April 5, 2011 Michael

Groupon: A Success Story or How We Facilitated 1,700 Kayak Rentals Over One Weekend

I first heard about Groupon in a story about that company receiving $500 million in funding. Any company that pulls that kind of money is bound to get attention and it got mine. I learned that Groupon provides daily specials (typically 50% or more) to people in a specific area. If a big enough ‘group’ buy the ‘coupon’ then the ‘groupon’ is on. They email one deal out per day to each major city. The business then splits the revenue generated from that special with Groupon 50/50.

At first glance, it seems like a steep price to pay and depending on your service or product it can be. Groupon is certainly not for everyone but Erick, my contact at Groupon, was very helpful in trying to figure out what, if anything, we could do with our client. We originally wanted to offer cabin/cottage rentals at a client’s campground but their share wouldn’t have covered the cost of the cleaning service. After some deliberation we decided on kayak rentals since our client sits on a medium-sized but scenic lake and anyone could enjoy them. The price point was set for a two hour and full day rental and the date was set for April Fool’s Day, a Friday, for the email to go out and be available over the weekend.

One more aspect of Groupon is that a certain number of deals have to be bought before the deal goes through. This helps protect the business in case the deal is a dud and is almost 100% achievable. Our clients goal was 35. Viewing previous deals, I was expecting a couple hundred so I was pleasantly surprised when we had sold 60-something by 9 a.m. Friday morning. The email sent out to consumers said the deal had tipped the goal of 35 at 8 a.m. Even then I had no idea how many we would eventually sell but I was so excited I would literally refresh my page and see dozens more bought in a matter of minutes. There were 800 or so by the end of the work day on Friday. As I kept checking over the weekend (much to the annoyance of my girlfriend) I got a call from our client saying his office was slammed with calls and could we change the phone number on the deal to another part of the campground to take the load off. Within an hour Erick had us all taken care of and orders kept coming in. By the end of Sunday night there were 1,692 orders for kayak rentals and our clients share was roughly $10,000. Not bad for kayak rentals over one weekend.

And while the direct results are great it’s the indirect results that made this deal even better. Our clients website traffic was ten times higher over the weekend. His office was slammed with calls for information. Plus, the law of averages means he should get a couple cabin / cottage rentals out of it after people visit his park to redeem their kayak rentals. In short, it was a win-win.

Looking back on our experience, it was more successful than any of us could have predicted. I don’t know that our client has had 1,700 kayak rentals since he bought them but Groupon made that happen. There are some things we’ll keep in mind for the next time. The first is the uniqueness of the deal and if it will be accessible to everyone. Is it something people can find anywhere or will this stick out and can everyone enjoy it? Second, are you going to make money off of it? Our client had cabins and cottages but not enough to warrant cutting the price so steep. He could fill his limited inventory half the time and get 100% of the revenue instead of getting 25% of the revenue if he was full all the time from Groupon. Third, take the timing into account. Kayak rentals are a summer activity and this was a perfect way to capitalize on people’s longing to get outside. Lastly, and maybe more importantly, be sure you can handle the influx of traffic both during the day the deal goes out and when people come in to redeem it. Is it a happy problem if your business is flooded with calls? Sure, but its still a problem. This is easily fixable if you backup options on the phone or in person. Go through the scenarios if you had 100, 500, or 1,000 extra people come by.

All in all, the positive aspects of the additional revenue/exposure far outweighed the negatives of not being prepared for so many people. And while this particular client may not have another product/service to offer the general public, you better believe we’re going to try to see if we can find something with our other clients. It’s too good of a deal to pass up.

Tagged: , , ,