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Surprise, Surprise! Groupon + Autos = FAIL

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On: Wed, Jul 27, 2011 at 12:09PM | By: Chris Weiss

Surprise, Surprise! Groupon + Autos = FAIL

So, it turns out that the locally-slanted, social-networking coupon behemoth known as Groupon is good at hawking small things like dinners and protein shakes, but not so good at hawking big purchases like $50,000 Cadillacs. One of the first experiments in Groupon-ing by an auto dealer has officially failed miserably.

Several months ago, Hyundai declared itself the first automaker to use Groupon and had moderate success offering a $29 oil change, tire rotation, and inspection in Chicago. The Korean automaker attracted more than 1,300 customers with the offer and was still analyzing the long-term impact the last we checked.

Earlier this month, LaFontaine Buick-GMC-Cadillac of Highland, Michigan got a little more ambitious. They didn't offer a Groupon for service, but for a new vehicle purchase, becoming the first dealership we know to try using Groupon in selling cars. The results were less than stellar. The dealer offered a $500 discount voucher that could be applied to a new vehicle purchase. It originally set the minimum opt-in at 10, meaning that if 10 people signed up, the deal would go live. Not even half that many signed up—the deal attracted only four measly takers.

As established with Groupon, LaFontaine's deal required those interested to spend $199 on the $500 voucher, which could be put toward a new car purchase any time in 2011. A few problems already: A. Who wants to spend $200 on a coupon that you may or may not use sometime later in the year. B. You can typically knock more than $500 (or $301, as it were) off the price of a car by negotiating at the dealership or waiting for some kind of incentive. And with that option, you don't have to spend any money until you're ready to buy the car. As Automotive News points out, the dealer could even jack the price of the vehicle up, thereby costing the customer more money to buy through Groupon than to buy directly. Car prices are just too shifty to warrant this type of discount scheme.

The dealer tried to work around this inherent deficiency by suggesting that customers could negotiate the best price as usual, then come back and cash the $500 voucher in. But, whether it was the extra work involved, distrust or a combination of factors, not many consumers were sold.

Groupon's model also seems to be questionable from the dealer's standpoint. Many small businesses like restaurants, spas, and hotels have found success in using Groupon to attract new customers. So, even though the Groupon deal itself makes little to no money for the business, due to the discounts involved, they are able to recoup the investment in the long run by developing leads and building long-term customer relationships. When it comes to cars, though, the market is pretty finite. Customers don't exactly buy cars as often as they buy lattes, dinners or oil changes, and while you may change where you buy a cup of coffee or slice of pizza based upon a past discount, you'll probably still want to purchase a car based upon things like research, comparisons, availability, and price.

In essence, there's no compelling reason to sign in for the deal and no compelling reason for the dealership to offer a deal more in line with the 50 to 70 percent off deals that made Groupon successful to begin with. The auto industry needs to tinker a little—or perhaps create an entirely new, Web-based deal service—before it has much success with this type of scheme.


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