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Opinions Wanted Groupon

Discussion in 'Picture Framing Business Issues' started by D_Derbonne, Feb 26, 2010.

  1. FramerDave

    FramerDave PFG, Picture Framing God

    $45 for $100 worth of framing.
     
  2. Jeff Rodier

    Jeff Rodier SPFG, Supreme Picture Framing God

    Is that your little stalker buddy coming back to life.
     
  3. johnny

    johnny SGF, Supreme Grumble Framer

    I hope not he's a Russian currently residing in Seattle.
     
  4. PicturedFramer

    PicturedFramer MGF, Master Grumble Framer

    Don't pawn that little edud on us in Seattle. We have our own home grown stalkers!
    Francisco
     
  5. johnny

    johnny SGF, Supreme Grumble Framer

    So it's done. Had some concerns going in: One of our strongest competitors just did one recently and got the eyeballs first. Then we were bumped a bit by the photographer. I still think the PPFA was behind that. Our competitor did not limit the # that could be purchased but we limited it to two. And ours offered less value for the consumer at $70 for $30. Still we managed to outsell the competition* and sold 99 of them. So overall pretty happy. Only 4 customers were previous ones. Another two had just come in that day and then went home to see the Groupon so we let them use it, of course. So it looks like 93 will be new customers. I google-mapped the guy currently shopping here and he drove 51.2 miles. 1600 clickthroughs to our website.

    *The framer not the photographer. LDO.
     
  6. autographlover

    autographlover True Grumbler

    I had some salesman call me up to market groupon. When he learned that a framing job can be more than the "retail" coupon value, he never got back to me. He said they dont want customers upsold on the coupon. Like they have to pay more than the coupon states?!?!?!
     
  7. johnny

    johnny SGF, Supreme Grumble Framer

    He may have been from a Groupon-like company. There are imposters out there who do not properly identify themselves. It just doesn't make sense that Groupon would call you then turn you down because of a basic fact about our business type. They know framing very well. We ARE their frame package special. When they have a restaurant they can plan on selling about 400 certificates. A hair salon is likewise hundreds. A waterpark or such is over 1000. A frame shop is about 80. They know that framing does not have as wide an appeal as other business types. They are ok with that because they try to get a mix of businesses. But they hardly need to go calling on frame shops when we provide the low end of their revenue. I can tell you, once you go on ad salesmen come out of the woodwork. Groupon has no problem with upselling, but they do want a customer to be able to redeem their certificate for something of value without spending more. We made our Groupon for the highest price level of our package frame special. We have upsold nearly every one redeemed so far and have had very happy customers. On the flip side, we have also let ourselves be taken advantage of a few times.

    Groupon has positives for sure but there are also negatives, and also things you must to do be prepared. I'll be posting about some of those when I get time.
     
  8. johnny

    johnny SGF, Supreme Grumble Framer

    Notes on some of the negatives:

    You're going to see an increase in customers in the weeks following your promotion.

    Is this a negative? Well, that depends on if you're prepared.

    Consider this: If 100,000 people know that you are going to be a vigorously busy business during a specific time period some of those people are bad.

    You should get a security system. It is not very expensive at all and you will get a discount on your store insurance too. For well under $1000 you can fully outfit your store with window vibration sensors, sound sensors, motion sensors, door sensors, panic buttons, wireless redundant backup, phone line monitoring and a full year of call center subscription all installed by a professional. We even secured the exhaust fan opening in our saw room. You'll pay $20 to $25 per month in subscription fees. DON'T DO IT YOURSELF. Seriously, not only installing the equipment but just determining what you need yourself is exactly like someone going in to Ms to buy a readymade to frame a 200 year old needlepoint.

    Think about it. You're telling the bad guys that you're getting X amount of new customers in the near future. You're going to have that much more stuff around to steal, more items, more cash, more charge receipts with numbers on them. My business has been fundamentally weird starting a few days after my promotion ended. People have been in here looking to steal. I've run multiple retail stores for more than 25 years, I know when this is happening from experience. I learned the security system lesson too late and so I've been guarding the store myself 24 hrs until we're secure.

    Our website got hacked. If this is completely random or if the huge number of hits we were enjoying made us a target I don't know. But it sucks. Which reminds me, absolutely do not do this until you have a great looking website. This is a web based promotion. Not only are you concerned with making a good first impression on buyers, you can gain scores more customers if they are impressed with what they see but don't want to buy a certificate now. If you have a lousy website you're going to turn off 100,000 people. Don't do that. Really. Just don't even call Groupon if your website isn't great, because once you sign the contract you kind of lose control over how soon they run it.

    Once your name goes up every ad salesman in your city now knows you are willing to coupon promote. They all want to get to you first. You do the math.

    People will buy the certificates planning to rip you off. But so far is a very small number of people and we just let them because it's easier than fighting. One was even from the bar association itself, so you wonder if they are really ignorant of the standard groupon rules. For example the rules say you can use the certificate for one picture frame and any value not used is lost. Our least expensive frame is $24.95. Our groupon cost $30 to buy. Why would you buy it if you want our cheapest $24.95 frame? Because you plan on bitching until you get 3 frames, that's why.

    But the vast majority of people spend more than the certificate so even after the angle shooters and the 3 customers who wanted to apply them to pre existing orders were still showing a nice profit.

    A good percentage of your new customers will be new to custom framing. This can lead to sticker shock or indecision but really you're just going to have to plan on spending more time with each customer to ease them into it. But hey you've made a new framing consumer!

    Your customers will be coming from further away than you're used to. Hey great! you may think and that's true, but this also means you must be on top of your game. If your customer drives 60 miles to pick up their piece and you say "Oh, we're just getting to that today." it's BAD. Remember most aren't used to buying custom work instead of off the shelf instant stuff. They are gunna just show up no matter what you say at the point of sale. All your orders should be complete at least 1 day before they are due. We've had people drive across town after 3 days on a promised 7 day turn around.

    More later.
     
  9. FrameMakers

    FrameMakers PFG, Picture Framing God

    Thanks for the honest implications of Groupon. I would love to see if it actually makes money for you at the end of 1 month, 3 months, 6 months and a year.
     
  10. johnny

    johnny SGF, Supreme Grumble Framer

    We're keeping track and I will share. After 20% redeemed I don't see any way we can lose money on the certificates themselves. On top of that we have all these new customers, people checking us out, and browsers in our stores.
     
  11. cvm

    cvm PFG, Picture Framing God

    Hi johnny,

    Thanks for sharing your Groupon experience! Sorry about the hacker and people casing your joint. I hope you don't mind me asking a few questions.

    What was your goal? Try to break even and gain some new customers?

    You said your deal was $30 for a $70 voucher and you sold around 100 of 'em so quick math sez that if all are redeemed you will be doing around 7k retail framing for which you received around 1.5k, paid out in installments? Is that about right? So @ hypothetical 28% COGs you would need to have an average upsell of <$10/order (on all 100) to get yer COGs covered? Is that kinda how you looked at it?

    Thanks.
     
  12. auntiesarahjayne

    auntiesarahjayne MGF, Master Grumble Framer

    I found this in an article about groupon

    "CEO and founder Andrew Mason of Groupon says the company explains the risk shops take when they sign on. It tells its 30,000 clients not to expect to turn a profit on the deals and suggests they limit the number of coupons they sell. The company also thinks the risk of drawing too many customers will ease as it starts drilling down to offer coupons tailored to neighborhoods and smaller cities."

    http://www.huffingtonpost.com/2010/08/02/groupon-deals-flood-local_n_666980.html
     
  13. Bill C

    Bill C CGF II, Certified Grumble Framer Level 2

    I see it only as a win win situation. You are only paying for the customers that are buying your coupon. So that one time fee brought you in a ( in most likelyhood ) new customer.

    Two years ago I spent about 20 thousand dollars in advertising for the year ( newspapers, coupon mailers ). I would say it probably brought in under 30 new customers.

    I would rather spend the 20 thousand in groupon, and have a 1,000 new customers. And in all likelyhood alot of those customers will be repeat customers.
     
  14. johnny

    johnny SGF, Supreme Grumble Framer

    Yes cvm that was the goal, get new customers and try to break even on the certificates.

    We've only had 14 certs returned so far out of 99. So $70 x 14 = $980 retail value in framing. We received $210 from Groupon for our cut of those 14 certificates. The resulting sales amounted to $2410.42 Each cert = us giving a discount of $70-15 so 14(70-15) = $770.

    $2410.42 - $770 = a total discount % of 32%. Not going to say how much was profit because I'm a firm believer in not posting wholesale info publicly but you can figure it out.

    Another one came in but the customer is still pondering going for our all-out $650 jersey framing or a less costly frame so that will skew the numbers up significantly when it's realized.

    This is a tiny sample size so take that into consideration. But even if only a small percentage of the remaining customers spend more than the certificate I don't see how we can lose money.

    Out of the remaining 85 groupons, take off $165 that we reduced existing customer orders by when three of them used them on pre-exisiting orders. Another 4 of them are pre-exisiting customers so that's not ideal. But now that I think of it these numbers also don't include a few new customers who called later and said they missed the deal but saw us on there and asked if they could have the deal anyway, which is great for everyone except Groupon themselves, and that was several more hundred in orders.
     
  15. johnny

    johnny SGF, Supreme Grumble Framer

    Now there are tons of ways to get customers in your store and Groupon is only one of them. You can really get the full power of this if you are prepared, not for the less than 100 customers that will come into your store, but by getting the attention of the 100,000 sets of eyeballs that will see your name.

    Make your offer alluring enough to get people to click through to your website and wow them there. We also have had a lot more promotions going this summer. Email campaigns, direct mail, in-store displays/fun items, web site, facebook, twitter. I thought up an eat-and-art campaign where I teamed up with a local restaurant and mailed their gift cards to my top customers so they can eat there then browse our gallery afterward.

    If you do it right the number of groupon certificates you receive back will be a minor number of increased customers you get. Don't just rely on Groupon sending you discounted customers. Take advantage of all the people who will suddenly see you exist.
     
  16. Dave

    Dave SPFG, Supreme Picture Framing God

    Help me understand something...

    Groupon derives revenue from:

    ~ 1/2 the cost of redeemed certificates?

    ~ 100% of the cost of bought but unredeemed certificates?

    ~ On line ads?

    Are all of the above where their revenue stream comes from?
     
  17. FrameMakers

    FrameMakers PFG, Picture Framing God

    They get 1/2 of all certificates purchased.
     
  18. johnny

    johnny SGF, Supreme Grumble Framer

    And in the approx 2 years they have been around they have sold nearly 9 million of them.
     
  19. Dave

    Dave SPFG, Supreme Picture Framing God

    I guess the reason I am asking is because, if I understand correctly, the customer buys the certificate on line... what happens to the funds from the unredeemed certificates?

    So you also get half the funds of the purchased but unredeemed certificates?

    There could be a fair amount of revenue there too.
     
  20. johnny

    johnny SGF, Supreme Grumble Framer

    Groupon would probably know the laws for each local market. In some places unredeemed gift cards must be surrendered to the state after a certain amount of time but I have no idea how Groupons are treated, nor do I care, because Ohio is not one of those states. So any unredeemed certificate here is free money.
     
  21. jim_p

    jim_p SGF, Supreme Grumble Framer

    Here's how it breaks down:

    The deal only runs for one day. Say the certificate price is $50, and 300 customers buy them. That's $15,000 net revenue.

    Groupon takes half of that, or $7500, leaving $7500 for the vendor.

    Groupon pays that $7500 to the vendor in three installments of $2500 (5 days, 30 days, an 60 days after the deal runs).

    At this point the money has finished changing hands. Whether or not a certificate is redeemed is irrelevant; Groupon and the vendor already have the money.

    Now in some states, the portion that the customer paid for the certificate has to be treated as a gift certificate. If a customer paid $50 for $150 worth of framing, but the deal expires (say, after one year), then the certificate is still good for $50 worth of framing.

    Is that clearer?
     
  22. Dave

    Dave SPFG, Supreme Picture Framing God

    Yep... thanks, Jim.
     
  23. PicturedFramer

    PicturedFramer MGF, Master Grumble Framer

    Does your competitor take you groupon?

    Just have a question.
    Can any competitor take your Groupon certificate as their own?
    Not the whole value while it is still current but the expired value or not.
    Lets say you bought the coupon for 40 bucks and the coupon is worth 100 bucks worth of framing. The customer is confused and comes into your shop to redeem the coupon for the whole value of 100 bucks.
    What would you do? Would you give the customer the 60 bucks credit towards the job worth 400 bucks? How would the math breakdown for that?
    Is it worth the small return on the job?
    Francisco
     
  24. jim_p

    jim_p SGF, Supreme Grumble Framer

    There's at least one chain of framing stores in my area that advertises "We honor all competitor's coupons", and this is the concept I think would apply here. I don't do any such thing. If someone were to wander into my shop by mistake and present a competitor's coupon or voucher, I would instead offer to quote my everyday reasonable price for the job... "You might be pleasantly surprised"
     
  25. johnny

    johnny SGF, Supreme Grumble Framer

    Out website traffic has fallen off from the Groupon effect diminishing and from it being messed up or down from being hacked a few days after the Groupon and we fixed some of it but it was hacked again last night.

    So the website hacking is probably not from being a juicy target from having tons of groupon traffic.
     
  26. j Paul

    j Paul PFG, Picture Framing God

    Well based on good results of some of you with Groupon, I have just signed up with the new service to our area. Basicaly repeated the offer that Johnny did. We will be doing $70.00 Groupon for $35.00 and customers are allowed to use it even on our Value Line. Hope to drive in new customers and even if I only break even cash ways getting a 100 or so new customers in the door will be OK.

    I also signed up my wifes business.

    I would suggest that if Groupon comes to your town that you get in when it is new. Waiting period is not so long.
     
  27. pwalters

    pwalters SGF, Supreme Grumble Framer

    The only issue with that is when they first come to town their database isn't that large and you don't get as much of a response.

    They pitched me and at the time they only had 10k whereas in other markets they were over 30k easily. I told them to keep me in mind. My thought was that if I ran and didn't sell very many, they might not feature me again in the future and I hadn't really seen anything like our business before so I thought I was safe. Then a month or two later they ran with the 6 great frame up stores here in town who did something like 400 and now they aren't as interested in onesie twosies for framers and I hear that they are going back to great frame up again. Nobody else would likely sell that many so that's where Gpon would make the most money. Makes sense to me.

    Live and learn. I say if you get the chance to go, go. Don't sit on the sidelines watching this pass you by.
     
  28. j Paul

    j Paul PFG, Picture Framing God

    I understand where you are coming from Paul. But I figured I wanted to get in on the ground floor before the other framers in town heard about it. (They're not well informed like me, because they don't participate here on the G ) ;)

    My wife has a www.CleaningBs.com company and another Maid service just ran an offer here in town and they had a tip point of 10 and sold 37. She would be happy with that, actually a little overwhelmed perhaps (although she does have help lined up)
     
  29. pwalters

    pwalters SGF, Supreme Grumble Framer

    Just make sure she prices her offering appropriately. I've talked with a few restaurant owners here in town who are some of the "horror" type stories you hear about Gpon and what we discussed was that most people who do the offer at more than or at their Avg ticket get pummeled. One's restaurant has an average ticket of $22 per diner for their meals (they didn't include Alcohol in theirs) and they did a $30 for $15 Gpon. That netted them a little less than $7.50 per $30 redeemed. That didn't hardly cover costs. When we worked the number he saw that he would have been better off at $15 for $7.50. He would have gotten around $3.25 for it and would have collected about $7 additional if someone spent the $22 average (diff between Gpon @ $15 and the $22 avg ticket). That would have given him $10.25 for a $22 average and he would have actually made money on it. If it turned out they spent the $30 that he hopes to raise his ticket to then he would have collected an additional $15 on top of what Gpon paid him and he would have netted $18.25 per $30 which would have made him money.

    Sure he might have sold a few less Gpons, but he would have been financially better off at the end and would still have had a pretty good piece of exposure.

    So make sure she doesn't price herself wrong.
     
  30. jim_p

    jim_p SGF, Supreme Grumble Framer

    We had a little something take place this afternoon, and I was debating whether or not to mention it on the Groupon discussion boards.

    A customer came in... we always ask fairly early on in the first meeting how they found us. This is mainly so we have an idea as to what is bringing in the customers, but also so we know in advance if they have a Groupon or other voucher. While we don't treat Groupon customers any differently, knowing that they have the voucher gives us a little something to use when it comes to closing ("That comes to $275, but it's only $150 after we apply the Groupon").

    So she tells us she was "just in the neighborhood and checking us out". Only AFTER the design is done and rung up and it's time to take a deposit does she whip out the Groupons. Clearly Groupon was the way she found out about us, but she hid that from us until the very end.

    This is the second time this has happened to us...

    I find this a little annoying... do customers actively conceal the fact that they have Groupons because they fear they'll get treated differently?

    Thoughts?
     
  31. johnny

    johnny SGF, Supreme Grumble Framer

    Some can't wait to bring out the Groupon certificate.... "I brought in a Groupon!"

    Some wait until they are quoted and then bring it out.

    Extremely few people have tried to get sneaky and angle shoot to try to double dip on a discount.

    We don't care when they tell us because we just use the Groupon as if it were a gift certificate. If someone really wasn't comfortable buying anything from us I would refund their Groupon price as a gesture of goodwill but no one has done that. Our store explanation on the groupon website was very clear what our bottom pricing was and what people got and that they would be spending more for nicer frames and so we've had no resistance and all customers have been happy, even the one little scammy one.
     
  32. pwalters

    pwalters SGF, Supreme Grumble Framer

    So you are applying the $100 as if it was a $100 gift cert? Not treating some portion as a discount to lessen your tax burden on money you haven't collected?
     
  33. PaulSF

    PaulSF PFG, Picture Framing God

    Jim, it isn't just groupons, it's any kind of coupon. The customer wants to keep their coupon a secret so that you won't try to upsell them or pad the price with "labor" charges.
     
  34. jim_p

    jim_p SGF, Supreme Grumble Framer

    Ah, okay. Until now I've redeemed very few coupons of any other kind (as in, very little response to coupon offers) so I don't have a baseline to go on.

    --jim
     
  35. PaulSF

    PaulSF PFG, Picture Framing God

    That has been my experience. Some customers will show the coupon right away. Others will treat it like a State Secret, getting the price down as low as possible and then whipping out the coupon to make it even less likely that we will be profitable.
     
  36. johnny

    johnny SGF, Supreme Grumble Framer

    No, I'm just talking about the customer's perspective.
     
  37. Pangolin

    Pangolin SGF, Supreme Grumble Framer

    I talked to a rep today for Groupon... Since the info is still fairly fresh in my mind, if anyone has further questions, go ahead and ask!

    Also, not mentioned before (that I can remember):

    The "tip point" - a set minimum number of people have to buy in to the deal for it to go forward (say 15 people have to buy in). If the tip point isn't reached (only 14 people "purchase" the deal) then the deal is cancelled, the Groupies aren't chraged, but they do get an email saying that the tip point wasn't reached and the deal is off. The incentive is for them to get their friends and family to buy in too, so the tip point will be reached or exceeded.
     
  38. DTWDSM

    DTWDSM SGF, Supreme Grumble Framer

    How is a "tip point" determined?
     
  39. FrameMakers

    FrameMakers PFG, Picture Framing God

    You set it.
     
  40. johnny

    johnny SGF, Supreme Grumble Framer

    For me the groupon guy recommended it hella low and I just said ok.

    If you look most of the tip points are very low.
     
  41. jim_p

    jim_p SGF, Supreme Grumble Framer

    Actually, I notice that the tip points seem to be roughly 10% of the final number sold. I think Groupon has enough experience to figure out the approximate response rate and set the tip point accordingly. For me, the tip point was 20 Groupons, and I went on to sell 345... that's in the ballpark.
     
  42. cvm

    cvm PFG, Picture Framing God

    345 is nice.

    There was a franchise frame shop near here that only sold around 40 when they did theirs.
     
  43. jim_p

    jim_p SGF, Supreme Grumble Framer

    Was that "The Great Frame Up"? They sold 30.

    A lot of it depends on the size of the market. I notice very few Jacksonville deals selling more than 1000 groupons, whereas Boston deals routinely sell several thousand. I was told that at the time my deal ran Groupon had 175,000 Boston subscribers...
     
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