« Archives in April, 2011

 Powered by Max Banner Ads 

Email vs Groupon: A case study


It’s widely rumored that Groupon started its Nashville business with 50,000 emails attained through various means. All completely legal of course. That list grew on the strength of punishing specials delivered on behalf of merchants who didn’t think through the power of growing their own list with ad dollars they were giving up in margins to a company that controlled the transaction while living in 50% of the reduced purchase price. Net pricing reduced 75% across the board with no consideration as to profit or the real cost of the marketing push. Take a look at Groupon’s last two weeks of specials and you’ll find perhaps one food related deal in the mix at the time of this post.

If you could start your ad campaign with 500,000 Middle TN email addresses, 82,000 or so mobile subscribers and expert consulting that shows you how to retain the transaction and the margins allowed you to offer Grouponesk type specials without giving up 50% of the purchase price, would that sound intriguing?

Let start by talking about email, marketing in general, and some specific thoughts.

According to Emailstatcenter.com the top three email headlines that lead to one opening the email received are the following:

A Discount Offer
A Free Product Offer
A Familiar Brand Name

If you’re a restaurant owner and could make your offer as compelling as Groupon or Living Social requires, i.e. 50% off of your retail or off the shelf price but could keep the income by controlling the transaction so you didn’t have to give up 50% of the offer’s price, wouldn’t that make sense? Is your offer compelling enough that a few people may have some interest? Let’s look at a case study shall we?

This recent Groupon special for Yolos was a featured “deal of the day” on April 8th.
The offer was a basic but wildly popular restaurant deal.

$20 for $40 Worth of Creative Cuisine and Drinks at Yolos Restaurant and Bar

It sold out completely at 2250 takers. Limit 3 per person. Limit 1 per table. Limit 1 per visit. Dine-in only. Not valid for 1/2 priced wine Mondays.

The facts as we know them.
On the deal Yolos received 2250 sales.

Groupon received 40 to 50% of the remaining $20.00 asking price leaving Yolos with $10.00 on 2250 sales. $22,500 revenue earned but paid in three increments by Groupon to account for charge backs or cancellations.

Groupon’s response rate was likely about 1%. That’s very strong. The open rates were likely far higher given the fact Groupon’s list is opt-ed in solely to receive the daily deal concept via email.

On an email blast through GoLoco Media with its 500,000 participants in Middle TN, what might we anticipate? We warrant a two percent open rate and do all we can to deliver that consistently. This means for a $2000 spend on average, one wise Middle TN business who could benefit from broad audience exposure could experience 10,000 opens with the right opening message offer.

If the underlying Deal of the Day features a great value proposition, the conservative buy rate could be 5% of the 10,000 opened. If so, 500 buyers at $20.00 net the wise establishment owner $10,000 with a $2000.00 ad spend. The $8000.00 net is the establishments immediately. No holds, no payment in three increments, no hassles. If we see a 10% buy rate that garners 1000 buyers at $20.00 then obviously we have a $20,000.00 gross revenue with a $2000.00 ad spend and an $18,000.00 gross revenue number with no waiting time.

By the way, if the establishment qualifies, we’ll even do net thirty on the costs or part of them.

If the establishment manages to capture 2250 sales at $20.00 they’ll see revenue at $45,000.00. Are you beginning to see how truly expensive Groupon and Living Social as advertising vehicles truly have become? Consider the above case and if you’d like to discuss how to marry email lists, mobile subscriptions, Facebook and social engagement into a new kind of campaign, we’re ready to chat.

Questions may be directed to Sherman Mohr, CMO of GoLoco Media Group
Comments welcome. Calls welcome to 615.264.4747