Note: Earlier this month RSC member Chris Rolando shared a story about a bakery that lost $8000 cash honoring an ill-advised experiment with Groupon. As one might expect, this is not an isolated incident. Read on...
After reading this April 14th article from the Milwaukee Journal Sentinel in the Spokane newspaper, which details a restaurant owner's costly experience with Groupon, I realized why this is such a bad deal for most local retailers: it attracts the very same customers that will be first in line to shop that merchant's Going Out of Business Sale, and for the very same reason: a ridiculously low price. Period. End of story.
Of COURSE shoppers will flock to your 50-60-70% off sale!
Of COURSE shoppers will strip your business to the bone, if you give them permission to do so. That's just the nature of consumerism.
But that doesn't make it a healthy practice for your business.
People attracted to these extreme deals don't care a whit whether the store makes a profit, or even whether it stays in business. After all, there are other places to shop.
"The desire for instant gratification." Remember this? It was at the top of Roy Williams' list of "The Twelve Most Common Mistakes in Advertising." That's what drives most retailers to try a Groupon-style "promotion," and may well drive them out of business if they don't give it a second thought.
Rod: This reminds me of one of my best quick hits to a clients refusal to advertise with me during his
big big Grand Opening. He explained to me that he was well known in town, people would shop with
him because of his status and he just did not need radio advertising because word of mouth would be
just fine. I said " Great - I*ll stop by for your going out of business sale". He did not last 8 months
in business and declared bankrupcy. Enough said.
Kent Lankford
WAKO AM FM
Lawrenceville ILL - Vincennes, Ind.
Here are two simple rules I have learned over the years.
1. When you advertise a sale, you cut your gross twice.
2. Word of mouth is worth exactly what you paid for it.
