Car wash booklets for half-off if 250 people pitch in, a coupon for two dozen pastries if 50 people pay for one dozen, a $500 driving experience for $99 if 100 people purchase the coupon: by now it’s safe to say that Groupon has changed the way many of us buy things (even car-related) online. But it hasn’t changed the way we buy everything: Groupon’s ambitious experiment tied to selling cars last week largely failed.
Last week something of a media firestorm happened when Groupon announced a partnership with LaFontaine Auto Group in Highland, Michigan: it was heralded as the first time the internet coupon retailer tried to insert itself into the car buying process and discussed across the country. There was, needless to say, plenty of publicity for the deal.
The coupon worked exactly like Groupon’s cheaper offerings: customers were offered a voucher for $500 towards the purchase or lease of a new or pre-owned vehicle at the LaFontaine Automotive Group in Highland, which sells Buicks, GMCs, and Cadillacs. Customers would receive the voucher for a price of $200 as long as 10 people signed up during the two-day deal. When only four customers signed up, they extended the deal to four days.
When the Groupon still couldn’t garner enough customers, the deal failed. LaFontaine decided to go it alone and offered the deal to the four remaining customers, even though their Groupon prices were refunded: management offered spurned Groupon customers an extra $300 towards a down payment. Eventually two coupon buyers purchased vehicles from LaFontaine.
Critics of the experiment point to the “Groupon effect” for why the deal failed: Groupon’s deep discounts result in businesses losing money on sales in order to get customers in the door. A Groupon is only truly successful if some of those coupon-wielding customers become repeat customers and pay full price. Considering that most car customers don’t decide, say, to come back a week later and buy the same product, the “effect” is moot.
Then there’s the price: the coupon holder saves only $300 through Groupon. LaFontaine’s makes are already providing incentives of between $500 and $7000, and a shrewd negotiator could cut $300 from a car’s purchase price rather quickly.
All in all, LaFontaine and Groupon say there are no hard feelings. Groupon spokesman Chad Nason told Automotive News that Groupon will “look at what this deal did and tinker with what we can do in the future.” He also pointed to the relative success of other dealers in providing Groupons for service specials like half-off oil changes or scheduled maintenance.
Source: Automotive News