Wednesday, November 23, 2011

People Who Can't Plan Shouldn't Run Businesses

Just ran across a story about a "businesswoman" who was nearly ruined by a deep-discount coupon deal.
Rachel Brown, who runs the Need a Cake bakery in Reading, Berkshire, launched an offer via the money-saving website in the spring in which she offered a 75 per cent discount on 12 cupcakes, which normally cost £26.

However Mrs. Brown vastly under-estimated the popularity of the deal and was besieged by 8,500 people who signed up for the £6.50 bargain.

Naturally, Mrs. Brown is accusing Groupon of nearly ruining her business. But isn't she really to blame here? You can limit the number of deals you will accept via Groupon. Sure, Groupon's salespeople are supposedly pretty cut-throat and want businesses to make pretty steep discounts to maximize Groupon's profits.

But you know what? Sure they are. Groupon's in business for Groupon, not for the Need a Cake bakery. I feel bad for Mrs. Brown, who was evidently taken to the cleaners here while Groupon made a tidy profit. But she should've thought this through. Hmmmm, she might have thought, what's my worst-case scenario? What actually happened probably wasn't far removed from that.

The Groupon business model offers a quick buck, since they pay upfront based on coupon sales. But somehow businesses seem to forget that each coupon sale is a promise to provide some service which they have already been paid for. This could be a problem for Groupon going forward. I wonder how many repeat customers they get? My guess is: not many. Then again, the depths of human gullibility and greed seem endless.

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