high, but you want to do your homework when it comes to crafting discounts or specials, and make sure you know what it is you’re offering so you can get a good return on that investment.”

He also recommends businesses look at the way in which the discounts are advertised and promoted—and beware of offering too many specials.

“This one in particular uses radio, so we get some value there,” he says. “You also want to make sure you don’t de-value your brand. If you condition [customers] to wait for another discount you could hurt yourself.”

Penny Stacey is the editor of AGRR™ magazine. Email her at pstacey@glass.com, follow her on Twitter @agrrmagazine, read her blog at http://fortherecord.agrrmag.com, and read her updates on Facebook by searching for AGRR Magazine.

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