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Group Buying: The Good, the Bad and the Ripoff

Every so often, we here at the Spy like to check in with those outside of our little lair to get some fresh perspective on hot topics of discussion, so this time around, why not delve into the world of Groupon and the issue of group buying. While we usually ignore our daily deals, maybe just out of sheer apathy, Kristina Eastham doesn’t. Here, the communications coordinator at Digitaria, which was acquired by JWT North America just about a year ago, shares her ups and downs with group buying.

At Interactive Day San Diego earlier this month, the audience heard a sales representative from Groupon give a sales pitch disguised as a keynote to pitch the benefits of group buying. But Groupon and similar sites have been under a lot of fire lately.

“Tired of seeing small businesses get screwed,” Rocky Agrawal has recently guest-authored an “anti-Groupon” series of articles on TechCrunch. Simultaneously, merchants and past employees are speaking up, helping Agrawal kick Groupon while it’s down (Groupon filed for its IPO on June 2 and is currently in its quiet period).

When I first got involved with group buying as a consumer, I was swiftly smitten. I quickly signed up for emails from as many providers as I could find and let the deals start rolling in. But the initial excitement wore off almost just as quickly. At the time I was living in Orange County and, while I set my preferences (yes, I like “Salon services” like hair cuts) I received a ton of “junk” I wasn’t interested in (no, I don’t want Botox or spray tanning).

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Eventually I bought a few deals, but ended up unsubscribing from most of them. Some of my coupons have expired before I had the chance to use them. Those I have used have delivered a full range of experiences. I wanted to share a terrible, mediocre and great experience to show what to look out for as a business and a consumer.

Group Deal: F – Unlimited (but totally limited) Exercise Classes
I bought my first deal for an exercise studio in Orange County that offered “One Month Unlimited Zumba, Barre, Pilates, Yoga and More.” I had been wanting to try a Barre class for a while and I figured at $34, I’d make it to at least a couple classes in a month. By the time I went to use the deal about a month later, they had cut their included Barre classes to one per week, smack in the middle of the work day. Many of their pilates classes were restricted from the deal and their mid-week classes all conflicted with a typical 9-5 work day.

While I take part of the blame for not being reading the fine print, in the end the businesses got my money in exchange for nothing, so I felt ripped off.

Group Deal: C – Mediocre-Yoga
The next deal I bought was for a well-known yoga studio down the street from my house. As an avid yogi, I was on the hunt for a new studio, a potential repeat customer. My experience there started out great: I enjoyed a few different classes in their broad selection. But the studio was suffering from its own group buying success. The parking lot was always packed and it often took 15 minutes of driving around to find a spot. By my third class — even though I arrived early, searched for parking and walked in the door with 10 minutes to spare — the class was already full. I didn’t make it back, but I still think I got my money’s worth. But the studio didn’t manage the influx of deal shoppers and in the end, lost a potential repeat customer to others who may or may not have been interested in the studio beyond the life of their groupons.

Group Deal: A+ – Shooting Range: Bullseye!
This was by far the best deal “experience” I’ve had. I spent $10 for an hour at the shooting range for two. I’d never shot a gun before, so I sent the link to a group of friends and we ended up buying three deals. I read the fine print (only valid Mon-Thurs, does not include the price of ammo) and was OK with the conditions. Six of us went in a group to try something new. The service was great! I learned a lot about the different guns and how to use them safely. They even upsold us, convincing us rent an additional gun with a laser sight.

In the end, two of us split a $70 bill for ammo, gun rental, and safety glasses (on top of the $10 investment) and in the end only ended up saving about 11% off the total price, but it was well worth it. Plus I enjoyed the experience so much, I referred friends and family (those who were looking for a local range), posted pictures on Facebook and Twitter and will definitely be going back. In the end we both won: I was happy enough discovering the shooting range that I don’t even mind that I spent $80 and saved $10.

Takeaways:
The bottom line is that small business owners need to know and stay true to their business models. Be realistic about the number of new customers you can service or limit your terms to slower times. It’s better to sell fewer deals and make all your buyers happy. Additionally, make sure your price-point or special deal is something you can upsell on and be prepared to convert deal buyers into long-term customers.

And most importantly, whether it’s Groupon or the next big thing, a wise man once told me: “Don’t believe the hype.”

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