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Tuesday, April 10 2012

Another Groupon Disappointment?

Last week another one of my competitors decided to run a 'deal of the day' with Groupon. If you are not familiar with Groupon you can read about them in detail in my other blogs. Here are the deals he promoted: $59.00 for whole house carpet cleaning, up to 1,100 square feet of a single story home, a $200.00 value; $99.00 for a two story whole house carpet cleaning, up to 2,500 square feet, a $350.00 value; $39.00 for 125 square feet of tile & grout cleaning, a $150.00 value. If we divide 125 by 150 we find that his average per square foot charge is $1.20 per square foot to clean tile & grout. On his website he is running a monthly special where for $99.00 he will clean up to 120 square feet of tile & grout which translates into $1.21 per square feet. One of the promises they make with the 'deal of the day' is that they will use a truck mounted cleaning system and will use a (2) man cleaning crew.

Will this turn out to be another Groupon disappointment for the client or my competitor? He sold 420 deals and he and his crews must complete the work in (6) months before the 'deal' expires. Let's look at the tile & grout cleaning deal: Since the coupon is for $39.00 Groupon will get to keep 50% or $19.50, my competitor will get to keep the other $19.50 paid out over three monthly instalments. Let's assume that the cleaning company is only (15) minutes away from the job. This would mean a total driving time of (30) minutes. Let's also assume that both employees are being paid $10.00 per hour with no bonuses, commissions, health benefits, vacations, etc. If you did factor in worker's compensation insurance, payroll administration and payroll taxes the cost of the employee would be approximately $13.00 per hour. Let's also assume that it takes these two men (15) minutes to set up, (15) minutes to clean up, and only (30) minutes to clean 125 square feet. When you add this with the driving time you would get 1.5 hours total. If we multiply 1.5 x $26.00 (the cost per hour for two employees) this would EQUAL $39.00. We then need to subtract $19.50 (the profit from the 'deal') from $39.00 which gives us a NEGATIVE $19.50. Keep in mind that we did not include gasoline, cleaning chemicals, supplies, insurance or a reasonable wage for the cleaners.

Will this company have to resort to high pressure sales tactics to get the clients to purchase additional services they don't need or don't want? What happens when a large group of people all call wanting their tile cleaned in the next (7) days - this will certainly happen. One of the biggest complaints I hear from people and read about on line is that they had to schedule their appointment out (3) weeks in advance and they guys were still late or did not come at all. According to Bloomberg.com Groupon has had trouble with large deals being charged back - refunded by the customer.

My fear is that this is a No Win situation for both the clients and the company. It is worth repeating - "Cheap things aren't good & good things aren't cheap." If you have questions about this blog please email me at paddle@frontiernet.net.

Michael Hull

 

Posted by: Michael Hull AT 12:50 pm   |  Permalink   |  2 Comments  |  Email
Comments:
After reading this can you say "Bait & Switch."
Posted by Emily on 04/10/2012 - 03:28 PM
I hope this is not the case, but you bring up a potential problem.
Posted by Michael Hull on 04/10/2012 - 03:36 PM

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