Plug for my book: To Group Coupon Or Not: Small Business Guide to Groupon, LivingSocial and Others is now available!
Two weeks back it was LivingSocial that captured the attention cycles of social media with its Amazon deal – they gave away $20 worth Amazon gift card for $10. When it all ended, in less than 24 hours they sold 1.2 million gift cards. Potentially many of them are new subscribers – I was one of them.
Not to be outdone, two days back it was Groupon’s turn to run very similar campaign but with Barnes & Noble (competitor to Amazon in books, eBooks and eBook readers). Very similar deal. I cannot tell the number of coupons sold from the deal web page.
Here is a completely hypothetical description of how the deal conversation between the Groupon and Barnes&Noble business development managers would have went (B&N conversation assumes I am their biz dev guy):
Groupon: You saw the great deal Amazon did? They did $10 million in gift card sales in one day.
B&N: Yes, we were wondering about that.
Groupon: Think of how many of your sales they probabaly took because of that.
B&N: Well, we don’t think so. Those could all be Amazon customers already.
Groupon: But you can do just that to them, you can take away their sales.
B&N: How is that?
Groupon: Give away $20 worth of products for $10 with us. We have lot more subscribers, your deal will could sell lot more than 1.2 million.
B&N: Would that not cost $10 to $12 million for us and not to mention your fee.
Groupon: Customers who buy the gift cards usually spend more.
B&N: How much more will they spend? Can you give us 90% confidence interval estimates what percentage spend at least $20 more?
Groupon: It has worked for many of our customers, more than 90% say they will try again.
B&N: So we read a theory by Iterative Path that Amazon did not have to pay some or all of the $10 discount and the same for the fee to LivingSocial.
Groupon: But that is just a hypothesis, there is no evidence.
B&N: Very true. But it is likely. Didn’t LivingSocial gain more from the deal? Is it not the same case here? You will get many new subscribers or at least big visibility in media. We are not convinced we get much out of a $15 million spend. If you paid for the deal completely and pay us $5 for every new subscriber you get, we will do the deal.
Could this have happened?