Most people are familiar with Groupon, the U.S. company that offers “daily deal” type coupons to customers. Subscribers can get discounts on a number of different services, and participating companies often gain new customers or added business.
Rachel Brown, owner of the Need a Cake bakery in England offered 12 cupcakes with a choice of flavors and design on Groupon for $6.50, a 75 percent discount from the regular price of $26.
Brown got new customers out of her deal. About 8,500 of them.
According to the Telegraph, Brown lost between $2.50 and $3 on each completed order. She also paid $12,500 in hiring extra staff and paying hours of overtime to fill the orders, which cleaned out her business’s profits for the year.
The international communications director for Groupon, Heather Dickinson, said there was no limit to the amount of vouchers that could be sold, according to BBC News. Chris Moriarty of the Chartered Institute of Marketing said Groupon needs to cap the number of vouchers a business can sell.
Host of an online marketing program, RSS Ray, advised putting limits on the discount. He said, according to the New York Daily News, “If your business cannot meet the needs of customers, it will create a terrible customer experience.
“I was worried about our standards dropping and hated the thought of letting anybody down," said Brown.