Groupon: Read Ogilvy First

Hi John! Just wanted to point your attention to Groupons, and wanted to know what you think of them (out of curiosity). I've always believed in your saying that business owners are fully responsible for the choices they make, and it seems like this coupon deal is being torn to shreds by the public and companies who used them, and blame Groupon for their bad choices. Which is really funny, might I add. http://techcrunch.com/2011/06/25/stop-the-hate-daily-deals-arent-all-bad-and-heres-why/ http://techcrunch.com/2011/06/09/groupon-single-worst-decision/ http://posiescafe.com/wp/?p=316 Hope you're well! Amy Hey Amy, Thanks for the links.  The first fellow defends the "groupon movement" on the whole, but fails to mention a critical bit of analysis that I have in my book, about discounting. People need to understand that price cutting is serious business: On the basis of 25% profit, a cut of 5% requires 18% more dollar volume and handling 25% more merchandise.  20% cut require 300% more dollar volume and 400% more merchandise. If the deal made sense, one might enhance it by getting discounts out of the suppliers to the stores and co-promotion dollars.  Build the best deal possible on a sound foundation. The second link is an example where the comments are far better than the article.  This comment was particularly good: Nilay Patel Alcohol. My theory - the single most successful factor in whether a Groupon will generate more revenue than the face value of the coupon is if alcohol is served at the venue. Something tells me that the pizza place made up for the promotion by serving beer. Have a system to serve the customers, and then convert them.  If you cannot or do not, then like so many people, decline the means. The third link is heartbreaking, since it is easy to see her making a mistake at each decision point. The right decision at any one of those points would have caused her to decline the groupon offer. This social media group buying thing will shake out like online search did...  the early innovators will die away, and someone late will come along with a rational valuable model. But anyone who will ever buy any advertising should first read Ogilvy on Advertising.  I bought his book 30 years ago and saved a mountain by almost always saying no, because I can tell if the ad dollars will work.  Learn From Ogilvy!

Bookmark this post --- Email this post