Groupon: What's the Deal?

As much as 10% of the people in North America as signed up with Groupon! 10%, that's 45 millions! So the question is should you sign up as a photographer with GroupOn and get thousands upon of thousands of customers. Groupon will work with you to design the Groupon offer for you to get between a thousand clients to two thousand clients. Wow! In addition, usually it’s over the space of 2 or 3 days. That’s how powerful Groupon is.

How it works

1. You contact Groupon
2. You have a conversation/email with them
3. You offer a “special” between 50% to 75% off
4. Groupon sends an email to their subscribers in that area/postal code/zip code/category or interest.
5. The special offer is valid only for a few days
6. The customer pays Groupon
7. You receive 50% of what Groupon received. The other 50% is their commission You didn’t pay anything. You get between thousand and two thousand customers. Like I said: Wow! What’s the downside?

Economics

Before we can deal with Groupon, we need to go thought an economic lesson on marginal cost:

The marginal cost is the change in total cost that arises when the quantity produced changes by one unit. That is, it is the cost of producing one more unit.

─ Wikipedia

Let’s see the cost of a 4” by 6” print:

1. The photographer’s time to go to the place to take/make the photo
2. The photographer’s time to take/make the photo
3. Other costs associated with making/taking the photo, like accessories, assistants, rentals
4. The photographer’s time to process the photo
5. The cost of printing the photo: paper/ink… Costco/Wallmart: $0.12
6. The photographer’s time to pick up the photo
7. The photographer’s time to deliver the photo to the customer

All things taken in consideration, the cost is around $300. Now let’s see the cost of a second 4” by 6” print of the same photo.

1. Zero, was done on the first print
2. Zero, was done on the first print
3. Zero, was done on the first print
4. Zero, was done on the first print
5. The cost of printing the photo: paper/ink… Costco/Wallmart: $0.12
6. Zero, was done on the first print
7. Zero, was done on the first print

In this case, the marginal cost is $0.12 if we use Costco/Wallmart. Now let’s change from the print to making a portrait of one person with one print.

1. The photographer’s time to go to the place to take/make the photo
2. The photographer’s time to take/make the photo
3. Other costs associated with making/taking the photo, like accessories, assistants, rentals
4. The photographer’s time to process the photo
5. The cost of printing the photo: paper/ink… Costco/Wallmart: $0.12
6. The photographer’s time to pick up the photo
7. The photographer’s time to deliver the photo to the customer

All things taken in consideration the cost is around $300. Now let’s see the cost of a portrait of another person with one print.

1. The photographer’s time to go to the place to take/make the photo
2. The photographer’s time to take/make the photo
3. Other costs associated with making/taking the photo, like accessories, assistants, rentals
4. The photographer’s time to process the photo
5. The cost of printing the photo: paper/ink… Costco/Wallmart: $0.12
6. The photographer’s time to pick up the photo
7. The photographer’s time to deliver the photo to the customer

All things taken in consideration again the cost is around $300. In this case, the marginal cost is around $300.

That’s why cruise lines that are not fully booked usually sell cruises, at the very steep discount, but only in the last few days before the departure. Their marginal cost is almost zero. They already paid for the ship, the employees, the food, the gas…

Why & why not

• Groupon will significantly increase your sales. Can you cope with the increase volume? Can you make two thousand new portraits within a year? That’s 6½ portraits per day of different customers for 300 days.
• Contrarily to Craig’s list or barterers, Groupon customers are not “cheapskates.” Groupon’s customers are people that usually want to experiment for cheap but are willing to try luxury items/services.
• Since Groupon is on straight commission, they are not interested limiting the sales number to only 25 sales. They have to make their quotas…
• Groupon is great if you sell products, and it’s not that expensive to built/produce one more.
• Groupon is not so great when you are selling a service. Can you cope with the increase customer volume? Will you need to hire somebody else?
• You will not make any profit on the Groupon sale. You’ve offered a special at 50% off, and then usually Groupon takes 50% of what the customer paid. All you have left is 25%. Can you afford it? Some do, some don’t.
• Will these Groupon customers be repeat customers?

Payment

You only get paid after delivering the service or the photos.

Groupon will pay Merchant the Remittance Amount for each Voucher properly Activated for which a purchaser has fully paid Groupon and for which Merchant has provided associated goods and/or services to purchaser. It is Merchant’s responsibility to provide Groupon with a redemption code each time a good or service is delivered to purchaser. Upon receipt of these codes, which serve as proof of delivery of goods and services to purchasers, Groupon will forward an amount of the then-collected Remittance Amount Total to Merchant in proportion to the goods and services the merchant has provided purchasers to that point in time (i.e., the % of Gropuns that have been redeemed)

─ Groupon contract