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I remember a competitor to Groupon, Cudo, started doing travel deals.Big volume is dangerous as the supplier may not be able to deliver on the deal. A team with a high distribution were margins fighters, a team with a few lines of 25%, 35, 40, 50% meant they were margin takers.What Groupon started doing then, was putting a code on each coupon, which the merchant then had to record as and when a consumer redeemed a coupon in store.
Both companies want you to take them up on their offer and seek out the businesses they are effectively advertising and promoting.
The difference seems to be that Val-Pak sticks with a steady roster of companies, showing that there is a value for the investment for these companies and on the flipside, it is very rare for a company to follow-through with a second Groupon deal.
This has me wonder if the Val-Pak business model can still survive in the age of Groupon?
Are the business models of these seemingly different businesses really that different?
Assuming we are talking about the original business model, not Groupon Goods, the short lived Groupon Now and whatever else they have been attempting to do with Breadcrumb etc, it’s more complicated than what people think, but it’s also genius. The single best one though is, ““ Most deals don’t make money – the big ones do very well Firstly most of the money comes from epic, big discount, high price deals. The sales guys who figure out the great deals can do really well. Ticket price To make money you need to either have massive volume, or decent volume and a high ticket price. If you do healthcare related things like teeth whitening, IPL etc, you can easily get to 800, up to a few thousand. Big discounts Big, attractive discounts get deals done. High distribution meant the sales teams were ‘margin fighters.’ This meant you fought for every basis point.
The first one they did, to Ibiza I think, made them well over a million dollars. You used to solidly sell these, but you don’t get crazy money. Once Groupon figured out that they could do deals in areas like travel, entire teams were set up just to do these. A 75% discount on a brand name hotel was a good deal! Occasionally you would get Starbucks or other big names. Groupon’s margin There was huge pressure to have high margins. They would make margin distribution charts to see the range of margins that were achieved.I get a daily Groupon email and I’ve never bought a deal.Perhaps I’m jaded and I’ve read too many articles about how Groupon has hurt small businesses or maybe I’m simply not an impulse buyer?Our first post is by Vicki Thomas- Groupon is in the news more and more these days and particularly so with the rise in competitors in its space including Livingsocial and Wagjag.All three companies offer daily deals that include categories such as restaurants, travel, clothing, and salons.This got me thinking about coupons, and more specifically the coupons that arrive weekly in my mailbox – yes I’m talking Val-Pak.For some, coupons are dead and are a relic of the older days.In fact many companies have tasked their marketing folks with writing very popular and at times inflammatory blog posts and articles about how the Groupon daily deal has cost them more money and caused them to lose regular clientele.Once café reported losing ,000 from a Groupon deal.So if there were 500 coupons sold and only 200 redeemed, ,that the merchant recorded, then the merchant only got a pay out on the 200 coupons, ie 40% of the money. Since they were only getting paid as coupons were redeemed and many only redeemed just before expiry, it could take 3–6 months to get paid.So the actual formula was: Merchants got wiser and started negotiating to have the unredeemed removed, they didn’t always get it though… In some cases, like scuba diving classes with a year expiry, you could be talking a year.