Groupon & Livingsocial – the art of milking small businesses.

Posted Thursday, July 19, 2012

Computer repair farmers; milking the money from local businesses eager to succeed.

Many small businesses receive calls from these companies asking if they want to participate in their coupons. These two sites have a mass readership that will jump on many of the coupons merchants offer, which is great for them, right? They get exposure, new customers, and the customers get great deals. In theory, this is true.

In reality, it is not always best for the business. Businesses use these services to gain “exposure”, a word that is often used in the entertainment industry in lieu of money. No, you’re not doing this show for money, but you’ll get great “exposure” since X and Y from Z label will be in the audience that night! That bullshit has been going on for years in the music industry and is now trickling its way into the service industry. Most business owners use these services so they can create a client base and garner new positive reviews. Oftentimes, it does not turn out that way.

We are in a unique position to watch this unfold. We provide services, and our sister company provides parts, to other local businesses. Through this business, we interact with many laptop & cellphone repair shop technicians & owners regularly. Many businesses in the area purchase parts from us because we are cheaper than Chinese vendors if you are buying small quantities. Businesses needing a helping hand with difficult laptop repairs use us as their back office. If you are a preferred business customer with us, it is literally cheaper to use us for your repairs than it is to hire and train a technician, even at minimum wage. So it is common for us to do the brunt of the repair work labor, and parts sourcing, for businesses that sign up for groupon. We see what these businesses go through after creating one of these deals. Time and time again, it ends as a complete mess with little gained.

Myth: Starting a groupon will bring us many new customers, building a client base for our business.

Reality: Many groupon customers are customers who would not use the business’ services again without receiving another coupon.

At 70% off, you would often be better not having a customer than having a customer. Many groupon customers of small repair shops have called asking about a service then have hung up after hearing there was not another coupon, and never followed up with the company. The groupon mentality puts the idea into the head of consumers that all items and services should be sold at cost or below cost. If someone is making a profit, let’s find someone else who is not willing to make a profit. Starting a groupon or livingsocial deal means you now have a loyal base of people who will most likely only patronize your business when they can get something for free.

Screwing your regular customers with price hikes is bad for business. Consistency in pricing across the board with fairly priced service wins customers, not temporary discounts.

The second aspect of the groupon are the mandatory high discounts, of 50%-70% off. The crazy slash in prices encourages the small business owner to up their prices during the groupon period, which creates a bad experience for non groupon customers! I do know several companies that give quotes over the phone/in person, not online, that do nearly double their prices during groupon. Many retail stores up the prices of their products. I’m not saying deceptive marketing or price hikes are the complete fault of groupon. Bad parents often influence children to become violent, but it is the child who chooses to harbor this violence and let it out as an adult. However, the influence the parents had on the child must be taken into account. The same is true with groupon – the influence groupon has on businesses to hike their prices must also be taken into account.

In New York City,we really do NOT need any more incentive for business owners to institute random price hikes! Most customers would prefer a consistently stable, low price to walking into a store and not knowing if they will be paying $20 or $100 today for a service or item. It is not the one time low price that will grow your client base. Rather, it is instilling in your clients that at all times they will find value in your business, regardless of when they come or what they need. Instead of charging $300 for a keyboard replacement and giving 50% off, charge $180 for a keyboard. Maybe have a $10 for $20 deal that gets them $10 off. The first time they come to you, they may go with the other business that is $10 cheaper, but trust that as a return customer they will laugh and bitch out loud when they realize that business now wants $300. Value that comes from the heart, trumps value that comes from the groupon.

Myth: our business is ready for the groupon.

Reality: you are likely ready to handle 50-150 tickets a week, and are now going to be doing 900. If you believe you can handle this without dropping the ball once, you need to watch this video. The third aspect of these discounts is in the labor. One business had a large groupon that was posted for one month. At the time that redemptions could start, the business had over 900 customers come in within one week to have their devices repaired. This business was set up to handle 100 tickets per week, tops. Not only were they overwhelmed with work, which can push the quality of the work down – they were also performing this work for no money. Pushing your business to perform 500-900 jobs in one week is similar to getting the cheapest Honda to do 160 MPH on a freeway in another country. It doesn’t go well, which leads us to our next myth!

Myth: our business will receive many positive reviews on Google & Yelp as a result of offering this deal which will drive more business.

Reality: If you do manage to overcome the hurdles of octupling your business in one week, you now have to overcome the hurdle of making the average groupon customer happy, which is much more difficult than making your regular customer base happy. You are now attracting customers unnaturally – people who would not usually choose to patronize your business will show up just for the low price, so you will be receiving customers that do not naturally cater to how you do business. These customers are less likely to leave a positive review.

a) Your business will be overloaded with customers diving in to get youervices at cost, or at a loss. As a result, you may not be providing the personalized, 1 on 1 attention to each individual customer as you would with a lesser workload and a real profit margin. These customers may not receive the best experience, and may not leave a review. Worst case scenario; they leave a bad review.

b) This is a theory many are afraid to state out loud, but I am ready for the people who will be walking by to throw rocks through my window. I would like to add the disclaimer that this statement is not directed at all groupon customers, but is an observation based on the average hardcore grouponer.

Groupon customers on average are simply more ornery and irritating than regular customers. They have unrealistic expectations and attitudes of entitlement you simply will not find n your regular client base, which do not lead to receiving good reviews. Many businesses we have seen offer these have received their FIRST bad reviews FROM one of these livingsocial/groupon deals, after a 3-4 year record of untarnished positive feedback over trivial nonsense. Not following a technician’s advise then breaking your device again. Not believing the quote they received. Issues that rarely if ever exist with your average customer will be more likely to exist with your groupon customer, which will not be good for your social network review portfolio.

You set yourself up to receiving negative reviews when you use one of these services. Even if your business is prepared for the influx of customers, you will still have an uphill battle making these new customers you have happy. Your regular customers chose you because they did their research, or were referred to you by people who believed they would like your service. Groupon customers are at your door for one reason – PRICE! They may not be the kind of customer who would typically even choose your business over another business, or over not having the service done at all.

Groupon often attracts repair clientele that would not have an item repaired if not for the groupon.

Everytime I look for reviews of plumbers, car repair shops, etc – services that repair the necessities of modern living, I am amazed at the plethora of bad reviews I see. It was not until I had to be a customer of one of these services to understand the feeling. It’s one thing when a luxury device must be repaired. It’s another when a necessity must be repaired. I’m not giving you $400 to give me something cool or new. If I am coming to you for laptop repair, I am giving you $400 to get back the SAME scratched up, mediocre item I became accustomed to being in my life. I am not getting something new. I have to pay just to move back to where I already was. This is a SHITTY EXPERIENCE for the customer. Even if you do a GOOD JOB

People who use groupon often do not use a business’ service until it is grossly discounted. So, you are very likely to meet people who would not bother getting their device fixed unless it were cheap – people who will fit this mentality of being irritated at paying to get back what they already had. This isn’t doing your review portfolio any good.