Baker Has to Make 102,000 Cupcakes For Grouponers 611
Rachel Brown, owner of the small Need a Cake bakery, became a victim of the old adage, "Be careful what you wish for. You might just get it." More than 8,500 people took Rachel up on her Groupon offer of a 75% discount on a dozen cupcakes, forcing her to make over 100,000 cupcakes to fill all the orders. In the end Brown lost almost $20k. "We take pride in making cakes of exceptional quality but I had to bring in agency staff on top of my usual staff, who had nowhere near the same skills. I was very worried about standards dropping and hated the thought of letting anybody down. My poor staff were having to slog away at all hours — one of them even came in at 3 a.m. because she couldn't sleep for worry," she told The Telegraph. "We are still working to make up the lost money and will not be doing this again."
The Law of Unintended Consequences... (Score:5, Insightful)
75% off is a seriously deep discount, what did she expect would happen?
Re:The Law of Unintended Consequences... (Score:5, Funny)
I don't think they understood what could happen when the passed that law.
Re:The Law of Unintended Consequences... (Score:5, Informative)
Nowhere in TFA does it actually say she lost $20k, and in fact the article is from The Telegraph and the business is based in London, so all currency in TFA is in pounds. In fact it says she lost between £2.50 and £3 per batch, which means she lost between £21,250 and £25,500, which would mean she lost close to $40k. More relevant to your comment, she lost £2.50 and £3 per batch selling at £6.50, so it costs her a little over £9 to make a dozen cupcakes which she normally sells for £26, so yes, she has some healthy margins, although not totally unreasonable for food products where you have an awful lot of waste (anything you don't sell by the end of the day is trash). Though I also don't really understand who the hell pays £26 for a dozen cupcakes.
expensive cupcakes (Score:4, Interesting)
£26 per bakers dozen cupcakes!? Is this a normal price? That's $40! Are these normal prices in London?!
Re:expensive cupcakes (Score:5, Informative)
Re:expensive cupcakes (Score:5, Interesting)
Yeah, they have one in Gainesville, FL. It has a Sanskrit name, Sarkara, to make you feel more educated and karmic as you spend three dollars and something for a dry cupcake that ought to cost cents. It's *exactly* the same story as with coffee a few years ago: a cup of joe that used to cost cents at a diner or lunch counter in the 80's or before now costs dollars at Starbucks or Your Favorite Local Coffee Store (if you believe that purchasing a parity product at obscenely inflated prices from a "local" merchant as opposed to a chain is somehow morally superior: enjoy handing your money over for frivolities at an accelerated rate regardless). Interestingly, a coffee at the local coffee shop (Volta) around the corner from Sarkara cupcakes cost, to the penny, exactly the same: it's almost as if you're actually purchasing a token foodstuff of purely symbolic value to justify spending time in a place Other Than Home with wifi access, and the merchants are in pricing competition over that time, not over the token food item.
Re:expensive cupcakes (Score:5, Informative)
You really have no idea what running a business entails do you. The INGREDIENTS for a cupcake would cost cents, then add the labor, then add the rent, add the cost of the nice environment tables chairs whatnot, add the labor involved in managing both the bakery personnel and the service/sales staff as well as their benefits and insurance, and while I've mentioned it, insurance against idiots slipping and falling on a cupcake they dropped and suing, don't forget all of the overhead involved in running an office and paying for all those pennies worth of raw materials, balancing the books, advertising, There are many more costs that I haven't listed but I think you might be getting the point.
Just because you can make a cupcake for "cents" at home on your time with your equipment, by paying nothing for anything but ingredients DOSEN'T mean that you could do that as a business and stay in business and employ people.
Re:expensive cupcakes (Score:5, Insightful)
Re:expensive cupcakes (Score:4, Funny)
Re:expensive cupcakes (Score:5, Interesting)
If you are paying such prices for the shitty brewed coffee you were getting at a lunch counter, then yes you are being an idiot and getting ripped off.
But an esspresso machine costs significantly more both in initial cost and in maintenance costs than a brewing machine. It also requires more training to use (though Starbucks seems to skip that bit). It's also significantly slower (so you need more staff hours to make the same amount of coffee).
Of course Starbucks coffee is crap, though orders of magnitude better than the swill that passes for brewed coffee (and of course Starbucks does brewed coffee too - but why would you go there for that???)
And cupcakes have none of that. A "gourmet" cupcake is made in exactly the same oven with exactly the same ingredients as a regular cupcake...
Re:expensive cupcakes (Score:5, Insightful)
Just like a computer contains the same silicon and rare elements as any other computer, the devil is in how they're assembled and put together, and the skill with which someone makes them. A "working" program is made in exactly the same compiler with exactly the same syntactical constraints as a segfaulting program
Re:expensive cupcakes (Score:5, Insightful)
Exactly this. Except the $0.89 cup cake at my local grocer is made with mostly lard and sugar with waxy poor quality chocolate and lard icing and comes in maybe 3 different flavours and is sold in very high volumes at a low price.
Whereas the specialty cup cake is made with real butter high quality chocolate and other ingredients and is available in 20 different flavours and is sold in low volumes at a high price.
Basically think of Neapolitan ice cream from some big manufacturer vs Baskin Robins or some such. You can argue that they are overpriced for what they are but you can't say that the products are exactly the same.
One last point I'd like to make is that in some other countries in world, like France for example, specialty bakeries making high end pastries and cakes are the *only* types of bakeries. People are so willing to pay for higher quality food that there are no cheap grocery store alternatives. So maybe it's not a fad.
Re:expensive cupcakes (Score:4, Insightful)
I'm an Idiot? Really, that's how you start your argument... wow. I don't even know why I bothered reading the reset of your comment. When you start a response with "You're an Idiot" it just makes you sound stupid.
Firstly, I don't really care how "controlled" a factory is. I didn't say that the factories used inedible or poisonous ingredients. I'm sure everything they use is approved and won't make you sick. Just like Neapolitan ice cream from the grocery store is perfectly fine to eat.
Secondly, I don't care what you think "everybody in the industry" knows. Appeal to authority doesn't help your argument.
Thirdly, I never said anything about organic ingredients so I'm not sure why you brought it up. When I said high quality ingredients I meant things like real vanilla bean in a vanilla cup cake instead of "artificial vanilla flavour" or saffron in a saffron cup cake. Or orange zest in a orange cupcake instead of "artificial flavours and colours". I suspect you would know this if you ever left your mom's basement.
Fourthly, they are not ALL lard. Almost all specialty shops use real butter. Just Google "specialty cupcake ingredients". It's not that hard. You live in a really vacuous world if you think you can't get a real butter cupcake.
I am guessing that you don't travel much and haven't experience things and people out of your comfort zone. You probably don't feel welcome in new environments and around new people. Probably because you flippantly call people "idiots" and then go on to say the stupidest things. I suggest you try being a bit more buttery to people perhaps little sweeter and more sugary and then, perhaps, you will make something called a "friend" or even multiple "friends". And maybe, just maybe, one of these "friends" might even buy you a cupcake, with real butter.
Re:expensive cupcakes (Score:5, Insightful)
Are you talking about "Sprinkles"? There's one in Newport Beach and my partner and I went there, knowing we'd be wasting our money, to buy their cupcakes and make up our minds on the value of their boutique pastries. We spent $39 on a dozen assorted.
Our conclusions? The cake is no better than a correctly prepared Betty Crocker mix and the icing, while pretty, comes way too thick and very simple in flavor.
Don't get me wrong. I'm not a "gourmet" hunter who thinks he can tell a $50 bottle of wine from a bottle of two-buck-Chuck. In fact, I will admit bias against these boutique places that give MASSIVE price mark-ups to otherwise cheap food under the banner of "gourmet" or "artisinal" (don't get me started on the "gourmet tamales" they sell at my local farmer's market...). So when I say a flavor is "simple", I'm saying it's nothing special that would justify such a massive cost increase.
Summary: Spending $39 on a dozen cupcakes was a waste of money. People who pay so much for a simple pastry are stupid (self included) and those who think they're eating something with amazing flavor and tastably high quality have been fooled.
There's a reason you spend $39 on a dozen cupcakes (Score:5, Insightful)
Because you're buying them for an "occasion".
If you are tasked with providing dessert, stopping at wal-mart on the way to whatever occasion it is to pick up a dozen cupcakes for under $10 is tacky.
But if you stop at the "gourmet" Cupcake place and spend $40 on "special" cupcakes, that's OK.
You're really paying for the ability to buy your way out of having to actually bake without the social stigma of being too cheap/lazy.
Re:There's a reason you spend $39 on a dozen cupca (Score:4, Informative)
Actually, if you knew anything about walmart you'd know that it most likely came from the same town, certainly within 100 miles of the store. Even with American's requiring overpay to do menial jobs, its still cheaper to bake locally than ship across an ocean. We have automation for the bakery and can the truck still has to drive them in from somewhere so we don't buy food from overseas.
On the other hand, guess where most American beef ends up? Not in the US!
P.S. Before you bitch about walmart, get a clue about whats really going on, bitch about the things they do wrong, not the the things you're too ignorant to realize they do right.
Re:expensive cupcakes (Score:5, Insightful)
Two pounds a piece? Four dollars a cupcake??
Jesus Christ, do people really have that kind of disposable cash laying around these days? They'd better be some life-altering cupcakes for that price.
Re:expensive cupcakes (Score:5, Funny)
Yea, I was thinking the same thing.
Oh look, Italy is out of money! (continues eating $5 cupcakes)
Re:expensive cupcakes (Score:5, Insightful)
Yea, I was thinking the same thing.
Oh look, Italy is out of money! (continues eating $5 cupcakes)
Correction: Italy's government is out of money. Spending your cash in the market place actually helps the economy no matter the ridiculous price of the cupcake.
Re:expensive cupcakes (Score:4, Insightful)
In these case they do. These are baked same day, thats part of the "gourmet" deal. The specfic article seems to list the woman managing the store as the owner too, so yea it seems to be entirely local.
With the business being local, it means all the luxuries that business owner endulges in, will spread money (building new home? gardner? restaurants? buying a car? etc.)
Re:expensive cupcakes (Score:5, Insightful)
you say that, yet we had people decide over the course of a couple years that a $0.50 cup of coffee was now worth $3.95. Of course they'll pay $5 for a cupcake.
Re: (Score:3)
The $3+ drinks are usually made with milk and/or flavor and espresso. Drip coffee is still cheap. Yes, even at big chain coffee shops. If you don't want to pay that much, don't buy expensive fancy drinks.
If I could still find $.50 drip coffee, I imagine it would taste like crap.
(Unless, of course, you live in a large metro where prices are higher, but that's all your fault).
Re: (Score:3)
continued...
Of course, the "regular coffee" from these chain barrista places typically taste like cigarette ashes because they keep the same pot on high heat for 5 hours out of the day.
Re:expensive cupcakes (Score:4, Funny)
Two pounds a piece? Four dollars a cupcake??
Jesus Christ, do people really have that kind of disposable cash laying around these days?
Ask Starbucks et al and their $4+ coffee
Re: (Score:3, Informative)
That's a normal price anywhere for high-end premium cupcakes. These aren't the dry little half-frosted cupcakes you remember from elementary school, these are basically scaled-down high-end wedding cakes that sell for $3-6 each individually, with a small volume discount. It's a trend that started with the Magnolia Bakery in New York City and went nationwide when the characters on HBO's "Sex in The City" raved about Magnolia. Every decent-size city in America has several cupcake shops these days, it's hard t
Re:expensive cupcakes (Score:5, Informative)
I can buy pretty fine cake for $1, but I live in Eastern Europe.
Re:expensive cupcakes (Score:4, Informative)
As a general real-world rule of thumb, a convenience item that would cost you $10 in a large US city will cost you £10 in a British one. Its about buying power, not nominal currency exchange rates.
Re:expensive cupcakes (Score:5, Informative)
Depends on the cupcake.
If you're buying a basic, churned-out-by-the-thousand cupcake from a cheap high-street bakery like Greggs (or for that matter from the supermarket) you will pay 50p-£1.
But there is also a market for a much fancier cake. Where it's made with butter rather than cheap cooking fat, where the chocolate is real, high-quality chocolate rather than cheap cooking stuff, where the flavouring is essence rather than artificial flavouring, where the decorating is done by hand and includes fancy shapes made out of florist paste as well as a generous topping of buttercream.
We're talking the sort of thing you could happily serve to guests at your wedding. The sort of thing that celebrities you see in glossy magazines (but would rather see on milk cartons, if you're in the US) buy. Not the sort of thing you pick up for a cheap sugar rush. These will sell for about £2-3 each.
Re:expensive cupcakes (Score:4, Informative)
Does that actually exist?!
yes. £1.09 each
http://www.waitrose.com/shop/ProductView-10317-10001-110438-Cherry+%26+geranium+cupcake [waitrose.com]
Re:expensive cupcakes (Score:5, Funny)
You should see what they pay for gasoline.
Re:The Law of Unintended Consequences... (Score:5, Insightful)
Re:The Law of Unintended Consequences... (Score:5, Funny)
I owned a mall-based cookie/cafe store and also a pretzel store.
OK, I'll bite (so to speak)
How did you end up with the handle "TVDinner"?
Re:The Law of Unintended Consequences... (Score:4, Funny)
Hmm.
I think it was me that was keeping Radio Shack alive. I, until very recently, used to buy 1:1 audio isolation transformers exclusively from Radio Shack. They were about $4, which is very reasonable for quantities of 1, and were of consistent quality for decades. (They get used for projects at work, so I try to keep a few around.)
Why have I stopped buying them there? Because approximately 1 month ago, they stopped carrying that part and do not list a replacement.
I have subsequently noticed that the Radio Shack in the mall has closed. Coincidence?
Re:The Law of Unintended Consequences... (Score:5, Insightful)
so basically, she made a completely moronic business decision, but the article's slant is that it is the fault of groupon? Is this woman not aware she could have set these at a price that would have been reasonable as opposed to bankrupting?
Re: (Score:3)
She couldn't. Groupon won't run the deal unless it's fantastically good - on the order of 60-80% off. On top of that they then take 50% of the coupon cost.
In theory you're supposed to keep the details of all the customers and sell them stuff at a later date - though lots of businesses have reported that this can be nigh-on impossible. The sort of customer who takes you up on a 75% offer is frequently the sort of customer who would never pay full price under any circumstances.
What she should have done was li
Re:The Law of Unintended Consequences... (Score:5, Insightful)
so basically, she made a completely moronic business decision, but the article's slant is that it is the fault of groupon? Is this woman not aware she could have set these at a price that would have been reasonable as opposed to bankrupting?
From TFA:
Mrs Brown, who had only expected a few hundred orders, said that the experience was “without doubt, the worst ever business decision I have made”.
Sounds like she's well aware that she made a bad business decision. What the article doesn't clearly state is what options Groupon provided her in terms of prices she could offer or limitations on the number of groupons sold. At the end of the article, a Groupon representative says that there was no limit placed on the number sold, and that "(w)e approach each business with a tailored, individual approach based on the prior history of similar deals." This doesn't really tell us much, but it is entirely possible that Groupon sold Mrs. Brown on the idea by providing her with unrealistic expectations based on "prior history of similar deals".
It's also possible that she isn't actually blaming Groupon at all. The article makes that claim, but the quotes from Mrs. Brown only talk about her own underestimation of the response to the deal.
Re: (Score:3)
so basically, she made a completely moronic business decision, but the article's slant is that it is the fault of groupon? Is this woman not aware she could have set these at a price that would have been reasonable as opposed to bankrupting?
I agree that GroupOn isn't to blame here. Almost any time a business gets involved with Groupon it's a big mistake. The alternative is to set up Groupon deals that aren't actually any cheaper than normal rates, in which cases it's the customers who lose. It's possible to find a win-win through Groupon, but it seems that in the vast majority of cases Groupon should be avoided.
Re: (Score:3)
You know how groupon has gained it's volume? by dumping shitloads of money on salesmen who sell these deals to the shops, salesmen who don't give a fuck if it makes sense for anyone involved, it doesn't even make sense for groupon(they're losing money!!). but volume == bubble == _investor_ money , right?
so there should have been a limit and the groupon guy should have told the shopkeeper to add a limit.
groupon is ridiculously priced company for doing so BAD BUSINESS..
Re:The Law of Unintended Consequences... (Score:5, Informative)
I've used Groupon for my business.
The idea is to consider it a marketing expense -you are paying for customer eyeballs (our estimate was we were exposed to 400,000 customers who had never heard of us before), not expecting to make a profit on the items that the Groupon customers buy.. but you don't want to actually LOSE money on any sales.
Analysis not complete... (Score:5, Insightful)
...What's the price of advertising in all the newspapers etc that are covering this story?
Re:The Law of Unintended Consequences... (Score:5, Informative)
The fault of GroupOn is an inability to set limits in the number of coupons issued....If GroupOn allowed a limit to the number of coupons, say 2,500 then she many not have needed the extra employees and not suffered the losses from it.
You are absolutely right....except for that fact that you are absolutely wrong. Groupon DOES allow limits. I know I've intended to buy a groupon before but waited before purchasing, and when I later came back, the deal was over BEFORE the expiration because it reached the max quantity. Don't believe me? How about from the Groupon CEO himself:
http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2010/09/17/businessinsider-groupon-ceo-posies-2010-9.DTL#ixzz0zp2ktgaQ [sfgate.com]
Re: (Score:3, Insightful)
A limit is self-defeating. If you want one person to get a 75% discount, you might as well want everyone who gets a chance to get a 75% discount.
Groupon's issue is that it's aggressive about marketing these overgenerous discounts to merchants. So her mistake was engendered by their suggestions. If Groupon used its statistical information wisely, they'd have guided her to a discount level that would get her a reasonable increase in business, not a flood.
But Groupon doesn't really care if the merchant is h
Re:The Law of Unintended Consequences... (Score:5, Insightful)
Well yes, he claims that it has always been Groupon's policy. Of course, that was stated in response to a particular case [businessinsider.com] in which the business owner claimed that Groupon refused to allow a cap on the number of groupons sold.
We can't be sure what deals and limitations the various groupon salespeople actually present to retailers, but it's completely naive to think that Groupon is completely blameless in cases like this simply because the CEO issued a sympathetic press release.
Re:There is no "inability" (Score:5, Insightful)
Merchants simply fail to actually do so.
Not quite. The merchants that elect to set reasonable caps don't get their promo run. So you don't see them.
Groupon runs the deals that make them the most money.
If a cupcake business wants to run 200 coupons @ 75% off for $7where groupon takes half ($4.50) that's only $900 for groupon.
Groupon simply won't run that deal.
Groupon pushes hard for deals they damn well know don't make an ounce of sense for the business.
When I hire a contractor, or a consultant, or an ad agency... their job is fundamentally to come up with a good solution for the the business.
If a particular contractor consistently advises, even pushes businesses hard to make catastrophic decisions then they deserve some of the credit for those catastrophic decisions.
Re: (Score:3)
8,500 people took the offer. the story says £2.50 to £3.00 per dozen loss. That's £21,250 to £25,500 loss. She had to hire on extra staff at £12,500.
Her ad was: "Twelve Cupcakes with a Choice of Flavours and Designs for £6.50 from Need a Cake (Value £26)" I won't try to guess her profit margin, as that would be total guess work. We can calculate that she would have expected £221,000, but only was paid Â
Re:The Law of Unintended Consequences... (Score:4, Informative)
I'm surprised she didn't approach a local culinary school if her cupcakes took such skill to prepare and create.
Re:The Law of Unintended Consequences... (Score:5, Informative)
Well, for chain stores, sure. My wife runs a bakery [sorellashomemade.com] - specialty cake shop - and margins have to be higher because of specialized ingredients, lower volume, personalized decorating, and so forth. It tastes a lot better than the bulk-produced stuff you get at Costco or Sam's or even the grocery story, but it costs noticeably more, too.
Re:The Law of Unintended Consequences... (Score:5, Interesting)
My mother was a pastry chef who has made cakes similar to those on the website of your wife since I was 3 years old. I know the costs and labor involved to make make breads, cakes and other assorted patisserie fair. There is still an insanely low margin on baking using 'fancy' ingredients.
As for Groupon...Groupon costs a lot in food costs, and 2 years later I hadn't seen any significant change in sales that could've been attributed to their involvement.
Re: (Score:3)
Re: (Score:3)
Don't forget Groupon takes half, so she was selling at 12.5-percent retail.
And the moral of today's story is... (Score:5, Insightful)
... be careful about the special offers you advertise online. Groupon isn't at fault here - if anything, the complaint is that it did its job too well. If you put a sign in your window offering a special offer, you can take it down whenever you want. If you stick something out on the net, you need to be very sure that you can handle a bit of scaling around the response.
Still, full credit to the bakery for actually meeting the orders. I suspect lots of far larger retailers would have tried to weasel out of the deal they'd offered in a situation like that. And so far as I can see from TFA, nobody is talking about lawsuits.
Re:And the moral of today's story is... (Score:5, Informative)
Other sellers have reported that the Groupon salespeople do their very best to convince companies not to put any cap at all on the amount of product available, downplaying the probability of just something like this.
This is hence similar to a lender trying to get someone to maximise their borrowing. You could argue that the bakery as a company is a professional business and has no excuse - on the other hand you don't expect bakeries to be masters of internet marketing either. It would make you legally correct and a jerk.
Re:And the moral of today's story is... (Score:5, Informative)
Just replying to myself... Groupon does set that limit, and the fault is doubly with the retailer.
cut off? Re:And the moral of today's story is... (Score:3)
Mrs Brown said: "We had thousands and thousands [of orders] pouring in. We had to cut it off at 8,500 orders. As soon as we were making, packaging and sending the cakes out we were on to the next order. It was non-stop.
(emphasis added) Near the end of TFA:
Heather Dickinson, a Groupon spokeswoman, said there was no limit to the number of vouchers that could be sold. She said: “We approach each business with a tailored, individual approach based on the prior history of similar deals.”
Re: (Score:3)
Re: (Score:3)
Unfortunately, various people with marketing degrees tell me that this isn't an economically viable way to do things. Apparently nowadays, you have to accept thieves into your store with open arms.
Why are you asking the thieves? While I'm stereotyping here, so much of marketing today is about getting people to buy stuff that they have no reason to purchase. Every commercial seems to either use sex, or tug at heart-strings to tell you how it's going to save the children/environment/whales/grandma/handicapped. I tease my MBA spouse about it all the time.
Limits (Score:5, Interesting)
I seem to recall reading that Groupon allows businesses to limit the number of offers available. That is, rather than having to deal with 8,500 orders, Ms. Brown could have limited the offer to 100 (or some other arbitrary number) people.
If my understanding is correct and such a system exists, it would be foolish for a business to not use it.
Re:Limits (Score:5, Informative)
It's in groupon's interest to not let the client do that. They get vast sums of money from these "deals" and they know the system doesn't do the small business any good, because the couponers are pretty much all piss taking free loaders.
Re: (Score:3)
Not only does Groupon allow businesses to set a limit, it very clearly is in Groupon's best interest to do so.
If Groupon partners overextend themselves and deliver shitty service nobody will use Groupon.
Re:Limits (Score:5, Interesting)
Stupid is as stupid does. (Score:4, Insightful)
I may hate Groupon, but this person has no one to blame but herself. Do the math. If you sell that many coupons, even if only a fraction of them are redeemed, that's a lot of cupcakes.
Re:Stupid is as stupid does. (Score:5, Insightful)
I may hate Groupon, but this person has no one to blame but herself. Do the math. If you sell that many coupons, even if only a fraction of them are redeemed, that's a lot of cupcakes.
The point is that promoting your business via Groupon is very often a big mistake, unless you have a lot of perishable unsold inventory.
Selling via Groupon doesn't do much to build your business, since most Groupon buyers are cheap - instead of looking to become regular full-price customers, they will look for the next Groupon.
The customer is loyal to Groupon, not the businesses that sell via Groupon.
Re: (Score:3)
The customer is loyal to Groupon, not the businesses that sell via Groupon.
Any of these marketing devices do that. In my city, you can buy a coupon book for a (rather long) list of restaurants (usually two meals for the price of one). Behaviour? You buy the book, take your s.o. and then visit every place exactly ONE time. The book will last you a year. Next year: same procedure.
The restaurants in there put themselves in a horrible position, since they have no repeat customers. If they drop quality, they will have bad reviews, too! So it's only profitable for restaurant owners who
Just 102k? (Score:5, Funny)
Geez... (Score:5, Informative)
Are people bad at math or something?
From their FAQ:
Can I set limits on my deals?
Yes. You can limit the total number of purchasers. You can also set restrictions on how customers use the deal. For example, if you're a restaurant you can limit the use of Groupons per table or per order.
Re:Geez... (Score:5, Insightful)
Yes, people are very bad a math.
As evidence I cite MegaMillions, Power Ball, and the continued existence of Vegas with its billion dollar hotel/casinos.
Re:Geez... (Score:4, Insightful)
Math and lotteries only don't work out if you base your math on the idea that $100,000,000 is worth 100,000,000 x $1. It is not. Above a certain number, large sums of money become "anything I want and never have to work again" which people value at much more than 100,000,000 times "a cheap cup of coffee".
Re:Geez... (Score:5, Informative)
Actually, you've got it exactly backwards. Marginal utility of each additional $ goes DOWN as the amount goes up.
Look at it this way - Say I give you $1,000,000. For most people, this is absolutely life changing - pay the house off, do what you want for a few years, generally be secure. Now say let's flip a coin, double or nothing. Unless you are already quite rich, you should NEVER take that bet - $2m would be nicer, sure, but compared to the difference between $1m and $0, it's no where close to being twice as good.
If the amounts go up a lot - to Bill Gates $1m would be essentially meaningless.
Re:Geez... (Score:5, Insightful)
Unless you are already quite rich, you should NEVER take that bet
Yeah, but GP's point was that human's math sense is broken at those high levels. Those who can handle the differences and have certain other traits are the ones who get to be rich.
Those who's math sense is broken worse than average are the types buying lottery tickets as a retirement strategy.
Yes, the marginal utility of the next $ when NetValue=$1M is much less than when NV=$1. But humans typically don't think that way.
You're doing pretty good if you can conceptualize that a million bucks is just a million bucks.
Re:Geez... (Score:4, Interesting)
The math for the odds of winning powerball are 1 in a hundred million. (1 in a hundred M, 1 in 130 M, 1 in 200M same difference, roughly. ) and each dollar you spend increases those odds to $x in 100 million.
According to today's XKCD you need to have over 4 million in investments, which mean that the only prize that really counts for never having to work again is the big one.
So your odds of winning and never having to work again are very small until you start spending millions of dollars on tickets.
Re: (Score:3)
Another way of looking at it is like this.
Buying no tickets costs $0 and gains you nothing, and you have absolutely no chance of winning.
Buying one ticket costs $1 and gains you a pleasant few minutes of fantasy. Might be worth it, might not. It also gives you a real (yet tiny) chance of winning.
Buying ten tickets costs $10 and gains you the same fantasy, but at 10X the price. You still have only a tiny chance of winning.
Bottom line - buy no tickets, or one ticket, but never more than one. There's no ga
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Hell, I value the fun discussions with my friends about what kind of crazy things we would do with $100,000,000, the day dreams about winning, and the jolt of adrenaline when checking for a (hah!) winner more than I value a dollar.
For $1 a week I get to have all that and marginally support my local schools. Not many things as fun you can have for under 15 cents a day...
With Vegas, too, it's actually quite easy to come out ahead:
- Go to a casino that gives you a free drink if you put $20 in a machine. Put $2
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A lot of people gamble for the fun of it, you know. There is value to the thrill of potential winnings, and that value may very well be greater than the dollar amount spent.
Granted, there are a lot of suckers too, especially in Vegas.
Re:Geez... (Score:5, Insightful)
Yes, people are very bad a math.
As evidence I cite MegaMillions, Power Ball, and the continued existence of Vegas with its billion dollar hotel/casinos.
You don't understand that buying a lottery ticket is more than just owning an almost non-existent chance of winning enough money to actually change your life. It is the opportunity to spend a buck or two and spend several very pleasant days fantasizing about what life would be like if you do win. Seen that way, it isn't a bad bargain at all. It's certainly better than spending that couple of bucks on some high fructose corn syrup favored carbonated water that's tough on your liver, metabolism, and overall health.
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It's only being bad at math if a person expects to win.
Playing for the hell of it or for the thrill of watching the drawing with money on the line is just fine. You paid your money for this form of entertainment just as you would have paid for any other.
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The odds of the typically poor people who buy lottery tickets becoming super rich multimillionaires if they didn't buy lottery tickets but instead tried other ways, is probably lower than if they did buy lottery tickets
I generally don't buy lottery tickets[1], and I think the odds of me becoming one of those super multimillionaires are practically zero.
Yes there are some poor people who become multimillionaires through hard work and some luck. But t
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Math isn't the whole
Re:Geez... (Score:4, Insightful)
Yes, people are very bad a math.
As evidence I cite MegaMillions, Power Ball, and the continued existence of Vegas with its billion dollar hotel/casinos.
The common refrain "the lottery is a tax on those bad at math" is incorrect.
The correct euphemism is "the lottery is a tax on hopelessness". For $1, they get a sliver of hope they will change their lives and live happily ever after.
Go ahead and cite math. Go ahead and point out that lottery winners often blow through their winnings rather quickly and wind up no better than where they started. Go ahead and talk to yourself since logic and reason take a back seat to emotion with most people.
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No, the other people are still going to pay, so if you buy 250 million tickets, you will have a 50% chance of winning 100 million. Oh, that's $50 million if you take it as lump sum. $25 million after taxes. So, expected value of spending $250 million on powerball tickets is $12.5 million.
doh! (Score:4, Funny)
Let them eat cupcake?
Very common (Score:5, Informative)
Stories in the press abound of small business retailers, particularly restaurants, living to regret making an offer on Groupon. These entities live on forming relationships with customers. Groupon brings in people who are only there to eat on the cheap and won't likely return.
Example story: http://posiescafe.com/wp/?p=316 [posiescafe.com]
"we met many, many terrible Groupon customers customers that didn’t follow the Groupon rules and used multiple Groupons for single transactions, and argued with you about it with disgusted looks on their faces, or who tipped based on what they owed (10% of $0 is zero dollars, so tossing in a dime was them being generous). "
Re:Very common (Score:5, Interesting)
At work I don't get tipped for just doing my job, and if my company's customers gave me money directly for just doing my job, or for doing my job differently/better than normal, that's called corruption or just plain wrong. Heck at some places you're not allowed to accept gifts/$$$ above a certain value (usually low, sometimes even _zero_) from customers.
In theory if your employer isn't paying you enough to do your job, you should find another employer or another job. But in practice the "tipping" system is not likely to change in those countries...
Re:Very common (Score:5, Insightful)
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In e.g. Ohio, the legal minimum wage for tip-earning workers is a miserable fraction of the normal minimum wage, and employers do not have any obligation to improve that. The American way is to fucking tip your waitstaff, because that's their primary income. They're lucky if they don't have to split their tips with the house, or other servers.
You think minimum wage ought to be enough for anyone? Wake up and smell the 21st Century. Not tipping your wait staff isn't your private revolution: it simply makes yo
She's doing it wrong. (Score:5, Funny)
She should take a hint from KFC, not fulfill the promise, and just delay it in courts until it turns into a $3 coupon years later that requires OCD record keeping to capitalize on.
Oh wait, this is a small business, those don't hold voting rights in our corporatocracy.
Re:She's doing it wrong. (Score:4)
Groupon's fault (Score:5, Insightful)
How hard would it be for Groupon to make the default limit be a small number? If the business selects a large number with a large discount, then their forms could ask, "Can you really service this number of customers over this time?"
I know it's easy to blame the baker for this mistake, it's not a viable business strategy to kill your customers. Customers are supposed to be bled slowly, so that you can bleed them some more tomorrow.
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I don't see how Groupon can be considered long term viable, if this is the kind of press they're getting.
Additionally, I imagine there are quite a few people like me out there who only use groupons with businesses I already patrionize regularly. I find myself waiting for the next groupon to show up before purchasing what I would have gotten without it anyway. Great for Groupon, but not so great for the business in question. Doesn't much sound like a sustainable model to me.
Only The Latest GroupOn Horror Story (Score:5, Insightful)
The next horror story will be from the people scammed by the IPO who thought that they were buying into a company that actually created something of value. Hard to believe that Google once offered billions ($5.75 billion, I believe) for this vaporware company -- and GroupOn actually turned them down. That was the luckiest turndown since Yahoo! refused Microsoft's (by today's standards) insanely generous offer.
Groupon needs a staggered approach (Score:5, Interesting)
Don't sell at a loss (Score:3)
Anyone who offers a sale below the cost of manufacture is seriously lacking in business sense. At worst this should only have netted zero. Any model where "the more you sell, the more you lose" is just stupid. That, and if you can't make a dozen cupcakes for £6.50 (~$13!) after cost, you should really give up baking.
Re:Don't sell at a loss (Score:4, Insightful)
Never ever heard the term "loss leader" have we? Frys makes a lot of money selling $100 cables to the guys who buy $500 TVs.
Do the math (Score:5, Insightful)
My wife owns her own photography business (just her and an employee) and she had been toying around with the idea of using Groupon and LivingSocial. As much as she hates spreadsheets, I made here sit down and model what the deal looked like and what her break-even points were. Talk to your Groupon/LivingSocial rep. to get stats about similar deals (as much as they can give you)--quantity, conversion rate, customer conversion, etc and be conservative since the rep will definitely paint a rosy picture. After doing that, she made some very important changes to the structure of the deal she made with LivingSocial that protected her against some run-away scenarios that would have cost her money like this person ran into and the LivingSocial deal has been a great success.
The other thing, hinted at by the owner of the bakery is your brand. If all you're concerned about is pushing product and volume, then a low-end price for the Groupon/LivingSocial deal is the way to go. But be aware that the lower the barrier to entry the less the customer values you or your services. For service-based businesses (like my wife's photography company), a higher price for the deal is more likely to bring customers who value service and quality. You can still offer good discounts while having a higher price point by carefully choosing what you discount and what they are purchasing up front.
Bottom line: know who your optimal customer is and do the math or you're likely to get burned.
At least she honored them (Score:5, Insightful)
A few months ago a local restaurant had a Groupon which my wife purchased. It was a 5 course dinner for 2 for $20 on weeknights, or $30 for Thursday - Sunday. Within 2 days she received an email from Groupon stating that the restaurant was no longer honoring the deal. Groupon gave us a full credit (not refund, just money we could use towards another deal) Ever since this, my wife has not wanted to go back there.
The irony of this was that we discovered this restaurant through a different deal website, and it quickly became somewhat of a regular for us. Honoring a previous deal made us customers, not honoring a subsequent deal made us no longer customers.
When Groupon actually works.... (Score:5, Informative)
I've known a number of businesses that got burnt by Groupon. One of the pubs we used regularly did a groupon deal and we went in and bought a lot of drinks with the meal. Most other people just asked for a glass of water and never came back.
There are two situations where Groupon works:
1) There is no cost to you (Gym membership) and there is a chance to up sell.
2) You have sourced an item at a ridiculously cheap price and even with Groupon taking 50% you are going to make a profit.
On (2), I knew somebody who sourced suits for $30, created a web site for the sales ploy, sold a 1000 units through Groupon at $250 and made a fortune.
Groupon can be extremely destructive to your business.
Advertising is not free (Score:3)
Groupon is a simple scam (Score:4, Interesting)
The obviousness of Groupons scam is obvious enough to most but the more subtle one is the lie of advertising. Advertising does NOT work as advertised. That is something to remember, advertising is a product SOLD by advertising agencies. So the companies telling you advertising works because they studied it are advertising companies... conflict of interests?
You have two basics forms of advertising. The first people barely think about but is putting your products and your shop on display. It is not just the sign above your door but prices on your products. Think about this simple thing, did you EVER walk out of store because you couldn't find the price so thought "fuck this". BAD advertising. A lot about this basic advertising is convincing people to enter your shop because they think that what they want can be got at an acceptable price. For stores like bakeries this means charging the right amount for the right amount of convenience and quality. People complain about Starbucks being to expensive but they got fast steady quality service (compared to all the other alternatives at premium locations. I can get a cup at a burger chain for less next door at say Utrecht Central station in Holland but GOD the burger joints service is piss poor).
But if you want MORE customers then pass by traffic. What do you do... advertise? Do you READ advertisements? No? To busy. Exactly. Anyone that can afford a 5 dollar cup cake is far to busy to read the local newspaper. Same with banner ads. Who here sees banner ads? If you see banner ads, you are in a lower class. Elitist? Damn right.
Research has shown the Groupon's claims on age and income of their users are over-estimated. They are an older demographic and a poorer demographic. This is a group who hunts coupon's. They use a coupon and then don't come back unless they get another coupon. They are deal hunters.
If you got something to dump, then deal hunters might be worth going after but if you got a premium product that doesn't get 75% cheaper in total costs with bulk, then Groupon makes no sense.
Groupon works for HP Printers because HP makes its money on ink. It makes sense for products you need to shift now and you got to much off or make a very high margin on but otherwise, it NEVER makes sense.
Food products and services do not work with massive discounts aimed at bargain hunters.
It would be like selling Rolls Royce at 75% discount hoping for repeat business.
Not only do people not NEED two of them but those who buy it at the discount can't afford the regular price AND at the same time you are diluting the price of your product for your regular customers.
Or how would you feel if the person in front of you paid 1/4th of the price charged to you? If I was in that store behind a groupon customer and they tried to charge me full price they would be picking cupcakes out of their ears.
A european chain stunts with taxless days, basically a 20% cut that amounts to the regular sales tax. So... I never buy from them unless they run one of these events because I can wait for them or another chain to run one when buying a TV or such. Turn your customers into bargain hunters and bargains they will hunt.
Stay away from advertising unless you truly and fully understand what it is going to cost and what it is going to deliver you. It is like gambling. Or lawsuits. Casino's, lawyers and advertisers ALWAYS win.
Re:When will businesses realize (Score:5, Informative)
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You should probably look up how Groupon (and the other coupon deal sites) work. Customers purchase a coupon from the Groupon website, which is then redeemed at the retailer or restaurant. So, if the deal is "$20 worth of steak for $10", the customer pays Groupon $10, prints out the coupon, goes to the market, and redeems the coupon for $20 worth of steak.
What you can do, is tell Groupon to only sell X number of coupons. But then, that doesn't drive customers to your store the way your thinking above does