Daily Deal Dilemma: Does Groupon Need a Refund, a Reboot, a Stern Reprimand or Just a Little Maturing?

The answer depends on whom you ask. If you ask Groupon CEO Andrew Mason, 31, he’s likely to say the latter.

But before we get to Mason, let’s recap.

Back in February 2012, I wrote about how Groupon, the daily deals “Mecca” was launching a PR blitz to help rewrite its then recently soiled reputation after a slew of communication missteps:  a fumbled Super Bowl ad and a case of fuzzy earnings math just prior to its November 2011 IPO.  It revamped its website and added the public relations might of Paul Taaffe, the former chairman and CEO of Hill & Knowlton. (For history buffs, that’s the 85-year-old Manhattan-headquartered PR agency once known for its support of Big Tobacco and its infamous “A Frank Statement to Cigarette Smokers,” 1954 newspaper ad, that claimed the “statistics purporting to link cigarette smoking with [lung cancer] could apply with equal force to any one of many other aspects of modern life.”  Gotta love this industry!)

In that earlier post I puffed on about the tough job that Taaffe had ahead of him, referring to the journey as a “rocky road” while going on to say that, “taming the daily deal beast just doesn’t seem like a job anyone should embrace,” and that “public relations leaders can only craft a message so far. Too much spin and a message – and a company – can spin out of control. Let’s see what happens next.”

And (nearly) spin out of control it has.

Earlier this month it was reported that the Securities and Exchange Commission had begun a preliminary investigation into Groupon’s questionable financial accounting practices after the company announced that it was revising its 2011Q4 earnings, cutting it by $14.3 million to $492.2 million from $506.5 million. The announcement left many Groupon naysayers crying, “I told you so,” while investors are jumping ship in search of…. better deals.

Fast forward a few weeks since the troubling news and Groupon’s stock slide continues. On Thursday April 26, 2012, Groupon’s stock price was nearing bargain-basement levels, trading at $12.06 a share, after its $20 a share opening in November and its 52-week high of $31.44. The reason for the downward revision? Groupon hadn’t set enough money aside for customer refunds.

So in light of all this communications turmoil, one would expect that Paul Taaffe and his team would be out in full force defense and crisis mitigation mode.  To date, however, Taaffe’s strongest defense was when he told reporters: “Every three months Groupon is a different company.”

Somehow I don’t think that’s what investors wanted to hear.

But to give credit where it’s due, Groupon CEO Andrew Mason at an informal town hall meeting on Wednesday admitted his company no longer has “any margin for error,” adding that Groupon is “still this toddler in a grown man’s body in many ways.” In helping the company grow up, the company has announced plans to bring on board additional senior management, and according to a recent Wall Street Journal article, at least two new board members – all designed to show that the company can mature, mature quickly and rebuild investor confidence.

As a public relations professional, one of the most important pieces of advice I can give is telling clients to be up front about their actions and intentions and if there’s no substance behind a marketing campaign, then there’s no point selling the message.

Frank town hall meetings that get section-front coverage in the Wall Street Journal (check out Marketplace in the print edition) is probably not enough to quell all investor fears. But as Groupon closes out another challenging month and is only two and a half weeks away from its next quarterly earnings report, it’s nice to see a maturing response.

Perhaps then – and in an ironic way - Paul Taaffe was on to something after all. Just maybe, Groupon is beginning to change. And just maybe this change is here to stay and the company will not be something different three months from now.

We’ll have to wait and see.

Groupon’s Dodgy Deal: Can a PR Blitz and Site Overhaul Save the Company From Itself?

When it comes to Groupon, the daily deals digital Mecca, my, my, how the dot com angels have fallen.

Even as a public relations professional who’s seen and navigated her fair share of client missteps, I’m a bit gobsmacked by how a company that less than two years ago snagged the front cover of Forbes magazine with the eye-catching title “Meet The Fastest Growing Company Ever,” has managed to have its PR rug so skillfully pulled out from under them. What’s especially noteworthy is that Groupon’s recent rotten deal has been entirely self-made.

For readers who aren’t up on the latest Groupon happenings, the company has for the past several months, endured a barrage of PR setbacks, helping re-write the company’s until-now spotless public narrative. Here’s the errrr…..deal: In 2011 the Chicago-based company was roundly sacked following a Super Bowl XLV (45) ad that appeared to mock the decades’ long Tibet-China conflict. A few months later, and just ahead of Groupon’s November initial public offering (IPO), the company that had since its founding been branded based on its hyperactive growth, had to slice its reported revenue in half due to questionable accounting practices. Tsk tsk tsk.

Even the company’s opening stock price, fittingly perhaps, came in at a bargain $20 compared to an earlier valuation that said the couponing site was worth $30 billion. Re-tweaked fuzzy math brought that value down to $12 billion.

And while the company’s NASDAQ stock as of this writing is hovering near its opening price, only down .2 percent, and they’ve managed to start the new year with no additional public relations faux pas – that is if you exclude their announcement last week of a 2011 fourth quarter loss of $9.8 million – a sense of Wild West mentality combined with deck-of-cards-like fragility (some would say Ponzi scheme) continues to deal the company a PR blow.

To be sure, Andrew Mason, Groupon’s 31-year-old CEO, isn’t going down without a fight. In the effort to build back its image as a leader in the online deal-a-day world where coupons attract customers to once-hidden brick and mortar establishments and where everyone wins, the company announced this week major revisions to its website. Among the changes includes adding “thumbs up” and “thumbs down” capabilities so that Groupon users can help the site be more selective when doling out its latest offerings. And in another striking move, Groupon announced the hiring of public relations veteran Paul Taaffe to better manage the company’s image. His arrival comes after only a two-month stewardship by Brad Williams, formerly of EBay Inc.

Whether or not Taaffe, 50, paired with Mason,31, is the right combination of relative youth and relative years remains to be seen. But the fact that his arrival comes after his predecessor barely had time to break in his desk chair’s seat cushion, more than even erroneous math or disgruntled business owners crying foul over the supposed Groupon “deal,” is the best indication yet, that Groupon might be sick. Very sick.

As PR professionals we are tasked with helping keep our client’s message on track, being consistent and accurate with the media, and when calamity strikes, honest and up front about our mistakes. But that hard work should always be predicated on a company that gets its facts and its story straight –before it goes public. To do anything less is like having one hand tied behind your back during a boxing match. Or if you’re a lawyer, having your client reveal a critical detail that could alter a defense only moments before opening arguments. That type of handicap serves no one.

There’s no denying Groupon’s had a tough year. And while it may be easy to say “what’s 365 days in the course of a life?” Groupon, much like its leader, is still very young, having just celebrated its third birthday. But if you’re three years old and already a third of your life has been troubled with a mixed marketing message, what does that suggest going forward?

Taaffe’s got a rocky road ahead of him, for sure.

Good press or bad press aside, Groupon and its thousands of employees and millions of dedicated users aren’t going anywhere anytime soon. But taming the daily deal beast just doesn’t seem like a job anyone should embrace and revamping a website is just not enough. Public Relations leaders can only craft a message so far. Too much spin and a message – and a company – can spin out of control.

Let’s see what happens next.

Why Groupon WON’T Save Your Company

Current economic environment notwithstanding, most consumers are attracted by ways to save money - not in their bank account, but on stuff - because they are going to spend. Businesses, naturally, oblige by offering “deals,” the growth of which has exploded thanks to Groupon, LivingSocial, Daily Deal and the dozens of other wannabes. Of course, the growing number of daily deals appeal to our human nature – getting the best offer before the next person does. One doesn’t have to be a coupon hoarder or penny pincher to fall in that category, and Groupon has been most “helpful” in transforming so many of us into online deal hunters.

In less than a year, the “Groupon experience” has become incredibly popular with retailers and restaurants trying solicit new customers and get the cash register ca-chinging again. But if they expect a lot of these new customers to jump all over non-Groupon prices after paying heavily discounted rates at the start of the relationship, they are delusional and tragically mistaken.

Last month, I posted a comment on a Loyalty group I’m a member of on LinkedIn:

“While relatively innovative, Groupon is not a company that helps brands build loyalty. Because Groupon offers consumers discounted goods/services from an ever-changing variety of companies, it inherently encourages consumers to purchase a scattershot of different items, driven by heavy discounts offered during a short timetable - not through developing brand loyalty. The process works against loyalty because it drives consumers to try many new brands – rather than sticking with one brand consistently - all on a single factor. Price. Groupon essentially says to consumers, why stick with the usual go-to salon/restaurant/bookstore when you can try this coupon for another, different company that's much cheaper than what you're probably paying? Companies may increase business by using Groupon to bring in new consumers who might not normally try their brand, but in terms of encouraging long-term brand loyalty the service simply isn’t equipped to offer real results. I've always argued that when marketers go down the discount highway, it's almost impossible to turn back around. Think about it... it's highly unlikely that a consumer making a purchase decision based on a percentage discount from an unknown retailer/brand will return to that retailer/brand for "non-Groupon" prices. Why would they? Instead, they'll simply look for the next bargain delivered by Groupon from yet another retailer/brand... and so on.”

That discussion is gaining a lot of traction as the “Great Groupon Debate” is argued among retail marketers and business reporters alike:

- Bryon Morrison, president of The Marketing Arm's wireless practice discusses the cons of Groupon in his article featured in Mobile Commerce Daily Countering the Groupon effect and linking tactics to strategy
- And Fred Minnick, writing for Stores, asks if daily deal sites good or bad for retail in his article “The Great Groupon Debate”

In a recent Slate feature, Noreen Malone lived off Groupon for a week. There was a lot of effort involved (20-minute walks each way for a coffee shop? No thanks.) and a little pressure (don't forget your coupon!), and Malone noted that it's also an easy way to be blinded by the deals: “We might not know, sitting in our cubicles, that we want these things—but take 50 percent off the sticker price, and suddenly we do,” she said.

And that's the trouble with Groupon. In a social deals-type environment, we look at sticker price, not at brand value. Groupon is less about the brand, more about the price. Why go back and pay full rates if you're always presented with something new—and that deal you grabbed wasn't even nearby?

Yes, we are even willing to go out of our way for a good deal, but will we return to the same place when we don't have a chance at a discount? Fat chance. In a recent survey by Cooper Murphy Copywriters, 82 percent of companies that had Groupon promotions in the past said that they were unhappy with the level of repeat business they received after running their promotion.

To continue Groupon momentum, a company might consider another deal, and another one... and they're continuing that cycle of margin giveaways in the process, not to mention alienating loyal customers who have been paying standard prices for months or even years. With an influx of new customers waving deals, will the regulars have the same level of service, the same experience?

It's better to concentrate on customer connections in the long run. Keeping costs low for all buyers—not just the Groupon set—will ensure repeat customers. Specialized pricing and competitive edge can hook new clients, but how can we keep customers coming back? is a better question than how low can prices go this month?

There is no quick fix to finding new customers – any marketer worth their grain in salt will tell you. The experiences that consumers are having with Groupon like not being able to redeem coupons for 4+ months (personal story that I’ll share with you next week) or finding out that the deals are only available at very limited times will and work against Groupon, the business and their brand.

My advice? Treat Groupon and its ilk with caution and think about long term ways to connect with customers to build profits – not give away margins and alienate existing customers through deep discounts.