August 10

How NOT to Handle a Groupon Promotion, According to Peter Drucker

Marketing

10  comments

I recently had an experience with a Groupon promotion run by a local hotel, which I think makes a great example of how NOT to do customer service.

Briefly, here’s how it went…

In May I signed up for a Groupon promotion by the Buxton Palace Hotel for “£59 for a leisure day with two treatments, cream tea and a glass of Prosecco for two”. I got a message saying they were already booked several weeks ahead, so I left it a while.

Yesterday (August 9), I looked up my Groupon account to check the promo was still valid. Yes, great!

So it’s still listed as “Available”, with “21 days left!”. I sent off an email to the hotel, excited to make my booking.

This morning, I was surprised to receive…

I enquired what they proposed to do next.

Only to be told…

OK, what’s so wrong with this “Customer Service”?

I can accept that I missed the window and I can say goodbye to my £59. My issue here is that the Buxton Palace Hotel seem to have missed an opportunity.

Let’s start by examining the whole point of running group-buying promotions like Groupon. As I explain on this post in Open-Source Marketing, the single biggest reason for doing these promos is to build your customer base.

The legend Peter Drucker

The legendary economist Peter Drucker wrote in his famous book “The Practice of Management” that…

…there is only one purpose of a business: to create a customer.

Businesses that don’t build a customer base don’t stay businesses for very long.

Now, I have to say that businesses can often lose money in the short-term with a Groupon campaign. That’s absolutely kosher marketing strategy (called a “loss-leader”): you sacrifice short-term revenues specifically in order to build your customer base.

It is worth noting that small businesses in particular should be aware there is a very real risk of bleeding themselves dry by running too successful a loss-leader campaign (so I hope that Groupon & Living Social etc. counsel their clients carefully before they let them take on too big a promotion).

(I’m sure I remember reading another quote by Drucker that most fundamental rule of business is, “Don’t run out of cash!”)

So, Buxton Palace ran this promo in order to build their local customer base. (Remember that, it comes up again.)

The model is straightforward:

  • you offer an attractive discount (on a product that should be a repeat buy),
  • then do everything it takes to delight your customers,
  • and hopefully they’ll come back many times,
  • so you make your money back manyfold in the long-run through repeat business

How they totally screwed it up

Here, the hotel has managed to screw up that simple process in style. They fell at the first hurdle, because they failed to get me and my wife through the doors.

Even IF they had to lose a bit of money by honouring the offer, they would still have the chance of making a new regular customer. I am actually actively looking for a spa that we can visit regularly for a monthly wind-down!

Plus, by showing good grace, I would also feel an automatic sense of goodwill or indebtedness, making me actually more likely to become a frequent flier.

Tip: Always be the first to give, and the last to give.

So they missed out on the opportunity to delight me and Mrs Hunt, and they lost the chance to get our regular spend.

And to fall back on, “It says in the small-print that we don’t have to honour this” is basically giving your prospect the bird. Sure, it’s legally fine, but it’s a terrible way to do business!

And now a message from Buxton Palace Hotel and Spa

What they could have done

First, never, ever, insult your potential customers! (Did I just have to say that?)

(Feel free to disappoint those who will never be your customers, but take care whom you insult, because the market is a fuzzy, rich soup and word gets around.)

Here’s what I would have preferred to see…

  1. Any kind of taking responsibility or apology. Even saying, “I’m so sorry, but the promotion actually closed on {x}.” (Signing off “Sincere apologies” does not count!)
  2. Any kind of alternative offer. “While I cannot honour that voucher, we would love to see you, so here’s what I can do. I’m sending you a £15 voucher for…”

The point is not that they are obliged to give me £59 of value. I’m a reasonable person and understand how these deals work. I have missed the window on group buying deals before and was not 100% confident I would still be able to claim this one.

But manners cost nothing, and even a token offering of alternative compensation has significance, because it respects the business-customer relationship.

As things stand, Buxton Palace Hotel has lost any chance of this previous customer’s business, not just in 2017, but for ever, which is a great shame.

Peter Drucker would not be happy.

About the author 

Ben Hunt

My job is to look at the world and wonder... "How can we make things better?"

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  1. I was similarly astounded with my experience a few years ago with a travel agent. I had used them for about 5 years in a row to book skiing holidays. When booking, they asked me if I would like to buy lift passes and I asked ‘Is this a better price than I can get in the resort?’ and the guy said ‘Yes.’ When I got to the resort, I found that the passes were something like £30 cheaper. I thought, no problem I’ll sort this out when I get back. I thought at a minimum they’ll give me a couple of £30 vouchers towards next years holiday. But not a bit of it. All I got was a bunch of quotations of the small print. Needless to say I never used them again. For the sake of a gesture that would have cost them next to nothing, they lost hundreds of pounds of future revenue.

    1. The short-sightedness of business reps can be staggering. If the owners only knew how damaging these practices were, they’d flip.

      1. You often see this from non business owners.

        The thing happens most of the time when people working from you don’t understand those principles or forget them.

        Sure it is not an excuse and it is our responsibility as entrepreneurs to ensure the values of the company are clear and shared by all the employees ..

  2. What a bunch of asshats. Seriously.

    This kind of stuff pisses me off… they’re just shooting themselves in the foot.

    I’d find their manager and email him/her a link to this article if I were you.

  3. Should have used Management by Objectives. The objective was not clearly identified or not all were appraised of such goal. From there, there was no clear approach to achieving said goal, so who must achieve what , in logical order , was never put forth by management nor was there ever a follow up measuring achievement toward the goal and adjusting the approach was not modified to achieve In short, managementwas totaslly absent.

    1. Very likely… or, the business realised they had lost money on this Groupon campaign and were relieved to turn people away. If so, I believe that shows either severe short-sightedness, mismanagement, or mis-selling of the Groupon deal on Groupon’s part.

  4. I am a firm believer in “empowered employees.” Sometimes, the break starts with “unhappy employees. But, either way, the critical training is how to solve these situations by achieving the best end result. I am a believer that there is always something that can be done to correct unfairness in the mind(s) of customers. Also, I am married to the concepts of “under promise, and over deliver.”

    In the example of your encounter, the real opportunity was in the final resolution process. First of all, NOTHING should be available with appropriate deadline without the intention of being honored. If the purchase/sale was completed, an establishment has the obligation of fulfilling their side of the agreement, or compensating to the full satisfaction of the customer, even if that means giving a full refund.

    Yours was a great article bringing to light that we must remember what we are in business for and to always seek the opportunity to develop happy clients/customers…. and if NOT that, happy relationships – regardless of whether they are customers or not. Roland

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