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Here’s The Math Formula For Structuring A Groupon Deal That Doesn’t Lose Money (GRPN)

Source: http://www.businessinsider.com/heres-the-math-formula-for-structuring-a-groupon-deal-that-doesnt-lose-money-2011-12

We’ve all heard the nightmare stories about Groupon merchants who lost tons of money because they were suddenly overwhelmed with thousands of customers whom they were forced to serve at a loss: The British bakery that made 102,000 cupcakes. The Irish hairdressers whose customer base now consists entirely of people who only want their hair cut a discount. The Portland cafe that lost $8,000 because the owner failed to cap the number of deals she offered.

It’s not just Groupon, of course. There are loads of other daily deal sites — Living Social, Thrillist, Google Offers, etc — but they all present merchants with the same problem: The conflict between offering below-cost deals to customers in hopes of attracting long-term “regulars” and structuring a deal so that you can still make a profit. The math can be tricky because merchants have to account for two different sets of discounts: The discount to the customer and share of the payment taken by the daily deal site for publicizing the offer.

Now TheDealMix, a site that aggregates daily deals into an impressively complicated map of your neighborhood, has produced an infographic that can help businesses calculate daily deal offers so th! at they won’t accidentally go bankrupt.

And, yes, The DealMix has presented its formulas in the form of cupcakes — particularly useful given the number of bakery-related Groupon disasters that have made the headlines.

The formulas include:

Offer Price – Cost of Goods > $0

Average Customer Spend – Value of Offer + Price > Cost of Goods

See the rest of the story at Business Insider

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See Also:

• Groupon Allegedly Hacked Merchant’s Email To Alter Contract
• The Facebook Advertising Hall Of Fame: Here’s Who Is Nailing It On The Social Network
• Will Ferrell Has Made At least 19—Nineteen!—Insane Old Milwaukee Ads

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