Merchant Alert: If you’re considering a Group-Buy Deal beware the hidden costs!
Group-Buy deals should come with a warning label for merchants and for clients. Sales representatives for Group-Buy companies are quick to sell naive and unsuspecting merchants on the myth that the sale of deep-discount deals will result in a much needed infusion of wonderful, new, loyal and repeat clients that are both willing and able to pay regular price for products and services. Don’t get me wrong, the group-buy deal will probably attract a few such clients who will become regulars (as long as your business provides them with worthy services/products), however, the percentage of deal-clients who will fall into this category is vastly over-exaggerated by Group-Buy companies. These companies can ‘sniff out blood in the water’ and know just what to say and promise in order to exploit new, small, income-strapped or otherwise economy-battered businesses anxious to survive. What the Group-Buy company’s representatives won’t tell the merchant before he or she signs on the dotted line, is that most of the so-called ‘wonderful, new clients’ attracted by deep-discount deals are already loyal to the Group-Buy business (e.g. Groupon, Trubates, Angie’s List, BuyWithMe, LivingSocial, CoupTessa etc.), and will never become loyal or even repeat clients of the merchant’s.
My experience has been that Group-Buy deals tend to attract deal-chasers, people who are interested primarily in the discount. These individuals go where the deals are and are concerned less with quality than with price. Many of them can be sorted into the following categories:
- The Ultra Demanding One-Timer – these are the deal-chasers who normally do not purchase whatever products or services you are selling at regular price. They only purchase if the product or service is half off or more. Many times they are looking for ‘the biggest bang for the buck’. They appear to be extremely picky and have a sense of entitlement, believing that: a) They should receive free upgrades to higher-end services or products on the menu, b) They are entitled to something free or extra simply because they are breathing (I call this the ‘something-for-nothing syndrome’), and c) The merchant should be bending over backwards to please them. I own a small massage and bodywork business. A number of deal-clients who fell into this category seemed to believe that they should have been able to have their spa service performed at the same time and/or in the same room as their friend/spouse/significant other free of charge!I have found at my business that a good number of those in this particular category actually travel from further distances (50 miles or more) than average. A handful of them have even come from out of state. Coming from such great distances, it is easy to understand why anyone would expect to receive a great deal. However, expecting a great deal at the expense of the merchant earning any kind of profit whatsoever is not only ridiculous, it is predatory. Many of the clients who purchased deals for my business admitted that, although they absolutely loved their service(s), they are only interested in purchasing spa services when they are deeply discounted. A few claimed proudly that they never go to the same spa twice because that way they won’t need to pay full price! Still others offered to become regulars IF and only if I agreed to provide them with the same deep discounts every time!
- The Inconsiderate No-Shower/Late Canceller/Repetitive Re-scheduler/Last Minute Booker – These are deal clients who – even though they booked their own appointments online or called to schedule their appointment(s) by phone and received appointment reminder notifications – demonstrate their lack of consideration and respect for small businesses by either not showing up for their appointments, canceling their appointments at the last minute, repeatedly rescheduling appointments only to cancel them again and again, or waiting until the deal is close to expiration or has expired in order to try to book an appointment. About thirty percent of those who redeemed group-buy deals at my business either no-showed, cancelled or rescheduled appointments multiple times, most with no or less than 24 hour notice. Deep-discount deals typically have expiration dates of six or twelve months after purchase. I have noticed that about 15-20% of deep-discount deal-takers forget about or ignore their deals until the very last minute, leading to a flurry of last-minute appointments and resulting in the best slots being taken. Some of these clients then become irate because the merchant’s schedule is so busy that the client cannot get an appointment on their preferred date(s). The few clients who manage to miss the expiration date altogether, can sometimes become highly upset with the merchant for not honoring expired vouchers. For the most part these individuals are only guilty of being lazy (waiting until the last minute), entitled, and inconsiderate or mindless of the merchant’s time and efforts. A small percentage of these clients, however, can sometimes devolve into a totally different category of Malicious & Vicious False Informer.
- The Malicious & Vicious False Informer – I had a couple of people who purchased my deals and either booked subsequent appointments but then either did not show up for the appointment or forgot about their deal and didn’t try to book an appointment until days before the expiration. One such individual purchased a coupon deal in January 2011. She then booked and no showed for an appointment back on May 14. Over the next two months she repeatedly booked appointments then cancelled them at the last minute. When contacted on the day of her first no show, she claimed to have called and spoke to someone else to cancel her appointment (untrue as I use my cell phone as my business phone and I am the only person who answers my cell phone). She then claimed to have gone online and cancelled the appointment herself (also untrue as my system showed no cancellation entry). Sensing that the client had simply forgotten, I decided to give her another chance. I informed her that her coupon had been redeemed due to her first no show but that if she called me and rescheduled for a later date, I would personally provide the treatment at no cost to her. My only stipulation, which I informed her over the phone and again by email – was that any new appointment she booked could not be cancelled again or else I would no longer be able to honor the deal. Two months later, she called and re-booked an appointment three weeks in advance. On the day she booked the appointment, I sent a reminder message reiterating our agreement that she could not reschedule or cancel the appointment as per our earlier discussion. An appointment reminder email was sent to her 24 hours prior to her appointment. Shortly after the reminder message went out about her appointment, she cancelled yet again! That day, I sent a final email informing her that her deal was considered redeemed in full and could not be honored at a later date. She responded saying that she had not heard back from me and that she wanted to cancel her appointment. I resent the email. She responded again asking why I was not responding! I sent around five emails that day asking her to call me directly since she had requested no phone contact and would not provide her phone number. I went back over all email threads with her and found her replies to my emails. I confirmed that her email address was correct and even tried to reach her one more time by email. She emailed me again and claimed that I had not responded to any of her emails and therefore she wanted a refund. I immediately informed her of her responses to my emails and also re-sent every single email thread between us. She became extremely irate claiming that she wanted to deal only with the owner. When I informed her that I was indeed the owner and had been the only one dealing with her all along, she called me a liar and claimed that I was playing some sort of game because according to her she had never received any emails from me! Cue the Twilight Zone music because at this point I figured either she or I were living in some sort of alternate universe. All along, I tried to be as courteous and understanding as possible. My last straw came when she emailed me stating that she did not like dealing with me and criticizing my customer service skills. I explained to her that I had actually bent over backwards many times to try to satisfy her even though her repeated late cancellations and no-shows had long rendered unusable the one discount coupon that she’d purchased. I also made it known that I was certainly not happy dealing with her either! Unfortunately, my standing up for myself and my business threw her further into the temper tantrum she was bent on having. She promptly contacted the Group-Buy company (which had a No-questions asked refund policy) and requested and received a refund; claiming that she absolutely hated my website, never received any communications from me, and did not like working with me because she felt I was inflexible! Also, since I’d had the unmitigated gall to stand my ground and refuse to honor her coupon yet again, she decided to “get even” with me/my business by submitting a negative business review on my company’s Better Business Bureau profile. At that time, her negative review was the first one that my business had received since I’d opened my doors in early 2009.
Unfortunately, the second of only two negative reviews my business has ever received came just this week – from yet another deal-chaser client. In May of this year, I sold 11 couples massage vouchers. The vouchers are set to expire six months after the purchase date. Since one purchaser recently requested a refund days before their voucher’s expiration date, my final number of deals sold became 10. Thus far, eight of the ten vouchers have been redeemed and one has expired. The last voucher is owned by the deal-chaser client who just submitted my second negative review. this client waited until two weeks prior to the expiration of her deal voucher before contacting me for the first time to schedule an appointment. She called on 11/3 at around 8am and requested that I book a single Swedish massage appointment for either that day or the coming Saturday. It was only when I asked for her name and contact information, that she informed me that the appointment would be for herself and her mom since she held the last voucher for couple’s massage. The couple’s massage of course requires two therapists. Since my 2nd therapist was not working that day and would not be in that weekend, I informed the client that it was not possible to book the appointment for the dates she’d suggested because I was the only one working both days. We went back and forth on potential slots. I asked her for a couple of dates and times for the following week when she and her mom would be available. Once she suggested two other days, I informed her that I would consult the second therapist regarding slots for the following Monday and Tuesday. In the meantime, she would check with her mom to ensure that those days would work for her too and get back with me. Less than two hours later, this client called the Group-Buy company and complained that she had not been able to get the dates she’d wanted and therefore she requested a refund. The company immediately called me to find out what was going on. I informed them that the client had only just called me that day and that I was going to contact her after consulting with my second therapist on some potential time-slots. I called the client twice on 11/5 and again on 11/6 leaving voice-mail messages that were never returned. After about a week, the client called again on 11/12 complaining that I had never contacted her. I checked my detailed notes on her profile in my appointment booking system and informed her yes I had called and I had even left voice-mail messages asking whether four time-slots on 11/7 and 11/8 would work for her and her mom. Each voice-mail had requested that she call me back asap to book the appointment. My ability to provide details that showed her own lack of follow-through evidently made this client even angrier. She immediately began shouting and became verbally abusive towards me, even as I sought to calm her in order to check whether an 11/14 (the last day of the voucher) slot might work for her instead. Rather than calming down, she became even more irate, shouting that my company needed to go “out of business” and that she would let everyone know what a terrible business I ran. Before I could respond she promptly hung up on me. I immediately tried calling her back, then waited a couple of hours and tried again but she refused to answer my calls. Later that night, I received emails from a review site. I discovered that she had written three negative reviews for my business: one on the Group-Buy company site, another on MerchantCircle, and yet another one on Yelp. These reviews were both harsh and dishonest. It is neither my nor my business’ fault that this client waited until it was too late to book an appointment on her preferred dates/time-slots. I certainly tried to work with her and went out of my way to offer other time slots where both my 2nd therapist and I were available. Unfortunately, this client was unwilling to work within our schedules but she expected us to work within hers. It both saddens and angers me that she felt it necessary to fabricate untruths simply because she was either too lazy or too forgetful and failed to book an appointment early enough so that she could use her discounted voucher when she wanted to. The eight other people who contacted me for this particular deal were able to successfully book and have their appointments. She could have done the same had she truly been willing.
It is extremely frustrating that the two negative reviews my business has received are both from individuals who have never set foot in my place of business, nor received services from my business! They were both angry because I refused to honor vouchers or coupons that were redeemed and unusable because of their own failures to abide by policies they both were aware of prior to purchasing their discount deals. They decided to make my business pay for their own short-comings!
So for all of you merchants out there who are contemplating running a Group-Buy Deal, be forewarned that in addition to the immediate revenue hit of the up to 50% group-buy discount that you are expected to eat, plus the Group-Buy company’s 50% portion of whatever remains, minus any credit-card fees that will certainly be passed along to you, both you and your staff will be subjected to some major headaches, aggravation and frustration when dealing with these types of deal-chasing clients.
The most important warning that I can give you from my experience, however, is that the biggest cost of your doing a Group-Buy deal may be to your company’s reputation. This is particularly relevant for very small businesses that perhaps do not have the bandwidth to honor these deals on any and every perceivable date and time, both up to and after the deals have expired! So after you’ve crunched all the numbers for the obvious costs of doing such a deal, you should consider some of the hidden costs and crunch your numbers some more. Truly consider whether your business can actually afford ALL of the costs of running a Group-Buy Deal!