An In-depth Review of Groupon and Why WFR Central is No Longer Going to Participate

 

Every year we do a complete analysis of Groupon; and, historically it made sense for us to participate. Originally, Groupon was a flash sale that created urgency to purchase in a small window of time, the deals were promoted directly into the inboxes of tens of thousands of potential customers, and those buying the deal typically wouldn’t have been a customer otherwise.

 

Over the last two-to-three years, things have changed, and we saw the biggest shift in 2017.   Groupon no longer uses the flash sale/e-blast model, but rather functions as an online marketplace where people actively shop for a deal. The purchase is no longer an impulse buy from an email, customers are actively looking for a product or activity to purchase at an extreme discount.

There are approximately 50 million unique Groupon customers, which equates to somewhere close to 40% of U.S. households, who are using this shopping tool.  And not only has the purchase behavior within Groupon changed, so have the methods in which Groupon markets.

Today, Groupon aggressively advertises deals through Google Ads and SEO.  These ads essentially cannibalize all potential full-price revenue of online customers, because when people search “Wheel Fun Rentals [city name]” or “Bike Rentals [city name]” the 50% off Groupon Deal will always show up higher than your native website.

We had a strong feeling that many of our Groupon customers would have been regular full-priced customers if there wasn’t a Groupon on the market.   So we surveyed half a dozen of our locations in California and Florida.  We asked every Groupon customer, “Did you have Wheel Fun Rentals in mind before you found your Groupon deal?”  The answers fell into two categories:

• Yes – I was planning to come here either way, but I found a Groupon.
• No – I didn’t know about Wheel Fun Rentals or I hadn’t thought of you before I purchased by Groupon. (i.e. new business)

 

In order to make the Groupon numbers work, we would need to see 75% of Groupon customers in the #2 new business category, and 25% of customers in category #1 – existing customers.  However, the results were reversed, and though they varied by location, as many as 65%-75% of Groupon customers were in category #1 and were planning to come to  Wheel Fun whether there was a Groupon deal or not.  That confirms to us that Groupon is siphoning away full price paying customers, and we are not even coming close to making up the difference on the Groupon revenue we receive on the new customers.

Based on our survey results, we have concluded that Groupon doesn’t make sense. The numbers no longer work in our favor and we are losing money with Groupon.  WFR Central locations will no longer be participating in Groupon Deals (with the exception of San Diego Segway tours.)

With all of that said, we are recommending you no longer do Groupon deals.  If you feel that Groupon users and redemptions may be different in your market, we certainly want you to test for yourself. You can follow the steps below to run your own survey.  If you have any questions regarding Groupon, please reach out to Sheena@wheelfunrentals.com

Steps on How to Run Your Own Groupon Survey:

1) You’ll need to have a current Groupon Deal up and running. If you don’t have a current deal running, you will need to re-launch one.  Note: it’s preferable to turn on an old/existing deal rather than launch a new one. We have heard that new deals that launch in 2018 will run on a redemption only model, so you would only get paid for the vouchers you submitted to Groupon as redeemed, not all that were purchased.

2) Train your rental clerks to ask the following question when Groupon customers come in. “Did you have Wheel Fun Rentals in mind before you found your Groupon deal?”  You can download, print, and laminate these training cards to have them handy onsite at the location.  It’s important staff are very clear about the question they are asking and the answers that are tallied so you get the correct information back from the survey.

3) Then, tally the answers, and put them into a spreadsheet like the one linked here.

4) Once you have a large enough sample size, you will be able to easily see if Groupon is cannibalizing full-priced customers or if it’s bringing you new clients.