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Why The First Car Dealership Groupon Failed

In a first, a dealership in Michigan partnered up with Groupon to offer Groupon’s first car buying groupon. The deal offered was $500 off the purchase of a vehicle for $199. Keep in mind that Groupon typically takes 50% of the price of the offer (in this case about $100) if the Groupon is successful (ie. meets the minimum purchase requirements). So in the event that the minimum of 10 deals were sold, this promotion would have cost the dealer $1,000. Not bad.. IF 10 cars were sold.


The deal failed. Why?


In my opinion, there are several reasons.


First, any kind of “deal” needs to have value to a consumer. This deal didn’t have that because consumers “expect” to negotiate with the dealer and $500 off the purchase of something that could cost $10,000-$40,000+ is just not “enough.” The deal itself cost $199 so, in reality, the consumer is only receiving a $301 discount.


Second, the offer needed a minimum of 10 people buying it for any of the 4 people that DID buy it to be able to use it. Since only 4 people bought it, those 4 people were never charged the $199 and the offer was never “live” for them to use. Obviously, if someone is willing to commit to spend $199 to get $301 off the price of a car, they are not only planning on buying one, but they are planning on buying it from THAT dealership. Seeing as the deal quantity wasn’t satisfied, you now have at least 4 people who think that either A) the deal isn’t a good one; B) something is wrong with the dealership; or C) all of the above. I highly doubt Groupon would provide the dealer with the names & contact information of those 4 people as that would circumvent Groupon getting any of the money.


Third, this Groupon, being the first of its kind, got some great press yet, when contacted, the General Sales Manager didn’t respond to inquiries. Those would have been golden opportunities for some exposure they wouldn’t have been able to buy. Rather than “seize the moment,” if you will, and take advantage of those opportunities, the General Sales Manager chose to engage potential buyers of this deal straight on Groupon in ways that, I feel, would have DETRACTED from the perceived value and may have actually discouraged customers from participating. Here are some of the comments he left:


In the unlikely event that we are unable to come to an agreement on a vehicle purchase/lease, for whatever reason, I will honor your voucher toward $199.00 in our service, parts or body shop departments. Purchase accessories, have routine maintenance done or have those annoying dings, dents and scratches repaired. 

So, now the General Sales Manager is saying pay $199 for the coupon and, even if you don’t buy a car, I’ll honor the coupon in our parts, service or body shop… in the amount of $199. Where’s the value there for a customer? That’s just pre-paying for things. Give me $199 and you can have $199 worth of “stuff.”.


William P visited our store yesterday. He selected and test drove the vehicle he was interested in. He worked out all of the pricing details with our sales staff until he was satisfied with the pricing. He THENAND ONLY THEN explained he had purchased the Groupon voucher but needed a vehicle immediately. We reduced his amount due by $500.00 and honored the voucher in order to accommodate a customer. He took delivery today. We’re still confident that the sales requirement will be met.

This comment was left BEFORE the Groupon was satisfied (ie. 10 deals were sold) which further reinforced the fact that customers really didn’t need to purchase the Groupon to get the $500 discount since the above referenced customer, who may have “committed” to purchasing the Groupon, ultimately was never charged anything for the Groupon since the minimum quantity sold wasn’t met, making the Groupons invalid.


So, while customers are bantering within the comments of the deal over the true value of the Groupon, the General Sales Manager chose to try and convince everyone it was a really good deal and that they should buy it by making statements that detracted from the value of the offer and, at the same time, failed to take advantage of the free exposure. There were almost 50 articles written about this offer. All of which could have been turned into golden PR and marketing opportunities for the dealer – if the dealer had responded.


This is a perfect example of why you should carefully analyze any deals/social media offered on such a large scale. Many dealers have website pop-up coupons that have the same offer “$500 off a car.” In fact, this particular dealer has a STILL LIVE “special offer” pop-up which features the Groupon offer (even though it’s now expired), even further detracting from the value of the Groupon.


I’m not surprised that this offer failed. Groupon is ultimately in the business of making money. Since the deal requirements weren’t met (meaning nothing was sold), Groupon didn’t make any money further reducing the chance that they will participate in any future similar Groupon offers by dealers.


If you’re considering trying to run a deal via social media or bulk offer sites (ie. Groupon, Living Social, etc.), you need to make sure that the deal is truly a good value for the consumer and only offered via that promotion. The dealer could have leveraged this deal in many ways even if they didn’t sell any cars from it. As you can see, while this deal is not available to buy anymore, it still exists in internet-land both on their website and via search engines and it’s even on the first page of a Google search for “Lafontaine Auto”. This is almost as bad as having a negative review because it plants the seed to a prospective buyer that $500 off a car at your dealership isn’t worth $199, which, by extension implies that a $301 discount isn’t valuable.


Don’t jump into social media unless you know what you’re doing. If you do, your promotion can backfire, just as this one did.


(Originally published July 15, 2011 on Dealer magazine)

Views: 411

Tags: dealer, digital, groupon, internet, magazine, sales


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Comment by Keith Shetterly on July 22, 2011 at 5:31am
Eh.  There's plenty of ROI in this for advertising, even if they never do it again.  And they knew that going in.  The seductive "bright shiny object" for digital is the direct measurement of results, all while traditional media is still very much in use and measurable only indirectly.  This was a successful hybrid of digital and traditional, regards results, and it did not cost them a dime in this case.  Nothing said or written about it by anyone, anywhere against it--and no matter how many times--will change that.  Much like the old "New Coke" tempest, LaFontaine was smart, whether or not they even know it.  And regardless of whether others know it, either.
Comment by Charles Kim on July 22, 2011 at 5:09am

Totally agree that this was a waste of time, energy, and resources for the dealership for the aforementioned reasons and others.  Things like Groupon are just more "shiny objects" that just takes focus off proven core marketing strategies that actually generate a meaningful, positive ROI. 


Dealers should understand that a more simplified, comprehensive digital and traditional marketing strategy is still far superior in terms of ROI (of brand equity, brand awareness, and/or sales opportunities) than branching out into a dozen or two different social media, reputation management, Groupon, or other strategies with demonstrably lower/negative ROI results as well as a higher degree of complexity.  A simple, well-planned, well-executed digital and traditional marketing strategy will enable any dealer to beat out a competitive dealer relying more on a complex social media/Groupon/Facebook strategy.  If you don't believe this, ask any marketing consultant that wants your business to work for you on a contingency basis only where they only get paid based upon a percentage of measurable incremental ROI (in brand awareness, brand equity, or sales opportunities) and see what they do when they actually have ROI skin in the game.


Master the basics of core digital and traditional brand marketing FIRST, and then if you want to experiment with some of these other things (which by the way have ZERO barrier to entry...i.e. you can get in on a moment's notice, so there is zero reason to blaze a trail here and get distracted when you can easily be a fast follower if necessary), knock yourself out. 


And spend more time on improving processes affecting the customer experience and optimizing the traffic you are already getting before inviting more people to the party; I'd much rather have a customer not know about me at all than have a negative impression (e.g. Groupon for a Cadillac dealer like LaFontaine...I can bet that Newport Lexus or Fletcher Jones M-B won't be doing something like this on Groupon anytime soon) or a negative experience at the dealership during a visit.

Comment by Keith Shetterly on July 21, 2011 at 11:59am
That's interesting, because this Groupon was to be presented AFTER negotiations.  In finance, actually, as it was considered advertising burden rather than cost reduction.  I don't think that came across well, either, in the offer but that's how it was set up.
Comment by Jason Manning on July 21, 2011 at 11:16am
Unfortunately  the consumer is smarter and may view this advertising as a joke.  For big ticket items it comes across as a bait and switch with our past reputations.  I've had customers laugh at a car buying coupon before.  They simply state:  "Ha!  I can do better than that down the street at the other dealers."  They continue to haggle.  They are right.  It's common sense.  We have to grasp the concept that price is not the first thing customers look for.
Comment by Keith Shetterly on July 21, 2011 at 11:01am

Thanks Arnold.  And you, too, Jason.


Groupon is advertising, not sales, for any real player with them.  It's completely misunderstood as a sales enabler, but that's not just the auto vertical.  It's advertising.


As far as Groupon approving this, they are experimenting with big-ticket items trying to expand their marketplace.


I talked to the dealership right before and right after they launched this.  THEY saw it correctly, as at the worst a great advertising reach, and at the best that plus some sales enablement.  Arnold, I agree with you 100% that the sales piece needs much improvement.


Jason, I just don't agree with seeing this any other way than advertising.  When we get that part will be when we can properly see if this has any value past this in the auto vertical.


Thanks again.

Comment by Arnold Tijerina on July 21, 2011 at 10:42am
Jason, I'm personally surprised that Groupon approved this deal in the first place.
Comment by Jason Manning on July 21, 2011 at 10:40am
It blows my mind that a dealer would try to use Groupon on car sales. It isn't even close to making sense. Groupon is successful with fast consumable items and events. The closest thing a dealer has to that is an oil change. Groupon is for oil changes. That's just about it. That is where this failed. Dealers are always trying to push more sales and Groupon is not for that purpose. The manufacturer will trump a Groupon offer on the price of a car with their rebates and incentives. You can compete with that? The customer is smarter than we think. The concept was poor. Someone should have stopped it right there. Bundled oil changes would have been more successful. The service department could have upsold and led the customer to the sales department. Why do we still make these mistakes? We need to harness the wild ideas and knee jerk marketing.

Just Do It Right (with Proper Concept and Execution)
Jason Manning
Comment by Arnold Tijerina on July 21, 2011 at 9:35am
Assuming it cost them nothing to run the Groupon, you would be correct and I agree that these types of deals could be leveraged well, we just need to figure out how the best way to do them is.
Comment by Keith Shetterly on July 21, 2011 at 9:29am
I am not saying the GM handled it right.  I'm saying that about 4% of buyers are "in market" at any time for a new vehicle.  Dealers spend a LOT of money on both digital and traditional advertising in order to get that 4% *and* to get their name in front of the other 96%.  And plenty of print ads, TV spots, and radio spots have left a lot worst negativity than this particular effort.  This reaction reminds me of the "New Coke debacle"--it turned out well in advertising for an already-globally-established, super well-known brand, no matter whether it was on purpose or a mistake.  This Groupon effort hardly compares to that negativity, except for some auto industry pundits, though the press may well feed at that trough, too, if that negativity keeps up.  For now, many of us can submit that the offer wasn't bought for whatever very good reasons, but that forensics needs to be focused on how to get this done RIGHT.  Regardless, unless that misplaced negativity sees press amplification, this dealership just bought a lot of advertising for nothing.  So, to them, it's hardly a failure at this time.
Comment by Arnold Tijerina on July 21, 2011 at 9:15am
If "a few hundred thousand people" viewed that offer and found little value in it, how is that positive? I think, at least in the case of LivingSocial and Groupon, when people view the offers, one of the things they use to judge the offer's value is how many other people bought it. If a consumer sees that nobody bought it, they "may" consider that not a good deal which could translate into "this dealership doesn't give good deals". I'm not sure if Groupon charges a company anything to have a campaign even if there are no sales but I "can" tell you that IF Groupon isn't making any money via auto dealer offers like this - they wont do anymore, but that's Groupon's problem, not the dealers. I think the dealer shot himself in the foot by posting those comments, personally, even if he DID honor the offers without the minimum purchase quantity being met. He "could" have honored the offer without TELLING people within the comments of that offer that he would. That just devalued the offer. Why would I pay $199 to save $500 if I knew I could save the $500 without paying a penny?

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