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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:
VALUE GUARANTEE OFFER!!!!
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)