In late 2011 I was working for a small web design and online marketing company, based out of a house in the northern suburbs of Cape Town. About 6 months in my boss and I thought of a great idea and before we knew it our relationship changed from employee - employer, to business partners.
Ok that sounds like we did it in an afternoon, it took a smidge longer than that, but it really was quick and that was the beginning of a new journey for both of us, together and as individuals.
Completely unrelated to the company I was working for, and he was running, we spent loads of time with our heads in the clouds. We dreamed of solutions to problems using technology we interacted with on a daily basis. Most of the time we’d do this after we’d had a few beers and at the end laugh it off or put it in the ice-box (I wonder how many ideas are in this ice-box everyone puts things into). This time however, we felt like we landed on something worthy of pursuing and before we knew it, we were building a business.
At the time in South Africa, Groupon was the best thing since sliced bread. This was mostly because of their marketing of unbelievable deals that any sane person could not pass on. Having deals sent directly to your inbox every morning so early that it would set the tone of the day to #winning, was unheard of and we.lapped.it.up.
Like with most things built with the wrong intention, we’d soon uncover their flaws. It seemed after a few short years, most of the conversation around Groupon and deals sites like them were mostly just bad reviews. Consumers were upset by the poor quality of the deals they redeemed and especially the terrible service they’d receive once staff got wind and a deal was presented. Consumers were often horrified by the expectation vs. reality when they were shown to the pokiest room in the hotel, different to the luxury suite they were sold online.
Side note: Their merchants sucked too (sometimes), my mom and I once bought very overpriced “Mandela Coins” (whatever that means) that were sold and apparently held similar value to that of a Kruger rand (even though not gold) and a promise that one day they would be a great investment (we may just have been too gullible). A few years after Groupon shutdown in South Africa, I re-investigated the transaction which I never truly was comfortable with. The merchant was made up, a fake and they had a few micro sites spewing false information about the businesses legitimacy. The contact details were no longer working and Groupon had nothing to say for it. If you’re reading this and you bought coins too, sorry mate, we messed up!
“Groupon has come under harsh criticism on consumer champion website HelloPeter in the last 12 months. Out of 3,784 reports on the site about Groupon SA, 3,300 have been negative with complaints ranging from goods not being received, no refunds, to incorrect product delivery, and poor after-sales service. “
The above is an extract from https://businesstech.co.za/news/internet/38521/we-messed-up-groupon-sa-ceo/ 27 May 2013.
How the Groupon model worked
Groupon would approach a restaurant, asking them to reduce their prices of a few menu items, and they would create deals which would be broadcasted for a period, by email to hundreds of thousands of South Africans nationwide. The idea is that through discovery they would create a new stream of brand loyal customers, and Groupon would win by taking a commission and the merchant would win, because hey, who doesn’t need a whole new stream of hungry (for whatever you’ve got) customers?
How did they get paid
So if you owned a burger joint and were happy to offer up your best burger as a deal, it could look something like this:
Normal price: R90
Groupon suggested price: R45
Groupon commission: 75% (R33,75) paid when the customer buys the deal
Your payout: 25% (R11,25) when the customer redeems the deal
No merchant would be excited about these numbers, but the promise of “a new stream of brand loyal customers” was more than enough to convince them it was a great idea!
The customer journey
There was nothing more irritating than being woken up by my vibrating phone every morning at 5am or earlier to get an email from a deal site. Even though I was initially excited by the idea of deals directly in my inbox, it soon got old. Deals like “Huggies nappies 2 for 1” or a breast pump specifically designed for me, was not my idea of the perfect morning deal.
Deals most of the time, were irrelevant!
Fulfilment was never a smooth or comfortable process. There was a stigma attached with pulling the crumpled or folded deal o (why are we still printing things?) from under the table - you’d be seen as a cheapo! This not because its how you normally felt redeeming something you already purchased at a better price, no, the staff made you feel cheap with dirty looks and sighs which indicated they knew they may no get a tip at the end of this and therefore we very uninterested.
The experience was shocking.
Story after story poured in, peoples expectation always trumping the reality. Meals were differently prepared to the normal ones on the menu, soda from the fountain instead from a can, seafood platters for one sold as for two. Sometimes rooms would be as promised, but you’d have to wait two hours after original check-in because it wouldn’t be ready when you arrived.
The level of service plummeted.
Because of these bad experiences, added to that the promise of a new shiny deal in your inbox the very next day, customers were nowhere close to being loyal - on to the next!
It was bad business!
Enter Do A Deali…
Do A Deali - Part 2 (the solution) coming soon