opkwashington.blogg.se - Groupon merchant

The other $10 goes to the cost of making the pastry, business overhead etc. We used a big spreadsheet 🙂 but here’s a summary:Īccording to a NY Times article a gourmet pastry shop can have margins as high as 18.2%. Mary still has a ways to go until she makes a profit. Mary concludes she needs 176 customers to return 20 times each ($12 purchase) to recoup her costs.

The cost to acquire each of those 176 customers was $41.

176 customers came back (Groupon says 22% return a second time).

Since her shop’s profit margin is 18.2% instead of making $2 per $12 sale, the Groupon cost her $7 per sale, for a total of $7,196.

Some used a groupon multiple times increasing her cost.

As the rush tapers off a few of the customers start to return. She gets a flood of customers, a few very busy weeks and gets a check for $3,000 from Groupon. She runs a Groupon, $6 for $12 worth of pastries! Groupon wants to keep the entire amount (they keep full amount if under $10) but Mary negotiates a 50/50 deal. Mary has a cupcake and coffee shop with profit margins of 18.2%. SCENARIO 1: The Gourmet Cupcake and Coffee Shop

We measured cost per acquired retained customer not cost per Groupon since that cost is evident.

Used published industry average margins.

We also measured results based on Groupon’s reported retention rate of 22%.

We measure results based on gradual retention (10% will return 20 times, 10% 10 times etc as a example).

30% of Groupons will be used twice (yep, by cheaters).

80% of Groupons will get redeemed (20% will expire unredeemed).

So if you agree to sell a $100 Groupon for $50 after paying Groupon $25 you will have just $25 to pay wages, and overhead.

Next, you have to pay Groupon 50% of the purchase price (unless your offer is less than $10 in which case Groupon keeps 100% of the revenue).

Groupon will demand your deal be at least 50% off the regular price. HOW BIG IS A BIG PRICE TAG AND HOW CAN I MAKE GROUPON WORK FOR MY BUSINESS? Yep, the data both proves and disproves most web chatter (see list of articles down the page). Think before you Groupon (and think before you jump into any large marketing investment).

The data confirms Groupon deals come with a significant price tag but can be profitable under the right circumstances. We created 2 scenarios, we researched sales numbers, and did some math to forecast the results. This post was published quite a while ago, however you will still be able to use the formulae below to estimate the returns or losses from using Groupon or other types of services like Groupon.