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There was a big splash in the automotive news world last week when we saw the first auto dealership Groupon offer. Twitter and blogs were all abuzz with industry experts, vendors, and dealers debating the deal, and offering opinions about whether it would work or not. Now the deal has expired, and the minimum number of Groupon vouchers weren’t purchased, so the deal is null and void.
Of course, everyone is now jumping on the “here’s why it didn’t work” bandwagon… There’s a great post by Arnold Tijerina over at dealer-magazine.com called “Why the first car dealership Groupon failed” – give it a read, he’s got a few great points…
To summarize, he says the deal didn’t have value for the customer because customers EXPECT to negotiate with the dealer and bring the price down by at least $500 – so why would a Groupon be necessary? Also, the dealer probably didn’t handle the Groupon correctly – as potential buyers were leaving comments debating the worth of the deal, the GM left a few comments of his own to try to prove to people how valuable the deal was:
VALUE GUARANTEE OFFER!!!!
In the unlikely event that we are unable to come to an agreement on a vehicle purchase/lease, for whatever reason, I will honor your voucher toward $199.00 in our service, parts or body shop departments. Purchase accessories, have routine maintenance done or have those annoying dings, dents and scratches repaired.
Seriously? If you don’t find a car, you can get $199 in credit in our service department… for the $199 coupon? That’s not a deal, that’s just pre-paying for services… So instead of proving worth, he’s devaluing his own deal. And this comment makes even less sense:
William P visited our store yesterday. He selected and test drove the vehicle he was interested in. He worked out all of the pricing details with our sales staff until he was satisfied with the pricing. He THEN AND ONLY THEN explained he had purchased the Groupon voucher but needed a vehicle immediately. We reduced his amount due by $500.00 and honored the voucher in order to accommodate a customer. He took delivery today. We’re still confident that the sales requirement will be met.
He posted this before the minimum number of vouchers were purchased, and before the time limit had expired… so he’s working against his own deal by showing people that the coupon isn’t even necessary!
Those are great points… but here’s the real reason I think the Groupon deal failed:
The way this deal was structured, you’re buying a $200 Groupon to save $500 on a vehicle purchase… So even if you bought a used car worth $6,000 (about the lowest priced vehicle they have in stock), you only end up saving $300 – only about 3%!!! Most Groupon deals tend to be at least 50% off the purchase price of whatever the voucher is for, and that’s all you have to pay. In this case, your $200 Groupon is also a commitment to spend at least $6000 more… so it’s nowhere near the easy impulse buy like most Groupon vouchers.
Plus, you’re committing to buying a car from that specific dealership. So now, the dealership is targeting all Groupon users in the Detroit area who are also going to buy a car in the next year (and realistically, the only people who’d buy the Groupon are people who are already looking to buy a car now). That’s probably a pretty small slice of the Groupon user pie in Detroit… and since the Groupon buyer then HAS to buy from this specific dealership, the slice gets even smaller…
That’s why the Groupon deal didn’t work – it wasn’t an easy “wow, what a deal!” impulse buy – when all the successful Groupon deals give you huge discounts, saving such a tiny percentage on a high-dollar purchase just wasn’t valuable.