Groupon

[howardwhite 6]

One of the proposed topics for the February DZO conference is

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Groupon: How to Make It Work for You

Groupon, if you haven't heard of it, is one of a nationwide set of sites which offers discounts on all sorts of things, including tandems.
A local DZ sold more than 2,000 Groupons for tandems at $149 (regular price > $200.) Since they were paying a commission to Groupon, I'm guessing they were getting ~ $120 or so.
I'm told, however, that many of the Groupons were never redeemed, so it might have been a pretty profitable venture.
Other DZs and tunnels are also offering them. I'd be curious about how they've worked out.

HW

[beowulf 1]

From what I have heard from Skydive Houston and Skydive Dallas, they have done well with the groupon. Of course there are a percentage that are never redeemed and those that are redeemed usually bring in friends or family that buy tandems along with the groupon.

[Tinley 0]

I was brought to Skydive Houston by some friends with a groupon and paid separately for a tandem, 3 months later I have my A-License.

[davelepka 4]

The entire Groupon concept is a winner. The business owner gets to set the coupon price, and also gets to set a minimum number of coupons that must be sold in order for the deal to happen. So a DZO can agree to sell tandems for $150, but only if (for example) 50 people buy them during the sale period. If less then 50 people agree to buy the coupon, then no coupons are sold.

I think in terms of a DZ, a big issue will be the scheduling of the tandems. They would need to be careful to only sell enough coupons at any one time that they could realistically service those customers in a timely fashion along side their other customers.

Let's face it, every DZ has a limited number of tandems they can process on any one day, and the majority of customers will be looking to jump on a weekend. If your DZ can only turn 50 tandems per day, and you sell a couple hundred Groupons in addition to your normal bookings, things are going to start getting backed up. if you throw in a couple of weather days, it get's even worse.

The end result could be some very bad publicity, with some very 'skyride' sounding stories. "Jane Smith paid $150 for a skydiving coupon from Skydive Smalltown, but every time she wants to jump, they're too busy jumping with other customers to get her up in the air".

One other area of liability, along the same lines, is that the 'unused' coupons may just be people waiting until they feel like jumping. Until those coupons expire, you run the risk of all of them calling at once wanting to redeem them. Let's say you give them six months to redeem before they expire, you might have a flood of customers looking to jump the last week of that six month period, keeping in mind that all the coupons are sold at once (in case somebody isn't aware, the Groupon deal is that the coupons are usually only for sale for 24 hours, so as a customer you have to jump on the deal right away, or lose your chance).

The last problem area I could see is for seasonal DZs. They would have to be careful not to sell coupons valid beyond the end of their season. To even expand on that a little, if there is a 'rush' toward the end of coupon validity period, even having that flood late in the season could present some problems as the fall weather can be spotty. In Ohio this year, Oct and Nov haven't been great, with maybe one weekend with two clear days, and a handful of weekends being a complete wash.

If the sceduling issue can be made clear to the customer beforehand, that would be a start. Maybe incluse the idea that, 'all jumps need to be scheduled at least 4 weeks in advance' in the pre-purcahse information. Then, when they call to schedule, if you happen to have openings in the next four weeks, you can offer those earlier dates to them, but the customer understands that they might not get to jump the weekend after they buy the coupon.

If DZOs of seasonal DZs are willing to extend the expiration dates to any customers who run into the end of the season, that would take care of that problem.

Otherwise, it looks like a great marketing tool for DZs. If you can sell 50 tandems at a reduced price, and even 3 or 4 let the coupons expire, that's free money to help offset the discount you gave everyone else.

[Dean358 0]

Groupons are basically a way to attract new customers, but like most marketing techniques, it has to be worth it for the participating business to pay for them. Groupons typically offer at least a 50% discount on a product or service and of the reaming 50% of revenue they take at least 50%. Thus a DZ which normally sells tandem skydives for $200 each would have to be willing to sell them for $50 or less each.

Now for some businesses this is worth it: businesses with excess capacity that have very little incremental per-unit costs, such as a boat tour operator that has empty seats, or a sporting event that’s not sold out. Or, businesses that hope to attract people that they can convert into repeat customers, such as a new restaurant, use them even though they lose money on each Groupon sale. Also, at least for the non-skydiving world, the redemption rate on the Groupons is 90% so don’t count on making up for the cost of using Groupons that way.

Does this make sense for a DZ? Not sure. If the DZ loses money on each Groupon redeemed and the low conversation rates from tandem passengers to students and/or repeat tandem skydives I don’t think so.

There’s a series in the NYT that’s been examining this issue. I recommend reading this one:

http://boss.blogs.nytimes.com/2010/11/23/doing-the-math-on-a-groupon-deal/

www.wci.nyc

[skyrider 0]

Groupons are a flop IMO for skydiving, because getting a group together, that actually show up come jump day, Is Tough!

I tried to get a group of Hells Angels, to come to Perris and Jump, (I am NOT a member) I had 6 interested...."1" showed up on jump day!

Maybe sold on a college level, they could work!

[sundevil777 102]

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Groupons typically offer at least a 50% discount on a product or service and of the reaming 50% of revenue they take at least 50%. Thus a DZ which normally sells tandem skydives for $200 each would have to be willing to sell them for $50 or less each.

Do you know the details of how a business can structure their offer? It doesn't matter what is "typical" if a DZ can offer whatever discount they want.

People are sick and tired of being told that ordinary and decent people are fed up in this country with being sick and tired. I’m certainly not, and I’m sick and tired of being told that I am

[labrys 0]

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Groupons are a flop IMO for skydiving, because getting a group together, that actually show up come jump day, Is Tough!

I think the entire point is that they offer a way for people who don't even know each other to purchase as a "group" for the discount. I don't think they're expected to show up at the same time.

Owned by Remi #?

[skyrider 0]

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Groupons are a flop IMO for skydiving, because getting a group together, that actually show up come jump day, Is Tough!

I think the entire point is that they offer a way for people who don't even know each other to purchase as a "group" for the discount. I don't think they're expected to show up at the same time.

Now your talking staffing headaches...Not all DZ's have 12 TI's on call!

Or if a pre paid coupon shows up during an already heavey schedauled day, you have a pissed off customer walking away, thinking their product they bought is worthless, or even Bait and switch!

[labrys 0]

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Now your talking staffing headaches...Not all DZ's have 12 TI's on call!

Such a DZ is not required to participate and is well within their rights to include the requirement that an appointment be scheduled no sooner than x weeks after purchase.. as already suggested in this thread.

Owned by Remi #?

[Dean358 0]

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Groupons typically offer at least a 50% discount on a product or service and of the reaming 50% of revenue they take at least 50%. Thus a DZ which normally sells tandem skydives for $200 each would have to be willing to sell them for $50 or less each.

Do you know the details of how a business can structure their offer? It doesn't matter what is "typical" if a DZ can offer whatever discount they want.

As I understand it, you can't do a Groupon deal for less than a 50% discount (might not apply to Skydiving?) From the NY Times article:


For those of you not familiar with Groupon, the company partners with local businesses to send a daily coupon e-blast to its members. The members who buy the coupon get 50 to 70 percent off on a product or service, and Groupon splits the proceeds with the retailer — usually leaving the retailer with about 20 to 25 cents on the dollar of retail value.

www.wci.nyc

[pilotdave 0]

The groupon people are very familiar with tandem operations since they have been selling many many coupons for them. They make an exception to their normal discount for skydiving coupons, since they know profit margins are already very low.

Dave

[PhreeZone 20]

How I've seen most DZ's get around the 50% off rule is they show their "regular price" to be something like $250 or $275 and discount that the required 50% to $125 or whatever. They then run "sales" like a spring tandem sale at $199 and then a Mothers day special, a summer special, a 4th of July special, etc that lets them keep their normal prices really high but always end up selling things at a discounted price. For the DZ side of things my quick math shows it can really depend on a few items but at the $125 price the DZ might see $80-90 back from Groupon. Out of that there will be the slots and the instructor pay that had to come out as well as money for repair of the gear. Pay the instructors $30 and that leaves you $50 to pay the slots and the maintenance so its razor thin margins. If you pay the instructors more the margins are even smaller or negative. The big area that is the profit maker seems to be in the unredeemed Groupons. That is $80 per coupon with no cost at all.

The odd thing with Groupon sales that I've seen is that can be an easier push for video since you basically can pitch the video plus their groupon price was about the same price as the undiscounted tandem so its a real bargain to a lot of people. On the flipside it can seem to drive large amounts of "Bargain hunters" that seemed to be more interested in penny pinching and not wanting to spend any mote time or money then absolutely needed to redeem their certificate.

DZ's have to be able to accommodate the large influx of customers if they want to use it. I've heard from several different people that some DZ's had seen anything from 200 all the way up to 2500 certificates being bought for a given DZ. It is a beast to deal with and to keep track of and the margins are really thin on it.

Yesterday is history
And tomorrow is a mystery

Parachutemanuals.com

[Hvance 0]

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The groupon people are very familiar with tandem operations since they have been selling many many coupons for them. They make an exception to their normal discount for skydiving coupons, since they know profit margins are already very low.

Dave

I know Hans @ the Farm worked with a similar website (halfoff.com) and they changed the margins. 25% for the DZ might not be sufficient.

I wish Google Maps had an "Avoid Ghetto" routing option.

[tkhayes 348]

it is quite regional and successful in some areas where in others they are not. In Florida they demanded $129 tandems and they take $20 per. Guaranteed to sell 1000 tandems for us - which i did not doubt, but there is no way I am selling tandems for $109 and hoping to pay for my costs.

If they sell 1000, then they get $20,000. They make a bundle and I operate below cost. For $20K, I can probably hire a large PR firm and do a substantial amount of my own advertising for a year. No matter what I tried to negotiate with them, i.e. $149, they did not want it.

So we refused.

All this crap about 'bringing friends' and 'buying video' - and the expiry dates. Great! Just what I need - a bunch of pissed off customers 'cause they spent $129 and get nothing for it. That is a whole lot different that spending $10 on a Groupon pizza deal and never redeeming it and losing my $10. Who cares.

Our philosophy is that I have 11000 tandem emails in my database. If I sent them all an offer for a $129 tandem, I bet I get just as many tandems and I do not have to pay anyone else $20 per.

I am tired of advertising leeches that suck the money out of my business. If they are truly advertisers, then they have a genuine interest in helping my business make money - not just theirs....

no way jose

[howardwhite 6]

Thanks for the link. Interesting.
Other thoughts;
-I know a lot of people who bought Groupons got really unhappy when they couldn't get their jumps on the day they wanted. Does that make people think the local DZ is a scam artist?
-If you see a Groupon for $149, does that make you believe that's what the product is selling for, and therefore depress the market?
HW

[MakeItHappen 15]

For those of you not familiar with Groupon, the company partners with local businesses to send a daily coupon e-blast to its members. The members who buy the coupon get 50 to 70 percent off on a product or service, and Groupon splits the proceeds with the retailer — usually leaving the retailer with about 20 to 25 cents on the dollar of retail value.

[JohnRich 4]

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In Florida they demanded $129 tandems and they take $20 per. Guaranteed to sell 1000 tandems for us - which i did not doubt, but there is no way I am selling tandems for $109 and hoping to pay for my costs. If they sell 1000, then they get $20,000. They make a bundle and I operate below cost...

And on the other hand, you make $100,000 in a lump sum, which you otherwise wouldn't have, and which can pay for that upcoming hot section replacement in a turbine engine.

[labrys 0]

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So the merchant gets $25 for a product or service that normally goes for $100??

Maybe you should read more of the thread. The 50% / 50% model isn't locked in.

Owned by Remi #?

[AndyMan 7]

Groupon has been wildly successful in the Chicago market. All 3 local DZ's are now taking part, Groupon seems to rotate through the 3 dz's depending on time of year.

Yah, you quickly sell 2500 slots at $110ish each. People are so quick to buy Groupons that you end up seeing some people buying multiple certificates. Don''t be afraid of the $109 though - you really do need to understand that about a third of the jumpers don't show up. This helps your margins since you're getting their money anyways. The numbers that I've heard (distant rumors....) is that a DZ typically books somewhere around $150 revenue for each tandem. Sure, it's not full price, but christ - you've got 2500 guaranteed tandems in the few months following the sale. And, these are new jumpers who you probably weren't reaching in your marketing already. These are tandems that are showing up on TOP of your existing business. This is revenue that's showing up AFTER you've paid your fixed costs. That's known as profit.

As for pissed off customers, I haven't seen any nastigrams on Yelp or here on dz.com for participating DZ's, nor have I heard stories around the DZ. People clearly know the deal when they sign up, and if they get pissed off it tends to be at Groupon and not the DZ.

The caveat is that you need the facilities, you need the packers, the rigs, the airplanes, and the staff to handle the jump in business. Many small DZ's just can't ramp up that quickly. Somone like you TK who's already got all that in place already? Sounds like pure profit to me.

_Am

__

You put the fun in "funnel" - craichead.

[PhreeZone 20]

Groupon is a "Group Coupon" type deal. The coupon is only for sale for a set amount of time (1-3 days usually) and it requires a certain number of people to take part in it for it to become valid. This is a option that the location has to set a minimum on the number of coupons that need to be sold for the deal to go "active", if the number is not met then the Groupon is never activated and the customers are not charged a dime. This is a way for something like a bistro to guarantee that they see at least 250 coupons being sold to make it worth it to bring in that many new customers. I've seen several deals locally not sell enough to go active (one specifically was a Botox deal that was like 65% off ) but Groupon is usually pretty good about working only with companies that their product is popular enough or the minimum is low enough it triggers the deal with in a few hours of being posted for the day. I've seen most Groupons either sell like wildfire the moment they are posted or they slowly sell until the minimum is met then they will spike over the next hour or two once people see the deal is on and active.

The concept is that the place sells a $50 certificate for $25 and gets $12 from Groupon. The customer must spend at least usually $75 to use the $50 certificate. The bistro ends up getting the $12 and the $25 ($75 minus the $50) so they end up making $37 at least on it. They spent $38 in revenue to get the customer but if a certain percentage of the new customers become repeat customers then that expands the profit over future visits. Also if the person ends up spending more then the $75 then the margin goes way up and might even cross over into profit.

We use the Groupons to go to a Sushi place locally. They had $50 certificates for $15 earlier this year but we have to spend at least $60 to use them. We tend to spend way over that since from our math its $35 off the bill at least. We get at least $60 worth of sushi for $25 but the total bill tends to be more around $90-100 since we splurge a bit more and order extra things since its at a discount. We pay with the $50 certificate and the rest is cash. The place ends up seeing us more often since we typically would not go out quite as often and sine we had never been to the place before the Groupon was posted so they ended up getting a repeat customer out of the deal.

Places like Ski Resorts, tour operators, museums and other places with lots of excess capacity for little or no additional cost love it since it draws in people that would not otherwise come out. I know I've bought a few groupons just since its for someplace/something I've wanted to try or go to but did not want to pay full price. I've seen things like tickets to car shows, art exhibits, skiing, hair salons, food, flight lessons and segway tours on ours in the last 9 months. Lots of these have excess capacity currently and the new business is mostly pure profit. Other places view it the same as advertising cost since they may lose some per transaction for the redemption of the Groupon but they had their ad directly displayed in the in-box of thousands to tens of thousands of people in a specific geographic location that is in the middle of their target market.

The other thing is a certain number are never redeemed so its a pure profit at that point.

Yesterday is history
And tomorrow is a mystery

Parachutemanuals.com

[tkhayes 348]

$109
minus 2 airplane slots, about $36 leaves $73
minus tandem/I and packing, about $45 leaves $28

minus wear and tear on rig and maintenance, is at or about all that is left (explained in other threads) leaves ZERO or worse, negative

[sarcasm]At least everything else at the dropzone, like electricity, rent, taxes, staff is free[/sarcasm]

sorry dude, the $100K that you are talking about is a fantasy.

if 20% of them don't show up and I get to keep the money, well then there might be some profit in it, but I actually have a conscience and am not interested in ripping off that many people.

If I sell 400 tandems even somewhat below regular price, then I make just as much money and Groupon does not get a cent of it.

I do not have a problem with Groupon making a dollar - I have a problem with them making a dollar at my expense.

Not to mention, the Groupon sales guy here in Tampa that I was dealing with was/is a complete dick

[tkhayes 348]

as I said, it is successful regionally yes. read my post above to explain the dollars that I see. Florida does not sell tandems for more than $200, I see that SDC and CSAC are both over $200.

If I could sell tandems for $239 then i would be making even more money than I am now. We have 15-18 dropzones in Florida and 8 million people in the entire state. There is a lot of competition here and there are still idiots out there willing to do tandems below cost for 'image'. I am not.

Everyone does stuff for cheap, occasionally. not 1000 times, and I will not apologize for trying to make a dollar and pay my bills/staff and me and the other shareholders

[davelepka 4]

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minus wear and tear on rig and maintenance, is at or about all that is left (explained in other threads) leaves ZERO or worse, negative

Don't forget about the scheduling issue. Every time a Groupon tandem is taking up 2 slots, a rig, and instructor, those assets are no longer available for full price (full profit) tandems. Even if those tandems are a break even deal, you're still losing out on the income those assest could make with a non-Groupon tandem.

Even in the case of a modest profit, you're still not able to take advantage of a higher profit non-Groupn tandem while servicing the Groupon customers.

Now if you are a DZ with excess lift capacity, and you can cut a deal with Groupon where you could make a modest profit, and then you could schedule only a limited number of Groupon tandems for a given day, it might be a good way to fill your airplane, and keep all of your staff busy all day long. When you're counting on your guys to be there for you, it helps if every instructor and every packer can always count on putting in a full day's work.

Maybe a good idea would be to include a clause in the coupon that all reservations need to be made 'x' weeks in advance. So you schedule no more than 10 or 20 of them on any given day, leaving the slots open for full paying customers. Then, as the weekend approches, say Thur or Fri, you can see if you have any openings for the weekend, and start calling the Groupon customers scheduled for the following weekend and inform them of some 'last minute cancellations for this weekend' and see if they want to come out this weekend. This way the Groupon customers become a 'filler' so you can always top off your schedule right before the weekend, and always be running to capacity.

All of the above, of course, is dependent on making a profit off the Groupon customers. Even if you can only clear $20 after expenses, that's $20 in your pocket, $35 for your instructors, and $10/$12 for your packer.

[tkhayes 348]

certainly if you own your own planes, there is probably yet another small margin and incentive to keep them flying too.

The biggest reason we did not go with them was their refusal to even budge on the price or the terms. i have to accept theirs or no deal. They sales guy was a complete asshole and had no respect whatsoever for my bottom line. Therefor, he does nto 'earn' my business