Groupon: The Big Deal

Customers are going ga-ga over Groupon and similar group buying coupon sites like LivingSocial. Who wouldn’t want to find a down and dirty deal in their email inbox every day? We’re talking restaurant meals valued at $50 for $15, $100 massages for $25 – and now, $55 weed control applications for $30 or even an $873 spring planting deal for $249.

“It’s something a little different than relying on your website and the old search engine on the Internet, or word-of-mouth marketing,” says Christopher Greer, vice president/designer at John’s Landscaping in San Antonio.
The sheer demographics of Groupon’s membership turned Greer and other landscape professionals on to the daily coupon service. Why not give it a try? For instance, Greer estimates that 35 percent of the approximate half-million people in San Antonio subscribe to Groupon.

Groupon is in 500 markets and has 70-million subscribers. Its staff is 1,500 strong and the company famously rejected Google’s offer to buy the fast-growing site for $6 billion.

Groupon is a big deal.

And that’s exactly why the professionals Lawn & Landscape spoke with this month decided to give the coupon giant a shot. Read on to find out what sort of deals your peers are offering on sites like Groupon, and the pros and cons of marketing via a “daily deal.”

Attracting new clients

Christopher Greer was looking for an out-of-the-box tactic to advertise John’s Landscaping’s services to fresh prospects. Rather than spending thousands on TV commercials or radio ads, he turned to his email inbox for inspiration.

Greer is a Groupon member, but he bucks the trend of Groupon’s typical demographic: “Most of them are single women ages 25 to 40,” he says. His target market is generally married couples ages 35 to 55.

Running a deal on Groupon wasn’t exactly hitting the company’s sweet spot, but it was something new. So John’s Landscaping ran its first Groupon in December, the day after Christmas. Takers could cash in on a design consultation, four flats of annuals and four yards of mulch for $249 – a value of $873.

“For being such a high price point and being the day after Christmas, Groupon told us they would be happy if we sold 16,” Greer says.

The first day of the promotion, 63 Groupon members bought John’s Landscaping’s deal. By the third day, that number had climbed to 107 purchases from brand-new customers. “Basically, we got 107 new clients who didn’t know us or anything about us before Christmas,” Greer says.

Groupon urges companies to run down and dirty deals. Members want their inbox to flood with offers for 50 to 80 percent off. It works for the demographic who subscribes to the free coupon service, and the companies who post offers can win by earning volume sales. Reeling in lots of buyers is important because the profit margins on coupon sales are skimpy at best.

“Our first offer was priced to cover our hard costs and overhead – that’s it,” he says.

Groupon took 50 percent, plus a 2.5 percent credit card processing fee because members pay with plastic. So John’s Landscaping took home 47.5 percent of the $249 service price, making about $10 on each sale.
But that cost analysis doesn’t paint the full picture. “Eighty-seven percent of those 107 people added work to the Groupon,” Greer says. One customer signed on for a $25,000 project. About a dozen became regular maintenance customers.

Overall, Greer’s first Groupon effort was a success – so he decided to run another offer in March 2011. This time, he pushed the price point even higher, up to $2,995 for a 20-by-20 foot flagstone patio valued at $5,500. Thirty-six customers took advantage of the offer.

The Groupon split on the second deal was 70/30 in favor of John’s Landscaping, so the company essentially broke even.

“I’m not sure you can put a value or price point on new clients that end up being thrilled with your work,” Greer says, figuring that Groupon will spark word-of-mouth advertising – more free marketing.

To manage the volume, Greer hired three new employees, which was in line with the growing company’s business plan, and because many of the customers decided to wait until spring to take advantage of the annual flats/mulch offer and flagstone patio, he could plan these projects and ramp up accordingly.

Sparking service interest

What would it cost to make contact with 134 fresh prospects and close sales with each of them? Jeremy White can’t pin down a number, but he knows that the estimated $3,000 cost of offering a Groupon weed control deal more than paid for itself. The reward was exposure and an opportunity to get clients hooked on his service.

“We’ve tried Valpak coupons and we’ve run ads in the paper, we have signs on our trucks – but we haven’t been very aggressive with our advertising for the most part,” says White, president of Midwest Lawn and Landscaping in Oklahoma City, Okla. “For many years, we were frozen and maintained our clientele.”

A couple years ago, White decided to ramp up his weed control service. “Groupon was one of our interventions to grow that business,” he says.

Pricing out the alternatives, he found that Valpak costs about $1,000 in his region for a coupon ad that reaches 40,000 people. In the past, White has received about 10 jobs from these efforts. A pre-purchased coupon like Groupon that is Internet-based appealed to White.

Midwest Lawn and Landscaping offered a $20 Groupon for $40 in weed control (an estimated 4,000 square-foot property). Groupon takes half of the $20 plus the credit card fee, so White received slightly less than $10 for each purchase. But 134 Groupons were sold, and the phones began ringing immediately the week after his two-day promotion ran.

“That was a challenge,” White says. To manage the volume, he left instructions on his voicemail guiding customers to his website. “We asked them to fill out our contact form, which was emailed back to us.”

Calls flooded the office for a week to 10 days, and then White worked jobs into routes according to geography.
Because he specified his service area in the Groupon, all of the coupon takers lived in his coverage area – except for one. “I gave them the option to get their money back and they did that through Groupon,” White says.

Another tricky situation White ran into was when a Groupon buyer purchased multiple offers for her 10,000 square-foot property. White honored the deal, but he was relieved that no one else had purchased in bulk. “If I were to run the Groupon again, I would include a disclaimer that says one coupon per property,” he says. “Essentially, someone could buy an entire year’s worth of weed control at a very cheap cost.”

All told, White received about $1,000 from pre-paid Groupon purchases and invested $4,000 in services. That $3,000 won him 134 opportunities to sell services to clients he didn’t know before the promotion. “Of those, 15 are confirmed repeat customers and a good 30 of them are potential repeat customers (for a lawn care program),” White says.

Layering promotions

“I’ll try anything once,” says Jeff Kollenkark, president, Weed Man of Fresno, on why he decided to give Groupon a shot when the company called asking him to run a promotion.

“My greatest fear is that we would have a lot of our customers getting offers that are cheap – that they’d be buying the Groupon and then we’d lose money,” Kollenkark says. But only 8 percent of the 212 people who purchased the offer were existing clients. The Groupon was for a $25 one-time fertilization/weed control (up to a $55 value – and beyond that, customers must pay full price).

Another fear: Looking like a bargain-bin provider. “I don’t want to get a reputation for being deep discount,” Kollenkark says. “I’m not the cheapest guy in the market, and I don’t want to be.”
But through Groupon, Kollenkark wanted to reach out to new customers in the Fresno/Clovis, Calif., market who are interested in improving their lawns. Better yet, he signed on 15 new lawn care program customers.

“We did Groupon to get some face time,” Kollenkark says, noting that his technicians did not go out to service coupon buyers’ lawns unless residents confirmed they would be home at the time of application. “We talk to customers when we are treating their property – that’s what makes us different.”

A layering approach to marketing gives Weed Man of Fresno the type of exposure it needs to ramp up sales year-round and in the spring. It spends about $115,000 on door-to-door marketing, TV ads and home shows each year.

“I didn’t pay anything for Groupon other than my lost revenue, but that was from business I didn’t have in the first place,” he says. “I didn’t pay them to run the ad. They sent me a check for $2,500 for 212 Groupons that were purchased.”

Kollenkark calculated $4,000 of new business from the 15 people who signed on for a lawn care program. He figures he “lost” about $2,600. “I offered $30 bucks off for the chance to talk to someone new – that’s reasonable,” he says.

The appealing part of the promotion is that for a relatively low cost, interested customers basically came to Weed Man of Fresno’s door. “They raised their hands and basically said, ‘Talk to me,’” Kollenkark says. L&L

The author is a frequent contributor to Lawn & Landscape.