You heard it here first: Groupon is a failure.
Even before their disastrous Super Bowl ad (see below) that exploits Tibet even as it pretends to lament its problems, we were saying the online coupon service was a bust for many businesses who have uncritically rushed to use it.
Same as we were among the first de-adapters of Twitter for business applications. Now new research is showing we were right about that, too.
But I digress.
New data[1] shows that promotions overall no longer provide the significant increase in sales (known as “lift”) that they have traditionally for consumer product manufacturers and retailers. Despite a second straight year of increases in products sold on promotion (30%), the average volume “lift” declined. Even as coupon redemption rates reached record levels in 2010[2], the pace of redemption fell 15% (from $2bn to $1.7bn) as the year went on.
Nearly three-quarters (70%) of product categories employ promotional support, yet lift declined in nearly 60% of them. Walmart is one of the biggest promotional losers, and has backed away from its policy of “deep rollbacks” to one of “everyday low pricing” after the strategy generated poor results, and those associated with it left the company (jumped or were pushed). Reasons for the drop-off in lift include “promotion fatigue” (bad news for Groupon and its imitators), a continuing reluctance by financially-strapped consumers to stock up (even if something is attractively-priced), and the increase in unsolicited digital coupons and promotions.
Even as Groupon hurtles forward to an eagerly-anticipated IPO, of 150 businesses who tried Groupon during a survey from 2009-2010 [3], 32% found it unprofitable. More alarming for those thinking of going with Groupon: those who joined later turned out to be less-likely to find it profitable.
Yikes.
Restaurants have been especially outspoken in their disgust with Groupon: over 40% of restaurants found it not profitable. And the Groupon customers who did use the offers usually spent nothing beyond the promotion, didn’t leave a tip, and never returned. So much for using promotions to build a customer base.
And for marketers in love with Facebook, Twitter and other social media: an increase in “chatter” last year about deals and promotions on various commercial Facebook sites and with multiple “tweets” did not translate into increased sales volume.
The marketer’s dream of a one-to-one relationship with a receptive consumer remains just that: a dream.
[1] Source: Symphony IRI Group.
[2] Source: Valassis Communications.
[3] Source: Rice University.
We are proud members of the International Licensing Industry Merchandisers Association (LIMA), the recognized, authoritative voice of the licensing industry.