Why Groupon Doesn’t Work

anddrewmason_groupon

Imagine Your 3 Favorite Brands
Coke, Nike, Tom’s Shoes or Prada? Brands are shorthand we use to swim through contemporary life’s information flood. Without brands we drown in marketing.

Groupon isn’t sustainable marketing because it destroys brands.

We don’t BUY brands, we JOIN them.

- Faith Popcorn, marketing guru

Groupon was a boiler room operation with a predictable demise. Groupon is all about the pitch. Small to Medium Sized Businesses suckered into believing Groupon campaigns = Internet marketing may or may not recover. At some point the “greater fool” theory can’t scale.

You can’t scale a BAD idea no matter how much VC money you burn. Groupon’s 50% price cuts were and are the very definition of a bad marketing idea. Most small businesses, those who have been in business for any amount of time, know that price is tricky.

Value perceived is value created.

What happens to those hard-won “value propositions” when you are at a party and someone tells you they just ate at your favorite restaurant on a Wednesday night, ordered your favorite dish and got the same meal you buy on Saturday 50% off?

Word-of-mouth advertising, normally the best recommendation engine always, just worked AGAINST the restaurant foolish enough to believe customers gained with such steep discounts can ever be profitable. They won’t and can’t.

Survival after Groupon’s wrecking ball for brands comes to town is victory and survival is not enough. Once Groupon swoops in and quakes the hard-won value propositions of everyone’s favorite restaurant, gym or childcare center who cleans up the mess?

Those foolish enough to give in to Groupon’s mass hysteria, the “greater fools” clean up mess. Even businesses who REJECTED Groupon must do some cleanup. Their value propositions have been tarnished too.

wizardBecause I TELL you I am a wizard doesn’t make it so.

Groupon fired their CEO Andrew Mason today (picture at top) reminding me of a friend’s first day at Pepsi. “We’ve fired a bullet at you,” my friend was told after signing her paperwork, “when it hits you is only a question of TIME”.

Put aside the hubris and arrogance of such a statement long enough to realize Groupon’s Founder Andrew Mason has been dead man walking since their business model was created.

I am proud to be an Internet marketer. That something I love like life itself could be so debased, so spun into something it is not and can never be is depressing.

Let’s imagine again.

You’ve owned a dry cleaning business for 20 years. You aren’t rich, but you’ve educated your children. Education is something you and your wife had to leave early to work. You even have a few dollars set aside for retirement. One day a bright young man calls and asks if he can help your business grow online.

His pitch is confident and you buy a Groupon campaign.

You buy because you don’t understand the web and are afraid your lack of understanding will cost you. Groupon plays on that fear painting a picture of FEAR (what if your competitors do Groupon first) and greed (this one thing can make the web work for  you).

Now walk into the same dry cleaner with an actual silver bullet.

Place the silver bullet on the counter and make the same claims. “Fire this one bullet and all of your dreams will come true, put aside the hard incremental work that got you here and use our silver bullet,” and our soon to retired dry cleaner throws you out without thinking twice.

Internet marketing is a loaded gun.

The next time some fast talking huckster aims Internet marketing’s loaded gun at you be smart enough to duck and tell them to leave.

What about you?

Did you buy a “Groupon”? Did it work short and long term? Did your business grow? Tweet your reactions to @ScentTrail, @1918, @CommsNinja or @MarkTraphagen with #NMLGroup and we will curate in.

#NMLGroup Comments

@financeguy74
Groupon raised all that VC money so they could move into other business models like POS technology. #NMLGroup
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I think Financeguy74 is on to something here. They raised their cash before Square was in market. I bet the pivot we are about to see heads toward POS.
@ScentTrail
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Great comments on Mark’s G+ Link to Why Groupon Doesn’t Work
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* Wizard photo from http://www.flickr.com/photos/treehouse1977/2788908633/ via creative commons.

Comments

  1. says

    This is among the best “demise of Groupon” articles I have read. In addition to creating a “desperation marketing” position for these businesses, they make them hold all the risk and then get paid last (while Groupon gets paid first and holds all the cards).

    There is room in this space for a business model that puts the business owner in control, avoids the desperate types of marketing with huge discounts and doesn’t take half the net profit. That business model had been identified and is being executed as LocalSense.com. Take a minute to check out their model and you can see how it keeps the good marketing aspects of daily deal advertising intact while removing all the Groupon ugliness.

    • says

      Agree Erick and your summary is masterful (wish I thought of the “pay first” angle). We had an interesting comment on #NMLGroup about Groupon really wanted POS. I think that is where they are headed now that they’ve scorched the earth so well in the hyper-local SMobile marketing area. Despite the scorching I agree with you, there is an opportunity to really HELP SMBs use the web to communicate their value propositions, a way that, as you note, puts them in control.

      Great comment and thanks for your insight. Marty

      • says

        Martin, you should know that Erick is executing about 2/3 of the idea we pitched at startup weekend last year. It’s up and running and is actually solving problems for local companies who want to leverage social to increase traffic to their real-life venue.

Trackbacks

  1. […] I wrote this piece for New Media Leaders because GROUPON is a brand wrecking ball. Groupons absurd deals destroy years of hard work on small business value propositions.Least you think I am piling on, Groupon fired Founder Andrew Mason today, I've been meaning to write this article for a long time. Just wasn't mad enough until today (lol).  […]

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