May 30, 2017

Groupon Case Study

I have real world numbers from a GroupOn campaign to share with the world! This in combination with my very sexy equation from a previous post and my newly added, downloadable GroupOn Excel calculator allows us to get all kinds of insight.

The businesses I know that have participated in these campaigns have seemed pretty happy with the results, but none of them tracked their numbers. That meant I had to make some assumptions, but no longer.

Case Study

Here are the metrics from a real GroupOn campaign. I would expect that results will vary from business to businesss and especially between different industries. If you need to better understand these numbers, read the previous post.

  • Business Type: Very Casual Dining
  • Business Age: Fairly new business
  • GroupOn offer: $20 certificate for $10
  • GroupOn’s commission: 50%
  • Total Sold: 1,225
  • Redemption Rate: 68% (32% were never cashed in)
  • Average Ticket Amount (with certificate use): $20 (people spent pretty close to the face value amount)
  • Estimated number of new, recurring customers: 75%. This is expressed as a % of the total number of certificates sold. These are people that will come back even without a certificate.
  • Estimated Long term, recurring customer income: $20. Without a certificate, the average ticket is about $10. This means that it is assumed the new, recurring customers mentioned are expected to come in about 4 times over the “long term”
  • Normal Margin on sales: I did a loose calculation because I knew the net result… 230% margin or COGS is about 30% ticket price.
  • Brand Value: $0. This is such a fuzzy number, that I left it as zero.

The real world result is that this business owner was paid $6,000 with costs around $5,000. According to the super-awesome spreadsheet – using the numbers above – the analysis shows:

  • Campaign Profit: $1,076.52
  • Total Long Term Profit: $13,883.33
  • ROI over the “Long Term”: 130.77%

Not too shabby.

Footnotes

There are some notes worth mentioning:

  • The business was paid by GroupOn in three, equal payments over 1-2 months. They were happy with this.
  • Purchases with certificates with Tickets less than $20 don’t get change. Typically, they would order something else to get over the $20 level.
  • Redemption volume was heavy in the first and last month, the numbers were:
    • Month 1 – 225
    • Month 2 – 150
    • Month 3 – 100
    • Month 4 – 50
    • Month 5 – 50
    • Month 6 – 250
  • The number of new, recurring customers is very difficult to determine and is basically a gut-check. Unfortunately, it is largely responsible for the determination of the Long Term Profit… so be careful how you use it.
  • I assumed “Long Term” meant over the course of a year when determining some of the more “magical” numbers. You can assume whatever you want, but make sure you understand what it all means.
  • The calculator is intended to be functional, not fancy. It’s pretty basic, but still very, very sexy.

Is Your Audience Listening?

This is a topic I’ve struggled with over the past few years. There are so many people that measure success based on the number of followers/fans they have, but I question how valuable these numbers are. Those companies that do email blasts to a billion people see success as a 2% click through rate…. they’re playing the numbers.

I’m currently in the camp that believes quality is better than quantity. I actually read the profiles and posts of people I follow on Twitter and I don’t automatically follow people that follow me. If I get a friend request on Facebook, I check to see if I know the person and, if not, I check to see what friends we have in common. The justification I have for both myself and the organizations I work with is, having an engaged audience is more valuable than the raw numbers. I equate people that blindly follow others on social media to someone grabbing one of those business card fishbowls you see in restaurants – you can add all of these people to your contact list, but will most likely never do business with any of them. What’s the point?

The counter argument is that the more people you can reach, the more likely it is that your message will fall on friendly ears. If 2% of those fishbowl contacts is actually interested in what you are doing, then that is one successful connection for every 50 cards you filch.

I like analytics quite a bit, but I think that the real measurements that have value are in absolute numbers, not ratios. How many people are actually interacting with you through retweets, mentions, direct messages, comments, likes and wall posts? If you can push these numbers up that show engagement (without annoying people) by following every single person, then your ratio is shot, but so what? If you can do it by exerting more energy to vet your audience – fantastic.

Here are what I believe are the secrets:

  1. Add value to the conversation instead of just acting as a shill for your interests. So many organizations create accounts and turn on the traditional broadcast tower … “buy my product, visit my business, enroll in my self help program, etc.” What information are you providing that help people pursue their interests versus just another advertisement?
  2. Go deep on the conversations your audience wants to have. Social Media is a two way street and your opportunity to have an ongoing conversation, build relationships, and turn bystanders into passionate patrons.
  3. Focus on the real metrics that measure if people are interested in what you have to say versus how many people are within earshot.

I’d love to know what strategies others are using. Let me know what you think.