The National Jean Company yesterday had sold 2,000 Groupons in the New York City area by 5 p.m. with seven hours still left in the campaign. The company was the social-buying platform’s deal of the day in the metropolitan market, offering a $125 voucher for $50.
During various points on Tuesday, Brett Perloff, marketing director for the mid-sized retailer, told ClickZ the brand’s four Long Island stores and two Manhattan locations were already fielding calls and getting walk-up visitors with questions about the vouchers by late afternoon.
“Groupon told us to expect around 2,000, and that’s where we are at right now,” he said. “And I think once people get home from work at 5 p.m., we’ll see another bump.”
Groupon informed him that approximately 500,000 New Yorkers would receive the e-mail offer. The Chicago-based coupons firm also tweeted the National Jean Company offer to 6,300 followers on its New York-dedicated Twitter page.
There was no volume limit to how many vouchers could be sold during the 18-hour campaign, Perloff said. “If the final number ends up being 5,000, that’s great,” he said. “We look at it as a potentially big customer growth opportunity.”
Perloff said his company decided on the 60 percent discount – or $75 loss leader – after examining other offers in Groupon’s client portfolio. Some examples involved results from competing denim stores, while two showed the numbers for National Jean Company campaigns run by independent franchisees in Boston and Columbus, OH.
“We looked at the results for a lot of $50-for-$100s and a lot of $50-for-$125s,” Perloff said. “One-twenty-fives got a much bigger response. We felt in terms of creating new customers and getting new foot traffic, it was worth it to give people a better deal.”
The vouchers are redeemable until Dec. 21, a timeline designed to bring in holiday shoppers who may spend more than $125 on their visit. However, Perloff suggested the campaign was about acquiring long-term customers and not turning an immediate profit.
“We anticipate taking a loss on this,” he said.
Perloff added Tuesday’s strong showing would lead the National Jean Company’s sister brand, Denim Habit, to utilize Groupon with its two Philadelphia-area locations. “We have confidence in our brands that once people visit our stores, they’ll come back,” he said. “Groupon is a great example of using the Internet to drive bricks-and-mortar sales – or foot traffic at least.”
West Coast Café Calls Groupon ‘Worst Decision Ever’
But at least two small businesses appear to strongly disagree with Perloff’s assessment after their experiences with Groupon.
For instance, Posies Café owner Jessie Burke on Sept. 11 authored a blog post about losing $8,000 on a Groupon campaign. The Portland, OR-based eatery offered $13 worth of food for $6 on March 9. While the social-buying platform allows businesses to cap how many vouchers can be sold, a communications breakdown between Burke and Groupon’s sales rep was evidently to blame for 1,000 area consumers – far more than she wanted – purchasing the offer.
Ultimately, Burke said she suffered enough monetary loss that paying her retail space rent and staffers had suddenly become problematic. “It has been the single worst decision I have ever made as a business owner thus far,” she wrote in her blog.
And Burke’s anecdote came on the heels of a Wall Street Journal article that highlighted less-than-positive campaign results for New York smoothie shop Xoom. Local consumers bought 1,300 Groupons for a one-day campaign in June, according to owner Jennifer London. But she told the Journal the effort failed to produce repeat customers.
“Most of the people who came are not from this neighborhood – I most likely won’t see them again,” London explained. Fortunately, she said, not all the coupons were redeemed. “I definitely would have lost money if everyone had shown up,” she said.
When asked about the Posies Cafe situation in particular, Groupon pointed to CEO Andrew Mason’s blog post from last week, where he defended his platform against the growing negative buzz. In the post, Mason stated that 97 percent of Groupon’s business partners have asked to be featured in the company’s e-mails again.
Meanwhile, Gregg Stewart, president of marketing firm 15 Miles and a ClickZ columnist, suggested that it is not Groupon’s place to create long-term customers. “Groupon can be a terrific way to drive foot traffic into a new store location to spur a ‘trial’ of the store or business,” he said. “However, it is up to the store/business to find a means to migrate a deal-based consumer into a repeat customer.”
It's easy to think of customers as fish you can bait with discounts. It's also lazy. Marketers should adopt the B2B mentality of solving customers' problems.
Amazon is well-known for sending emails just for you. But a business doesn't have to be Amazon-sized to successfully deploy the same strategy.
Instead of launching a fully-formed new program, try innovating in increments, where you make a series of small changes that eventually add up to something big.