It’s Raining Cupcakes – And Losses

Internet coupons have been stuck in the dark ages of print. Instead of using modern techniques like social networking and clever psychology (yes, a few companies have done coupon apps for mobile and SN sites like FaceBook, but they’re not very inspiring), most just create “print ’em yourself” coupons to be used at a store. And that’s a hassle. So to compensate for the annoyance factor, coupons delivered in this manner generally offer steep discounts.

Groupon has taken this a step further – offering really steep discounts on premium items *if* they get a set minimum participation (like 100 customers). But what if *too* many people agree – like three thousand? This happened to a tiny boutique cupcake vendor in SF recently, and it was three weeks of agony and spot buying of supplies to satisfy people. Was it worth it? Probably not, since the vendor had to pay more to satisfy customers paying less.

It’s ironic that a decade after the Internet bubble and burst, a simple thing like vending a coupon is an enigma to companies and customers. I’ve done work in this area, and believe me – the level of cleverness and innovation here is very very low. This is partially because of the demographics to which the old media group is wedded – older frugal housewives – and not the sexy 18-34 spendthrift guys dearly beloved by, well, most everybody selling high-priced junk and low-priced junkfood.

But for the poor cupcake vendor who got too much business for too little profit, I only have pity. No small business can scale to cope with flash sales nor offer the kind of personalized attention that creates recurring customer sales. And the customers don’t see the boutique aspect of an artisan – only a cheap discount on cupcakes they might have bought at Safeway instead.

The Internet is a very powerful sales mechanism. Too bad people don’t give it the serious consideration it deserves with respect to the simple coupon. I think there’s a lot of money on the table and nobody wants to pick it up.

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Lynne

Lynne Jolitz is a startup entrepreneur, inventor, and creator of new innovative technologies. Lynne is also a writer on tech trends for publications like Byte and Dr. Dobbs Journal.

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