Groupon marketing results

This is a follow-up to my posting about our attempt to get some Yelp reviews. The reason that we wanted to look good on Yelp is that we were planning to market some helicopter intro lessons via Groupon. We took our standard $225 helicopter into lesson and had Groupon sell it for $69. The fraction that they share with us will cover some of the cost of spinning the helicopter; we instructors will have to volunteer our time in order to try to convert some of these folks into long-term customers. We expected to sell 200 and hoped for 500. We figured that maybe 1-3 percent of these people would sign up as regular students, so we’d put in a few weekends of sweat and come out with 2-10 new students.

Starting just after 6 am, Groupon sent out emails to its roughly 200,000 Boston subscribers. I knew that there might be a problem when I checked a few minutes after receiving my email (I am a subscriber). They’d already sold 30. By 11:00 am, they’d sold more than 2000. We finally had to beg them to shut it down at 2600 (we could have set a limit initially but didn’t think to).

I think what this shows is that we were much worse at marketing than even we could have believed. East Coast Aero Club has been training pilots since 1985 and the owner reports that people almost invariably say “I didn’t know that I could learn to fly here; I thought that Hanscom was only an Air Force base.” Because the phone very seldom rings with new customer inquiries we figured that there was almost no market for helicopter lessons in Boston and not too much for airplanes either (though ECAC is one of the nation’s larger flight schools, with about 30 airplanes). One lesson that I’ve learned from Groupon, though, is that there were probably a lot more potential customers out there than we imagined but they didn’t know we existed.

On the other hand, we probably priced this deal too low. A huge number of customers telephoned the office to ask if they could buy the $69 intro lesson deal directly from us. We tried gently to explain that we weren’t quite sure how we were going to serve 2600 customers and that adding a 2601st would not help. We then offered them the $225 standard intro lesson price, which is already discounted to some extent. Nobody was interested at that price. So unless we can figure out how to sell them 2nd, 3rd, and 4th lessons at $69, perhaps this will be the first and last flight for nearly all of these folks.

22 Comments

  1. thomasb

    March 19, 2010 @ 5:58 pm

    1

    Perhaps requiring the 2,600 prospective students to complete the questions at the bottom of http://philip.greenspun.com/flying/helicopter-first-lesson prior to getting into the helicopter will pare the number down to something more manageable (and result in a higher percentage of people likely to go on to additional lessons?

  2. Dejan Strbac

    March 19, 2010 @ 7:48 pm

    2

    I thought coupons were limited. Those are pretty significant numbers. So, the discount between $225 and $69 with 2600 persons is about 405K. Out of curiosity, how much did $69 go down after Groupon’s percentage? Also %50? If I see it right, out ouf your overbooking and negative income, they’ve made around 80K in a day, while it’s questionable how this affects your regular business further on?

    I am sorry this happened to you, but sincerely believe it could have been much worse, yet there might even been some positive outcome. 2600 people will for sure brag about taking a helicopter lesson, which might spin it up for someone.

    IMHO, I think you guys discounted the wrong thing. By discounting the first lesson, you’re seen as a one time entertainment – a cheap experience. The offer should have been made on the packaged deal – e.g. full training level 1. That would attract the audience (obviously narrower) you want, waiting for a more favorable price (although if Groupon kept their fee on that, you’d go bankrupt)

    I wrote this morning about this same issue on Chicago Time Out: http://bit.ly/bkZ7ll
    I actually believe Groupon’s business model hurts local businesses much more than it helps them. It rips off their profits on high volumes. If you didn’t have to pay their percentage, you could have actually made good business out of this $69, or if you were still largely in the green zone with that, you would have been able to provide with a better deal to the customers.

    The audience Groupon serves is a nomadic crowd driven by discounts. It jumps from one offer to another. It is unreasonable to expect or promise long term results with a one time offer to a crowd like that. Yet Groupon has nothing to do with group buying or collective purchasing. That’s misguidance from their side, and false outcome advertisement for businesses. Businesses need expanded audiences and permanent exposure, not a one day hit & run deal.

    This crowd is attracted only by the price and that is the only thing you can’t promise long therm. Moreover, they are driven to Groupon, not to you, your services and website. Wasn’t that called advertising and exposure, what Groupon promises?
    I find that a bad bargain. There is no business but profitable business, and it is absurd there’s a clone infection of their business model around the world.

    I am researching the field of collective purchases, and will humbly suggest you take a look into this for the future http:/www.SyncFu.com I think that’s what you needed in first place. It’s a new, free service that works on your website, group offers which you fully control, without anyone between you and your customers. If you see it interesting for the future, please contact me, we are still shaping it and it would be great to modify it hands on by serving your needs. Doesn’t cost a thing.

    All the Best!

    – Dejan

  3. philg

    March 19, 2010 @ 9:03 pm

    3

    Dejan: Don’t feel sorry for us! I do think that what Groupon is paying us [not sure if it is fair to them to share it, so I’ll keep it secret for now] should cover our marginal costs of running the helicopter (most of the maintenance and fuel expense is associated with “collective cracked”, i.e., in a hover or flying around, which isn’t for very long with an intro lesson; there is a lot of time spent getting settled, running the startup checklist, shutting down); it doesn’t cover the capital cost, hangar, or insurance, but those are costs we were already incurring. We don’t yet know how many of these folks will convert to standard $369/hour student pilots, but it isn’t Groupon’s fault that we don’t have a crystal ball. As for the price being kind of low, we set that ourselves! Groupon likes to offer “big” discounts to its subscribers, but they didn’t hold a gun to our heads.

    Groupon had the huge mailing list of opt-in customers and we didn’t, so I think that the deal was fair. It might have been nice to have had a higher price and sold 750 instead of 2600, but, again, I don’t think that Groupon could have known how many would sell. Based on our experience with Bostonians and helicopters, I guessed “almost none”.

  4. Dave

    March 19, 2010 @ 9:05 pm

    4

    I’m one of the 2600 who bought on Groupon this morning. I can tell you from my purchase, and one friend of mine who also bought and told me about it, that you priced too low. His actual statement to me was “I’ve never even been in a helicopter! I’d probably pay $50 for a ride, forget about flying it myself!” So we both bought for the novelty factor, and will most likely not be repeat customers (I live in RI anyway, so even if I do take follow up lessons I would look for someplace closer to me). Probably not what you want to hear.

    However personally I might have gone for the $225 price if I knew you existed and had this sort of package. I always assumed flight lessons would be expensive, long, and boring until you get any good at it (100’s of hours). Your Groupon ad really jumped out at me because it emphasized that I could show up and IMMEDIATELY FLY A HELICOPTER. Like not after a month long class, not after a simulator for a week, right then. Same day. If I had seen this before, there’s a good chance I would have done it. I paid almost $200 for skydiving once, and that only lasted 3 minutes, so it’s definitely possible that I would have done this too. College students in particular (like I was at the time of skydiving) would probably interested, especially if you accommodated small groups. Of course if the $225 price itself is only a teaser price for more lessons, you may not want to get into the business of one off flights.

    Anyway I hope you can honor the $69 I paid, I’ve already started reading the FAA handbook. Looking forward to it!

  5. philg

    March 19, 2010 @ 9:22 pm

    5

    Dave: Of course we will honor the price! We won’t be sorry if you don’t fly with us again, as long as you are happy with the quality of ground and flight instruction. Perhaps you will tell some friends about East Coast Aero Club. My main concern at this point is that we will have to stretch people out because we don’t have a huge number of helicopters and instructors and they will get annoyed that they had to wait 3 months before flying.

  6. kc

    March 19, 2010 @ 10:03 pm

    6

    i am a subscriber of groupon and came across the helicopter deal this morning. i also thought it was priced too low. I figured that a lot of people would jump on the deal (as the previous poster mentioned, I’d imagined many people would be willing to pay $69 just for a ride). i was surprised to see that it was sold out at 2600. I always thought these groupons had a cap, so I expected that maybe there is a cap at 500 or so (due to scheduling, capacity, etc).

    having said that, i was not one of the 2600 to sign up. i do not have as much interest in flying a helicopter as much as private jet lesson. i knew this was priced too low as i have been actively researching discovery flight lessons (and the introductory ones are priced at $199 or so), which is fairly reasonable all things considered. i figured it’s reasonable for those who are interested in learning more about it, rather than have everyone come out of the woodwork.

    if the focus is to try to convert 1-3% of these folks into taking future lessons, i think it may serve you well to do an survey on these folks who purchased the groupon to figure out why they signed up. that way, you could focus on upselling to those people who are genuinely interested vs those just wanted to experience a one-time novelty.

    truthfully, there aren’t a lot of groupon deals that I liked yet (enough to buy), but this is definitely one of the more interesting deals i’ve seen on groupon so far.

  7. philg

    March 19, 2010 @ 10:31 pm

    7

    kc: Due to FAA regulations, they are not paying $69 “just for a ride”. They will have to study, attend ground school, and then pass a post-ground school exam (which they will not pass if they haven’t done all of the reading). A helicopter can be crashed much faster than the “private jet” that you want your intro lesson in and it is illegal to allow an untrained person to manipulate the controls of a Robinson helicopter.

    As for surveying the Groupon customers, I don’t think that we can do that until they show up. We don’t get the contact info. They have to come to us with their coupon (which makes sense when you think about it).

  8. William

    March 20, 2010 @ 6:19 am

    8

    It seems that if you just sold “rides”, if that’s even possible, at or around the same price you’d be in the green. The groupon crowd (think 20-somethings looking for fun at the right price) looks like it would line up for a helicopter ride but is not interested in full-blown lessons.

  9. kc

    March 20, 2010 @ 9:34 am

    9

    Sorry, I think there was a misunderstanding. I’m aware and understand that there is a lot of prework required (as it should) and that there are regulations involved (in order to operate or control) an aircraft. What I meant in my earlier post is that I think people would be willing to pay $69 just for a helicopter ride (as a passenger with the helicoptor operated by a trained instructor/licensed pilot).

    As far as surveying, there’s always the website. There’s not a lot of content on the club’s site. My guess is that people will have to call in first ( rather than just show up). So, maybe after an appt is scheduled, the folks manning he phones could direct those groupon folks to take a survey).

    Anyway, there are plenty of options one could consider to see how to manage the process, so good luck. Personally, I think it’s great there is so much interest in aviation.

  10. Chris Neumann

    March 20, 2010 @ 10:34 am

    10

    Once you get through those 2600 lessons, I’d try the local business schools as a marketing tactic. I know a bunch of Stanford biz school people that got their fixed wing licenses during their second year, which is when MBA students seem to have nothing to do but party and travel the world. I never understood why the CFIs out here in the bay area don’t do a quick presentation on what it takes to fly to these people.

  11. Steve

    March 20, 2010 @ 1:28 pm

    11

    Interesting angle, Dejan. You use some strong words to color your unsupported assumptions about the consumer and businesses using Groupon, not to mention Groupon itself – ‘rips off profits’, ‘cheap experience’, ‘nomadic crowd’, ‘hit & run deal’, etc.

    I find it all a bit insulting to the businesses, the consumer, and the reader – it’s not as if this thinly-veiled sales pitch wouldn’t be seen for what it is.

    Also, peppering this same comment around the web and then citing it as content that supports your claims is a bit over the line: “I wrote about this same issue this morning in Chicago Time Out.” You posted your same sales pitch as a comment, you don’t write for Chicago Time Out.

    Sure, it seems like there was a miscalculation of the response that Groupon would get, as philg agrees, but to call it a conspiracy to rip off businesses is really beyond the pale.

  12. ML

    March 20, 2010 @ 11:22 pm

    12

    Interestingly enough, a flight school in Chicago is doing the exact same thing this weekend on Groupon. (see http://www.groupon.com/deals/bachman-aero/) They priced theirs at $165 (normally $295) and have almost 600 takers. $165 seems a bit steep for an impulse buy – but that probably helped weed out some of the casual people who just want a ride.

    I don’t know how you’re able to offer it for $225 normally. These guys are charging more than that and they’re flying the Hughes 269c – I always thought the R44 was more expensive to operate.

  13. Lise

    March 21, 2010 @ 1:02 pm

    13

    Yet another Groupon buyer here. I’ll be one of the once-and-only-once people (sorry! money is expensive *g*), but I’m thrilled at the chance to FLY A HELICOPTER. 😀

    This morning I mentioned it to a friend and he told me he wasn’t on Groupon but he’d heard of it from a friend who was. So I suspect that, with all of the people who bought and told their friends, and all of the people who wanted to buy but didn’t make it and griped to their friends, a *lot* of people now know about your existence who didn’t before.

    By the way, I noticed in the Groupon forums that some people were just realizing that they’d have to study the handbooks and pass an exam. What’s going to happen when some of them ask for their money back?

  14. philg

    March 21, 2010 @ 4:15 pm

    14

    Chris: thanks for the B-school suggestion. I do think that the local business schools, including Harvard, have been consistent customers for East Coast Aero Club’s airplane business over the decades.

    Lise: I’m not sure why the Groupon folks are surprised that they’d have to study. The deal details mentioned ground school and reading. Did they imagine that it was going to be trivial? If learning to fly required zero mental effort, everyone would have a certificate (since a pilot’s certificate costs less than the difference between keeping an old car an extra year and buying a new one). What will happen when they ask for their money back and say that they want to fly without reading or learning? I guess we would have to tell them that they should lobby their Representatives and Senators to get them to change federal law (since it is SFAR 73 to FAR 61 of Title 14 of the Code of Federal Regulations that requires a Robinson helicopter student to complete ground school prior to manipulating the controls). If people persistently fail ground school (they can take it as many times as they like until they pass the exam), I guess we could group them into threes and take them for a short helicopter ride. That would not violate federal law.

  15. Bas Scheffers

    March 21, 2010 @ 11:14 pm

    15

    How’s this for an idea:

    http://www.aopa.org/training/articles/2010/100104mall.html

    I’m struggling for ideas too; lots of people that want to fly but don’t know that a) it is actually achievable for them and b) that they can afford it.

    And with the low margins, spending a lot of money advertising broadly in mainstream publications (local newspapers, etc.) with a low conversion rate is too expensive. Flying schools need to be smarter.

    We had some success with an airshow at our local airfield yesterday, but we could have been more succesful if better organised. 1 TIF and 2 full first lessons were booked and paid on the day (with barely any discount at all), with some more seriously interested people that I do expect to call soon. 4-5 new students would be positive outcome. Luckily it was as cheap as putting the aircraft just outside the hanger, a “learn to fly” banner on the door next to it, some flyers and a whole lot of talking.

    At the next airshow in the area (unfortunately a year away) I’ll make sure we have much better pressence with more instructors on the deck for people to talk to. The two of us were too busy to talk everyone hovering.

  16. Ryan Keough

    March 26, 2010 @ 8:44 pm

    16

    When Matt S. at the Nashua office mentioned Groupon and the helicopter training promotion to me (I am in the final stages of the development of the new ECAC website) I immediately thought it was brilliant. When he said that you thought of it, I knew it would be interesting. I know your name through your significant visibility around the Internet in the aviation blogosphere and forum networks, but that’s what piqued my interest… if anyone could find a way to leverage the internet to help aviation, you’d be part of it! I had never heard of Groupon before, but once I dug into it, it completely makes sense and effectively leverages the power of social media along with the traditional opt-in market as well… plus it has that addictive “special deal” feel that Woot! always had, especially for premium or unique offerings. Even though you believe the price point was too low, I actually think it was where it needed to be. When considering what it would cost to even get 2600 quality consumer leads in such a niche interest topic (what, you mean EVERYONE isn’t an aviation nut??), I think you’ll realize that it’s well worth it. Even with a 1% retention rate, the lifetime value of 26 full rotary-wing training students with residual, post-certificate rentals will more than make up for it. And the 1% retention is being extremely conservative. Boston metro market consumers, especially along the Route 2 corridor, have the income, intellect (read: curiosity), and general tenacity to be a potentially perfect market for advanced-level pursuits such as aviation… the PROBLEM has always been reaching them. Traditional media buys in the area have always been higher in cost than most of the markets nationwide (with only NYC, L.A., Washington DC and Denver being higher) but even with a decent ad budget, reaching the right segment is tough with the diversity of media that is available… there is no single TV station, radio station or printed media that delivers the type of return that justifies the cost. Direct marketing has the same challenge as list purchases of opt-in mail or email are costly, production costs are as well and even with a well-researched buy, a 0.5% conversion rate from cold to lead is rather optimistic (unless it’s a pre-qualified list of people who have said they were interested in flight training, which just doesn’t exist for purchase – I’ve looked). Leads from the FAA Pilot database may be free, but they run hot and cold too… and unless you buy a consumer or buying habits list that can cross-reference and segment them by income or behavior, it can be as effective as using a shotgun to harvest lumber.

    Groupon seems to capture the segment that is right for flight training… younger, experience-motivated, social professionals with an intermediate level of technology / Internet savvy. They may be bargain seekers, but so are the shoppers of Zappos.com and NewEgg.com – not the customer base that is clipping coupons from the Sunday paper for the Double Coupon day at Shaw’s… they are value-seeking, not cheap.

    The helicopter training offer was also unique… it wasn’t the usual 50% savings on a dining experience, indoor rock climbing, teeth whitening, or massage therapy offers that Groupon seems to have more than enough of. It’s buzz worthy… and that’s why it stood out.

    The other added bonus is that the Gen-Y demographic has far greater potential for word-of-mouth-marketing value. They like to talk about what they are doing, and if they really like what they are doing, then photos, videos, and the all-important review or blog post will follow. Twitter, Facebook, and YouTube will follow… and that’s a pass-along value that will last. However, if the experience is less-than-great, the social media results can also hurt. That’s a reason to monitor the SM sphere for the offer and respond in an honest and transparent manner to any issues…

    Truthfully, I think that this offers so many opportunities… exposing 2600 people to even the concept of flight training of any sort is fantastic! Make sure to leverage the GA-industry value adds like the AOPA Flight Training magazine 6-month free trial (and by-the-way, it just was redesigned by the same design firm that did the EAA Sport Aviation mag redesign… and it’s better than ever!) and make sure the financing options for full training programs are easily available and understood for each ground school class. And adding excitement to the required ground-based education component… like an intro video to ‘wet the whistle’ will certainly extend the excitement of actually being in the helicopter. Even if they decide to not pursue the rotary-wing program, the fixed-wing offerings are certainly still on the table and very attractive. You have their interest… that’s 80% of the battle!

    I think this is a really fantastic case study that should be pitched to our aviation publications. When every aviation alphabet group is asking “how do we stimulate pilot starts to promote flight training??”, this is a great result… the PR value is fantastic.

    Kudos to you in thinking of this and getting it done… it’s tremendous and I believe it’s the start of something quite significant. Now, if only I could find something that would be as effective for the B2B corporate aviation flight department / FBO market, I’d be in heaven!

    All the best,
    Ryan Keough

  17. Eric Jones

    April 7, 2010 @ 5:16 pm

    17

    Hi Phil,

    It is very interesting reading about yours and ECAC experience with GroupOn. While I live in Los Angeles I did grow up in Boston with my family within easy reach of Bedford. Since the cost of training is a significant investment I flew with a couple different schools throughout the country including ECAC before deciding on one to train at. Ultimately I decided to get my Private here in Los Angeles flying out of Van Nuys but felt that David Smith was a top notch instructor and I have been keeping ECAC in mind for both Instrument and the Commercial ratings.

    From a business standpoint how has the GroupOn offer affected your current students? Do students paying full rate have priority when booking flights? I had an experience here in Los Angeles while I was a member of an in-door climbing gym. They ran a GroupOn offer that completely overran the place. In the end a lot of long time members who had been paying full rates and were very loyal left and went elsewhere due to how out of control it got. I’m sure you will have long worked through the backlog of intro flights long before I’d be getting an Instrument rating so it would in no way impact my decision to fly with you guys. My only interest is really how you guys have managed trying to keep everyone happy and maintain the health of your helicopter side of the business. Will continue to keep tabs on your blog so please keep posting about your long term experience with this.

    Eric

  18. philg

    April 7, 2010 @ 5:54 pm

    18

    Eric: We have ample capacity right now (the Obama Economic Miracle has not reached East Coast Aero Club). The Groupon customers are slowed down to some extent by the requirement that they read some FAA books before coming to ground school. Our ground schools have not been full. We generally schedule only one helicopter at a time for Grouponers, which leaves the second R44 for regular customers. We are also allocating our biggest blocks during non-peak times, e.g., Monday 9am-8 pm.

    The Groupon crowd has a whole year to do the reading, attend ground school, and fly. That spreads out demand so that it is manageable, especially as we are adding some instructors.

  19. chris

    April 12, 2010 @ 9:01 am

    19

    Greetings,
    I am grateful for your post, all seems fair to me. I also plan to use the Groupon marketing method for my restaurant. I am wondering about how were you able to track these new Groupon customers? It feels like a chaos if Groupon sends some kind of paper to track these new customers.

    Regards

  20. philg

    April 12, 2010 @ 9:18 am

    20

    Chris: Groupon sends you a spreadsheet with customer names and coupon numbers. When the customer shows up you can see the coupon, which also has a barcode that you can enter into a Groupon backend page to mark “redeemed”. They don’t give you any database of customer email addresses, phone numbers, etc. if for no other reason than coupons can be purchased as gifts, so they know who bought it but they don’t know who will show up at your restaurant.

  21. Jonas

    May 17, 2010 @ 3:28 pm

    21

    There’s a cautionary Groupon Facebook group called Groupoff. Check it out.

  22. Mark

    August 5, 2010 @ 6:01 pm

    22

    Any idea a few months later how many of these 2,600 folks turned into real customers?

    I ask because as a small business owner, we’re looking to run a Groupon advertisement as well, our business model is similar though in that as a 3rd party wine club we’ll be taking a loss on the first months shipment. After that though, hopefully we’ll have a large number of new customers.

    Any idea what percentage of people I can expect to cancel after receiving their first wine club shipment?

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