Five tips to hacking your own Groupon deal
We ran a Groupon a year ago and learned a lot in the process. I think they are a tremendous marketing tool, but must be used with precision. Let me break down how ‘flash sales’ work and how to best structure if you decide to run a ‘deal’.
Six months after launching I approached Groupon to run a deal. They were at their peak with a half million San Francisco subscribers and little competition. As a startup selling sustainable seafood I thought this would be the perfect way to garner awareness and raise some capital. Since people have a year to redeem, we could use the cash up front and slowly pay back as they cashed in.
I was told by the Groupon sales rep they always do a 50/50 split but we agreed to 60/40 split after I negotiated. A few weeks ago they offered me an 80% split. After the deal ran, we realized that they put the wrong map on the coupon. They also put our redemption code in small letters and their own, unnecessary code, in huge letters up top. We probably got 500 calls on these mistakes alone.
How to run a flash sale (Groupon, Living Social, etc)
1. Negotiate a good split. There are hundreds of companies out there so don’t be afraid to walk away. You should negotiate at least a 70% take.
2. Make money on the deal. They will try to sell you on a losing proposition in order to ‘gain exposure’. Not worth it. Many customers will not return and there’s no reason to lose money on them. Ensure no possible way for people to use the coupon that would result in a loss.
3. Ensure your costs will not increase before the deal expires. One year later as people frantically redeem their coupons our COGS has increased by about 10%. Ouch.
4. Make it so a five year old understands how to redeem. Seriously. Even still, you will get calls from people asking “so, uh, how does this work?”
5. Prepare for mayhem. It will be incredibly busy up front, then steadily slow, and then even more busy as the coupons set to expire. Make sure you’re ready and that you’ve budgeted for the product you will be giving away a year later.
We ran a deal with Living Social a few months later, employing these tactics, and it was a much, much better experience. If you’re thinking about running a deal I’m happy to discuss with you and even make some intros to companies we’ve worked with that put your business first.