Well Groupon has to be the storybook IPO of 2011 and it will probably be the biggest company on planet earth, sometimes what works for gigantic momentum plays (eg mega drag race) won’t work for anyone else.
They have billions of capital so can buy large high pressure sales forces. That gives them an incredible advantage like the army of timeshare condo salesman or if you have ever watched Tinmen, aluminum siding people.
In this case I’ve heard time and time again how well their sales tactics work. We just took a massage from a new business owner here in Hawaii. They have two sales reps here and she was promised a huge repeat installed base. Instead they doubled the number of groupons from 450 to 900 and doubled the term to 18 months on her. They now hold over $100k of her money and will pay her on 60 day terms and sounds like they will keep it all if redemptions don’t happen.
It’s brilliant because they get all the money upfront. As a small startup she feels she has no choice but to honor it. She is working basically 24-7 for no profit for groupon for the next year. And the rep is no where to be seen.
And let’s face it the customers haven’t turned out to be long term but very demanding price sensitive folks who won’t repeat. not something to build your business on.
What can we learn from this. Well for Groupon it’s an extraordinary opportunity with so many new businesses forming all the time and extremely profitable. But it sure won’t work for everybody…