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Groupon for Local Businesses

Devon McGibbeny

Madeleine Nelson

Carson Oostra

Ibrahim Shaaban

Business Background: Rustbelt Coffee

Rustbelt coffee is a new and up-and-coming coffee shop located in downtown Toledo on Ontario Street.

The business name is meant to represent the aura of downtown Toledo as a struggling city that has

been able to survive through hard times. Though the interior has been redecorated to harbor the coffee

shop the original steel columns and wood of the old building remain to tell the story of the once

struggling city. As the city begins to pick up momentum with new businesses and entertainment,

Rustbelt coffee is determined to support the local community to thrive by operating as a nonprofit with

sales revenues going toward funding other local nonprofits. The coffee shop offers a limited menu of

rotating crushed espresso drinks, exotic coffee blends and pastries. Trying to promote the living of the

community, 3 conference rooms are offered for daily rent as well as seats available for local creative

minds to collaborate. The motto of the business is “You can do this.”

How can Groupon benefit the business?

Groupon started in 2008 and is well established and known to be one of the world’s largest local and

mobile marketplaces as well as daily-deals service provider. Groupon has over 500 million global

subscribers and over 1 billion deals sold to date. As of the first quarter of 2018, Groupon had 50 million

unique customers who had bought at least one of Groupon’s deals during the trailing 12 months. With

an average spend of $155 per customer, many businesses have reported that Groupon has helped

company growth and increased revenues.

There will be no upfront cost for Rustbelt coffee to take advantage of this powerful advertising, which

includes radio, mail, TV, online, email, billboards, mobile and social media advertisement. These

channels can reach out to a wide verity of new customers.

Established only 2 years ago, Rustbelt Coffee was very successful in executing its market strategy by

targeting businesses in downtown Toledo. With Promedica’s headquarter moving to downtown Toledo

in 2017, this helped Rustbelt Coffee to target more customers, However, being a new business makes

Rustbelt Coffee a very top candidate to work with Groupon since the business is still in the growth

period and Groupon can help to increase revenue by creating new customers to avoid possible decline

in sales and to keep the company growing. Groupon will help bring more business by targeting

downtown area and widening the target market to include 20 miles radius to create an opportunity to

reach to as many customer as possible.

Rustbelt Coffee currently markets on Facebook; adding a link to Groupon’s specials would create a new

marketing opportunity in an easy and accessible way for both new and existing customers. We at

Groupon recognize the existing marketing efforts the Rustbelt Coffee has done and believe adding

Groupon as an additional source of marketing will add more loyal customers to the business.

To make your business more successful, Groupon would like to offer you a promotional and marketing

opportunity that has the potential to double your customers and in turns increase your revenues. You

have been successful within the downtown area but the challenge is to find customers that are not

aware of you and this is where Groupon can be very effective by utilizing all the technical skills that

Groupon has.

Promotion

Rustbelt coffee currently offers both an excellent coffee service business as well as a rental service for a

public community conference room. The coffee shop offers different plans for renting out the rustbelt

office/working space. They have different rates such as individual, group, and event rental spaces. Other

unique touches they offer are filing cabinets, a dedicated mailbox for people to have mail forwarded to,

as well as dedicated desks that people can rent out.

Rustbelt Works is the office rental space service that allows customers to rent a reserved seat at the

table, private call phone booths, concierge service, free coffee, free conference room rentals, and other

additional optional upgrades. The additional upgrades include mailing address and box, filing cabinet,

and discount conference room rentals. Rustbelt Works is available for $14/day, $60/week, or

$199/month. Customers can try the service for a 30 day introductory trial at a $49 fee. Group rates are

available as well as fees for the additional upgrades. Finally, the conference rooms can be rented out in

advance with a 50% down payment. The running rates per hour are $85/hour for 1-3 hours, $125/hour

for 4-7 hours, $115/hour for 8-11 hours and $100/hour for 12+ hours.

The main focus of the promotion offered on Groupon would be two fold, one campaign focusing on the

Rustbelt Works and another one focusing on attracting coffee customers. The overall goal would be to

bring you an influx of customers fast, without upfront cost and turning majority of the customers into

repeat customers. The key to effectively running a Groupon ad is to turn the rush of new customers into

regulars. The focus of the deals will be to limit the number of deals sold, price the promotion to make

money on each one sold, and offer the deal when business is usually slow for the company.

The first promotion will involve offering half off deal Rustbelt Works’ weekly work seat. This work seat

usually costs $60/week and will be offered for $30 for one week. This will allow the customers to have

an entire week to experience working at Rustbelt with unlimited coffee. The main goal will be to turn

these customers into monthly or yearly subscribers to the Rustbelt Works weekly or monthly

subscriptions. Only a very limited number of people need to convert to actually subscribers for this deal

to be successful. The promotion will offer a limited number of available deals, specifically fifty total. This

promotion will run in the fall when the company is struggling to retain subscribers due to the cold

weather and many customers preferring to work from home.

The second promotion will focus on the coffee shop side of the business. The promotion will specifically

offer a $25 gift card for $15. The goal of this campaign will be to promote the coffee and food service

that is available at Rustbelt. The coffee is very high quality and will likely result in many repeat

customers. A major goal would be to get people in the door and spread the work about the excellent

service and coffee available in downtown Toledo. The deal would also expose many customers to the

Rustbelt Works available subscriptions. This promotion will run during the summer when the coffee

business is slow. People drink less coffee during the summer but are often looking to try something new.

This will make for great timing for this campaign to run with hopes of creating return customers before

the winter months arrive.

This marketing strategy is beneficial due to no upfront cost, getting paid directly when a deal is sold, and

generating significant cash flow. The strategy will also get new customers in the door quickly, without

having to outlay any cash to bring them in. The focus of the campaign is to increase the exposure to

Rustbelt and the strong community message that the company supports. Downtown Toledo is currently

growing exponentially and people are willing to support this movement through supporting local small

businesses. This creates the perfect opportunity for Rustbelt to run this campaign and attract new

customers to this unique local spot in downtown Toledo.

Promotional Finance

What are the effects of the promotions on business financially? Is Rustbelt able to offer discounts of up

to 50% and maintain operations? Again, the promotions being offered are: 1) $25 of coffee shop credit

for only $15 to be offered during the summer, June 1 st

through August 31 st

; and 2) 50 offerings of weekly

work seats valued at $60 with unlimited coffee for only $30 during the fall, September 1 st

through

November 30 th

. The offerings are very beneficial for both Rustbelt and the consumers.

Rustbelt gains leverage from getting more people with their “foot in the door” by redeeming

the Groupon discounts as well as the consumers benefiting through the discounted rates. The one

stipulation that comes from the advertising promotion through Groupon is that 50% of the revenue

redeemed through the coupons goes to Groupon. With that being said, the already discounted products

and services sponsored by Rustbelt are further reduced. The $60 weekly work seat discounted to $30

only brings in a $15 revenue for Rustbelt after the Groupon cut. Considering that the deal also comes

with unlimited coffee, priced at $2 a cup, and assuming the consumer will drink two cups a day for the

five days ($20) leaves the company with a loss of $5 through the transaction. This is not to be alarming

considering that a coffee shop buys coffee stock in bulk and upscales the price. The $2 cup of coffee

offered on the menu barely costs the business $.50 in product. This is a gross profit of $1.50 per cup of

coffee.

After reevaluating the loss in potential profit to the discount, only $2.50 worth of product is

consumed per coupon redeemed and the cost of space for the seat at the desk is negligible for any

additional cost to the business’s operation. Therefore, the company may be forfeiting a profit to the

discount at first glance but, in reality, the $15 profited from the discount is more than enough to cover

product cost consumed as well as additional labor costs for the one customer during the week. There is

no financial instability in the bottom line of the business with a breakeven point estimated at just

covering the product consumed in the coffee. Furthermore, the $25 credit promotion discounted to $15

for the coffee shop will only return $7.50 to the coffee shop after the Groupon cost split. Considering

that the upscaled coffee price turns a profit of $1.50 per cup, a customer who only buys coffee with the

credit can buy up to 12 cups costing the company just $6 in product. This best-case scenario is still a

gross profit of $1.50 even with the minimal return on the discount with Groupon of $7.50 for the $25

value. For a worst-case scenario, the coupon redeemer purchases some of the other pastry or food

items that does not have quite the steep profit return margin. In this instance, the breakeven point is

closer to reality of just breaking even or with a small loss of a dollar or two. Both promotions in turn

benefit Rustbelt regardless of the breakeven point by only offering a limited period that the promotions

can be redeemed and especially with minimal risk to the bottom line. The outreach and return of loyal

customers far exceeds the negatives.

Loyal Customer Reach

To gain repeat and loyal customers, we could bring in more repeat customers using punch cards. These

would be used when customers purchase a freshly made beverage at Rustbelt. We could help speed up

the process of acquiring enough punches on a card to earn a free beverage by doubling the stamps

when a Groupon is used. This gives customers more incentive to visit, since they will be able to have a

current deal on their beverage of choice while also being two steps closer to getting a free beverage.

There may be an issue, however, with costs due to having discount drinks in addition to free drinks that

come with the filled-out punch card. To alleviate this, we could have specials from Groupon given out

sparingly among those with rent subscriptions first, before extending them to general customers

through their social media. We could also have those who found out about the rent subscriptions

through Groupon provide proof and those individuals could have the first two stamps processed on their

punch card through their first subscription. As previously stated, the quality of Rustbelt’s coffee will be

enough for customers to come back, even if their punch cards are filled, so just getting them to the shop

in the first place will help increase awareness.

Even with the Groupon benefits provided, it is still on the business itself to get maintain the customers.

Luckily, with the quality of their coffee, it will be easy to attract more customers. The only thing that the

business would have to do is ensure that the products and services are good enough to bring customers.

Providing excellent products and experiences through their offers and general service will help impress

those who visited the café using the Groupon and will help them to further connect with Rustbelt. Once

they learn more about what Rustbelt does, especially emphasizing on their sales being donated to

nonprofit organizations, will make these customers want to return and help to support those nonprofits.

By maintaining high quality products, customer service, and its concept, the company will be able to

retain customers beyond the Groupon deals.