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The Fatal Long Lasting Flaw of Groupon

This guest post was written by Ryan Durkin. Among other honorable ventures, Ryan is the Chief Operating Officer of CampusLIVE.com and the Fund Administrator for Massachusetts Soldiers Legacy Fund.

My name is Ryan Durkin. I am a proud Groupon customer, having bought a number of Groupons now and being extremely pleased with not only the deals, but the company as a whole. Groupon is fun. Young. Exciting. It is everything a young 20 year old from Boston likes in an internet company, with an extremely creative business model and extremely impressive growth. I have recommended Groupon to most likely hundreds of my own friends through word of mouth, and thousands (perhaps) through social media outlets. Needless to say, I am a big fan.

I have also been very pleased by Groupon’s customer service. Their return policy is outstanding (although I have never used it). They are quick to answer any emails regarding questions / timing on deals. They are great.

However.

It is now clear to me the fatal flaw of Groupon that they will need to address, should they want to succeed in the future. After all, it’s been proven that one bad experience for a customer can affect the perception of many others.

What is it you ask?

It is the level of customer service delivered by not Groupon itself, but of its local business partners.

Groupon has predominantly worked with local partners in the past. 50% off at restaurants, hair salons, massage parlors, site seeing tours, etc. Many of these companies are in the industry of hospitality. After all, I would argue that the majority of surviving and enduring businesses today pride themselves in at least one of three areas: price, quality, or customer service.

So the question I ask is: How can a deal generating business, like Groupon, control the level of customer service that local business partners provide?

Let me illustrate my point through a story:

This past weekend I decided to use two Groupons I had bought at East Coast Aero Club in Bedford, MA for a helicopter ride for me and my new girlfriend (we have been dating for two months). When I arrived, I was told I would have to buy a third ticket for an extra $99 because “each helicopter must fly with three people.”

Now. Here is what the Groupon stated when I purchased my two Groupons (one for myself, and one for my girlfriend): “Each tour requires three people to fly, so bring along the other two vertices in your bizarre love triangle. If you don’t bring along your fellow flying aces, East Coast Aero Club will randomly pair you with one or two other strangers or pre-friends, depending on one’s outlook.”

I have provided the link here so that you can read the full text as well for yourself: http://www.groupon.com/boston/deals/east-coast-aero-club-boston

AT NO POINT, prior to purchasing this Groupon, did it state that I would have to buy a third ticket in order to take this helicopter tour. Instead, it says that East Coast Aero Club (the local business partner / provider of this Groupon) would be responsible for matching us up with a third: “If you don’t bring along your fellow flying aces, East Coast Aero Club will randomly pair you with one or two other strangers or pre-friends, depending on one’s outlook.”
Now, here is the fatal flaw of Groupon.

The representative of East Coast Aero Club asked me and my girlfriend if we would split up to ride with two other couples that had arrived so that they could fill their helicopters with three passengers each. I said that I would prefer we stay together, seeing how (I would imagine) 90+% of couples buying a $198 combined total Groupon of a site seeing tour over the city of Boston would do so because they would want to share in the experience together, rather than in separate birds. Call me crazy, but hey… I’ve been called worse things.

I explained to the representative of East Cost Aero Club that I in fact did not want to split up with my girlfriend and would prefer to wait for singles to come. The East Coast Aero Rep, who clearly had a full roster of everyone coming that day to use their Groupons, said he did not think any more singles would be coming (which later turned out to be a lie). And thus, each couple would be forced to buy a third Groupon each in order to fly (an additional $99 out of our pockets). While disappointed I would have to spend an additional $99, I realized it was not the end of the world. This forced $99 purchase was not stated on the website at the point of purchase, but hey, worse things have happened and life moves on. I would have only written a little note to Groupon asking them that in the future they remember that with these helicopter deals to check their facts first and be more upfront with the wording on the website. It is a bit misleading when you read that “East Coast Aero Club will randomly pair you with one or two other strangers,” when in actuality East Coast Aero Club does not match people up beforehand (when they easily could) and instead force you to spend an additional $99 to do what you already paid $198 to do. Perhaps poor operational experience on behalf of East Coast Aero. Or perhaps they know they’ll be making an additional $99 per poor couple of two that walks through their doors and does not want to split. Poor operation experience or poor ethics. Most likely both.

I began to ask questions to the East Coast Aero Club representative as to how many other customers had this experience. He did not give me a straight answer.

Instead he said this in a very snooty tone: “It costs $400 to fly our helicopters, and we’re only making $297 on each flight.” (For all you reading this, $297 is the cost of three riders using a $99 Groupon each.) From there, he went on to say how East Coast Aero Club “losses money on these Groupons.”

People who know me know that I am a VERY easy going guy, who gives people the benefit of the doubt far more often than I should, who looks to find the good in everybody. I am a huge supporter of the principles of Dale Carnegie, and strive my best to avoid arguments at all costs. But, I ask myself this as a small business owner myself of 10 employees: Why would ANY BUSINESS on earth do a deal in which they LOSE money in the long run? It makes no sense. Zero.
The entire Groupon business model, from what I gather, is to bring large groups of people together for the specific purpose of getting a good deal (at the customer end), with numerous benefits at the local business level / Groupon provider, including but not limited to: a large influx of new customers, the opportunity to build repeat customers, and the growth of new demographics based on locations, ages, and races. NOT TO MENTION revenue paid ($$$) upfront on behalf of Groupon and revenue ($$$) for the business from customers who buy a Groupon on the website but never show (the sales for nothing model).

So here I am. Sitting in the terminal of East Coast Aero Club. Thinking to myself: where is the disconnect? Why is this East Coast Aero representative giving me attitude and such POOR customer service? Where did his hospitality go? (Remember, at this point I have already purchased a third additional $99 Groupon and have started calling friends to see who would like to join me on my romantic date over Boston with my girlfriend.) Why is this East Coast Aero representative explaining to me all of the reasons why Groupons are costing the company money, and why is he showing me (AND MY GIRLFRIEND) disrespect?

Because he was not properly trained on the Groupon business model.

East Coast Aero Club benefits by partnering with Groupon. Ask the 696 customers who bought the East Coast Aero Club Groupon on September 12, 2010. OR BETTER YET… ask the 2552 East Cost Aero Club customers that bought one on March 19, 2010! East Coast Aero Club, I have a feeling, made out pretttttyyyyyy damn well from these two deals on two different days this year. If they hadn’t, then why ON EARTH would they have run a second Groupon with Groupon? Why would they be a repeat customer? Am I right? OR AM I RIGHT?

Groupon. I am not asking for a refund. Like I said… I like you guys.

WHAT I AM ASKING FOR, is for you to increase the amount of time and dollars you spend on TRAINING LOCAL BUSINESS PARTNERS ON YOUR OWN BUSINESS MODEL. I ask this FOR THE SOLE PURPOSE for higher levels of customer service and hospitality on behalf of your partners. Look. I know you can’t influence the words that come out of other’s mouths. Sometimes, people say things they shouldn’t. I know I have many times in my life. What you can do however is influence the amount of training your partners receive. Groupon customers should not be treated like second rate customers by your partners. They should receive the same level of service with the same level of hospitality. No deal / discount model on earth should influence those two points. AND IT CAN BE CONTROLLED through proper training. Not eliminated entirely. But certainly controlled.

Please let me know what you will do about this issue within your company. I want you and all the other group buying sites to do well (BuyWithMe, LivingSocial, etc). You bring enormous value to people in their lives and have allowed me to do things I would normally not be able to afford. But, in the long run, you must figure out this customer service disconnect. The success of your business ultimately depends on it.

Thank you.

Kind Regards,

Ryan Durkin
COO, CampusLIVE
ryan@campuslive.com
978.697.4625