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Joanna Robinson

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The Perils of the Daily Deal Customer

Posted: 04/18/2012 3:40 pm

Dear Groupon, Living Social, and other "daily deal" site customers:

I manage a growing chain of massage studios in D.C. Back in 2009, barely three months into existence, we ran a Groupon deal. Thankfully, I wasn't bankrupted. Others have not been so lucky.

If you all-too-eager, super-discount customers want to continue to have your inboxes flooded with deals every day, please heed my advice -- or you will cause the entire daily deal industry to collapse.

Yes, you.

Not that I'd mind if you did. I just finished the final hellish weeks of a Groupon deal I ran a year ago. I'll probably never do one again. If enough merchants grow to feel the way I do -- and many already do -- Groupon and its countless imitators will wither and die because they will not be able to get enough businesses to participate in the deals you so enjoy.

Why aren't we going back for more? Because daily deal customers are worse than normal customers in every way imaginable.

Daily deals distort what economists call "price signals." You may not realize it, but you actually value my service less because you paid so little for it. And I value you less because you paid me so little. We're going through the motions of a normal market interaction. But that distortion strains our relationship.

Groupon's model breaks the normal customer-merchant connection. You bought something from Groupon. That makes you Groupon's customer -- not mine. And Groupon pays me a (very) small portion of that voucher's value.

The company's name is a play on "coupon." But that's not really what it sells -- they're more like gift certificates. For merchants, we have to provide a service or product when that voucher is presented to us. But we actually don't receive any revenue at the moment of exchange.

If you, the Groupon customer, have a problem with my service, you'll probably want me to answer for it. But you didn't buy anything from me. And if I have a problem with you, I'll want to turn you away because you're not my customer -- you're Groupon's.

You and the 2,000 other people that purchased a Groupon for massage are much less valuable than a normal new customer. In effect, Groupon has allowed me to "buy" new clients in bulk; you're cheaper and of lower quality than normal ones.

Compound that with the fact that I'm receiving about 25 percent of the revenue that I normally would for serving you, multiply that by hundreds of abusive, high maintenance customers, and it's easy for me to conclude that the $20,000 cash injection up front is not worth the pain and anguish you inflict on me and my staff over the course of a year.

Hence, I've started ignoring Groupon's emails and phone calls to set up another deal. And I'm hanging up on all its imitators.

There are plenty of other business owners that feel like me. As our ranks grow, these daily deal sites will have an increasingly difficult time finding businesses to participate. They'll run out of discounted products and services to sell. And, eventually, they'll fail and die.

If you want the daily deal model to survive, here's my advice:

1. Read the stipulations on the voucher before you buy and don't argue with the merchant about them. Never, ever ask for exceptions. If you can't make the voucher work as stated, be a grown-up and eat the cost of purchasing it.

2. Do not, under any circumstances, call the business the day their deal runs. Everything you want to know is probably on their website. If you can't find it there, you are an idiot or the business is run poorly. Either way, you shouldn't buy the voucher.

3. Try as much as possible to spend the voucher outside the first and last 30 days of the deal's run. You want to be lost in the current of normal customers so your effect is diluted. You don't want to be one of the hundreds of assholes clamoring to redeem their voucher right away or right before the deal expires.

Even if you're not embarrassed to be part of that mass (though you should be), think of it selfishly: redeeming during the bookends of the deal guarantees a degraded customer experience for you because the business will be under heavy stress.

4. Be gracious and a little embarrassed. Seriously. You got a really discounted price. You should not be petulant or high maintenance. You should be extra gracious and a little embarrassed. Merchants are liable to elevate you to the level of a normal customer if you engage respectfully. And that leads to a better customer experience for you.

When you cheap, bulk customers flood me with all kinds of additional problems, the costs extend well beyond money. I actually made a profit off the last Groupon I ran. But I won't do it again because of the pain inflicted on me and my employees when dealing with you.

Please keep all this in mind as you gobble up your daily deals and start to feel entitled. If the Groupon model fails, you'll only have yourselves to blame.

Joanna Robinson is the founder of Lunar Massage, which provides no-frills, community-based massage at two locations in D.C. (and more in the works). Lunar Massage was the third business to be "featured" on Groupon when the company first expanded to DC in 2009.

 
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