“Without doubt, it’s the worst ever business decision I have made. It’s been an absolute nightmare.” That was how Rachel Brown described her Groupon campaign to the BBC.
Looking to increase sales, bakery Need a Cake turned to Groupon to raise their brand awareness and find new customers. They ran a promotional deal offering a 75% discount on 12 cakes, selling each batch for £6.50 instead of the usual £26.
But the popularity of the deal caught them unaware, and their usual sales of 100 cupcakes per month was dwarfed by orders for 102,000.
To meet the unexpectedly huge demand, the small business of eight people had to bring in 25 agency staff resulting in additional fulfilment costs of £12,500. Coupled with the generous discount, it meant Need a Cake made a loss of £2.50 per order.
What does good look like?
A spokesperson for Groupon noted that a limit had not been set for the number of vouchers allowed for sale, despite the site offering this functionality. Had this failsafe been in place this costly promotion could have been avoided. As marketers we are often encouraged to better understand the financial implications of our activity, and this story is an instant classic to prove the point.
Of course, one very practical learning here is to make sure you can deliver on all your sales if demand turns out to be much higher than anticipated – and you set a limit in Groupon if necessary!
What’s the moral of this Bad Marketing story for you? What should Need a Cake have done differently? What will you do differently in future?
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