Why I Said No To Groupon

March 19, 2012 at 3:26 pm (Announcements, Projects) (angel cakes, capitalism, craft, cupcakes, entrepreneurship, groupon, small business)

A few weeks ago, a representative from Groupon called me about offering a coupon through their site for Angel Cakes.

We talked for a while and she explained it all to me. I recognize that she is essentially a salesperson and her job is to make it sound like a good deal. She succeeded. You can read all about it on Groupon’s site for selling their service to businesses, Groupon Works.

Despite the sales pitch, I was skeptical. I started talking to a bunch of people about their experiences and thoughts about it and eventually decided not to do it.

Why I said No

Let me be a bit conceptual here for a moment.

Like most small business owners, I consider what I do a craft. Each cupcake order I make is custom made in a small batch, usually by me with the occasional help of an assistant. What I charge for my work is that (sometime elusive) sweet spot between what it actually costs me to produce the order and what people think it’s OK to pay for cupcakes (aka “what the market will bear”). There’s not really a lot of wiggle room there.

Capitalism is really good at instilling in us the desire to pay as little for things as possible, despite what the things cost to produce. This doesn’t make sense. When we look at the “slow food” and artisan food movements, where things like organic vegetables and fancy cheese and nice bread cost a lot, the producers say it’s because that’s what it actually costs to make the food. While I’m sure we can all think of fancy food and artisan things that are over-priced, for the most part, while we live in a system where we pay for food (which is kind of absurd, but that’s another story), I think that charging what it actually costs to make something is right.

Offering a coupon (Groupon says it needs to be at least 50% off) encourages that kind of behavior – of thinking not of what something is worth, but a more self-focused “what kind of deal can I get this for” attitude that I don’t want to encourage. At all. It’s not the way to value things that are produced ethically, by people who care about what they are making and their customers.

Not offering a coupon feels like I’m saying “this is what my product is worth.” Good. Let’s go with that.

Isn’t it worth it for the marketing / getting my name out there?

As someone who works on publicity and marketing, I think about how to get the word out about projects all the time. Unlike other people, I think spending money on marketing and promo efforts is important and can be effective when done right.

When people say “I lost a lot of money using Groupon,” Part of me thinks of that dollar figure not as lost money but as the cost of a marketing effort. Then the discussion is, is that dollar amount something I am willing to pay as an investment in marketing? and did I gain customers as a result? For most people, the answer is no.

For example, when I look at my Groupon/coupon buying behavior and that of my friends, which I can guess is not that different from most of the Groupon-buying public, I pretty much only buy coupons for places I already go or have no intention of going to again after I’ve spent the coupon.

Most people who buy online coupons are coupon shoppers. If they want more cupcakes, they’re not going to buy from me, they’re going to wait for the coupon for the next cupcake place (because we all know that cupcake places are everywhere right now).

Now that I’ve had the opportunity to think about this in an in-depth way, I’m not doing that any more. It basically financially penalizes the small businesses and restaurants that I am patronizing and want to support. They’re not gaining me as a customer since I already go there (or don’t intend to go again), they’re just losing money on the transaction. If I don’t want people to do that to me, why am I going to do that to others?

One of the caveats I can imagine is that if I were offering, say, a yoga class where my costs stayed the same even if the number of participants increased, then it might make sense. But, obviously, cupcakes are different than yoga. And if I offered a class, I would probably just offer an introductory package (like half off your first month or something), bypass Groupon, and spend my time and money on social media.

Some of the things I read from other small business owners

There are a ton of posts out there about Groupon. Here are some of the ones I read that impacted me:

• Why Groupon is Bad for Small Business by Jeff Korhan. Jeff asserts that using a Groupon sends the wrong message, attracts the wrong customers, and creates new expectations. A lot of what he says is echoed above.
• Why Groupon is Bad for Business.. And Consumers by Maria Langer. I love this one. Maria really goes to town not only on the financial details, but on why we need to remember that Groupon is in this to make a profit – at our expense.
• Groupon in Retrospect by Jessie. The owner of a cafe details their experience with Groupon, and calls it “the single worst decision I have ever made as a business owner.”

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Notes.

I recognize that it may appear contradictory that I claim to be an anarchist and anticapitalist while at the same time being a small business owner and entrepreneur.

Never fear, I have planned a discussion of why this is not contradictory at all, to happen some time soon. The short answer is that a system where basic necessities are only available to those who can afford them is unconscionable. And though everyone would be better without capitalism, that is what we have right now and there need to be ways to exist within it that are better, while we work toward making something else a reality.

Like I said, more on that later. I’m talking with a bunch of my friends and comrades who are in the same position and am hoping to write up something in the next few weeks based on those conversations.