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Two Tales of the Groupon Tool

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Roger was a quiet bright kid who didn’t ask much. When he was 14, he begged my mom to buy him a wood lathe. When my kid brother tore the wrapping off the long wood box on Christmas Eve, my mother beamed. “Now you can make us new kitchen cabinets!” A lathe is a great tool if you want to turn out chair legs, salt and pepper shakers or Louisville Sluggers. It’s not the tool of choice for jasmin live cabinets. For me, the lathe was an unforgettable lesson in expectation, capacity and function.

This spring, expecting a bargain, I carried a $60 Groupon into a Janet Rufin’s Salon in New York City. The function of this upscale Gramercy salon? To turn a profit. The capacity of the Groupon as a useful tool? Uncertain. In case you don’t live in one of 40 U.S. cities where Groupons are offered, here’s a quick explanation: Groupons (short for Group Coupons) are localized coupons e-mailed to your inbox every day. Groupon began in Chicago and has been growing like a virus–7,000 employees and counting. Though Groupon has yet to turn a profit, they recently turned down an impressive buy-out offer from Google. They will be launching an IPO “very soon” according to the Wall Street Journal.

Groupons seem perfect for impatient value-driven times. Signup is free. The pictures are enticing, the descriptions kitschy and pithy–and the deals are unbeatable. For a value conscious consumer, Groupon hits the spot. Deals require minimum number of participants to activate the jasminelive discount and sometimes are limited to a certain number of buyers. There is a visible stopwatch counting down, second-by-second, on your computer screen. It’s the capitalist three-step: pant, rant and buy.

Hungry small business owners may be predisposed to participate. We want to believe we’re special. Once someone tastes our gelato or gets our haircut, they’ll break the doors down. Groupon’s sales team needs to hype the steep discount to potential business clients while they gloss over the 50/50 split of what little is left. Groupons are often marketed for 50 cents on the dollar, which means the business takes 25 cents on their usual $1 product or service. Groupon gets the other quarter. This protocol differs from ‘advertising’, where a business can spend thousands with no guarantee of increased traffic. There is less resistance because there is no significant up-front cost to the seller. And unlike traditional advertising, the better the response, the more the ad agency (Groupon) collects: they have a stake in your promotion.

Business owners may be buying the wrong client, though. They may buy the promotion looking for marlin and wind up with catfish. Folks who buy a Groupon promotion are more likely to be catfish–customers who suck up value and swim away, leaving the business with a loss. I never intend to pay $120 for a Big City haircut. I just wait in the depths for another salon deal to swim into my inbox. When I scheduled my Groupon haircut I expected to be cast off where the bottom feeders belong: to the most junior stylist. Instead, I wound up at Janet Rufin’s Salon in the owner’s chair.

I asked Rufin how the Groupon was going, and was surprised to hear her enthusiasm. This was the second Groupon promotion for Janet Rufin’s Salon. The first Groupon didn’t work out as well as she had hoped. Many business owners would have shrugged it off. Janet Rufin analyzed the deal and decided to give it another try. First, her staff was overwhelmed with the initial Groupon. With only a single offered option, that particular hair service was overbooked. Offering more options meant more scheduling flexibility, less harried staff.

Rufin watched her stylists work under pressure during the first go-round. By the time the second Groupon came out, she had let one stylist go, and coached the rest to treat Groupon customers with kid gloves. Rufin instructed stylists to sniff out the best potential clients and offer them another significant coupon for their next visit. Bringing new clients in is costly; Rufin wanted to keep as many of these newcomers as possible. Last time I spoke with her, Janet Rufin’s Gramercy salon had retained at least 1/3 of the Groupon customers, and the curve was still aiming up.

For Janet Rufin’s Salon, Groupon was a useful tool. She had reasonable expectations, she adjusted capacity and had an understanding of the function of this promotion. My second Groupon? A different story. The receptionist on the phone was rushed, her voice flat. I asked her if I had to make any special preparations for my visit.

“Before you come in for your laser hair removal, do not touch the hair for three weeks.”

I complained. “You’re kidding.” Silence.

“How long do the hairs have to be for this to work?” I asked.

“Just don’t clip them for three days,” she sighed.

This was weird. First she said three weeks; within seconds it was three days. When I arrived, the receptionist barely looked up.

“Groupon?” She laid her hand on the Formica countertop. I half expected her to yell, “Next!”

The technician who led me to a treatment room gave me yet another answer to my pre-treatment question. “Oh, you don’t have to grow hair out for laser removal,” she said calmly as she slathered on a layer of cold goo. That was a surprise. Then came the attack. Well, that’s a little harsh, but let me tell you, this live jasmin service comes with its own painful disincentive. To her credit, the technician (I can’t bring myself to call her a ‘stylist’) did give me a moment to steel my resolve.

Less than ten minutes later, she was done. “That’s it. Don’t pluck. Wait for the little hairs to fall out.” I was glad to leave. I felt like I’d been on an invisible conveyor belt in a poultry plucking facility. Did this business realize too late that they had made a horrible mistake? Were they resigned to getting Groupon customers in and out as quickly as possible? I left a phone message with the M.D. who runs this business. My call was never returned. Honestly, I have no idea if this board-certified doctor thought the Groupon was a success.

The staff was poorly prepared, abrupt and ill informed. Though the technician was competent, she wanted to get rid of me without bothering to cross-sell or promote their other dermatological services. This doc did one thing right. The Groupon was good for three visits. Even if the receptionist is curt and the service is perfunctory, after three visits a client may be habituated enough to come back for more.

I can’t help but think about Roger and the lathe. I respect Janet Rufin for seeing through the first few wobbly turns of the idea and ultimately harnessing the power of the Groupon tool…but I’m still not paying $120 for a haircut. The dermatologist, I suspect, is still wondering why he wasted money on that darn Groupon.

Why Groupon is like Government: Three Reasons to Avoid Groupon’s IPO

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Rakesh Agrawal, meet Felix Salmon. Rakesh is a small business strategist, entrepreneur and avid blogger. Salmon writes about financial matters for Reuters. Rakesh sees a rocky road ahead for Groupon; Salmon thinks Groupon is doing swimmingly, thanks. They are both right, which makes them both wrong.

In my first Groupon post “Two Tales of the Groupon Tool”, I explained that, in the hands of the right vendor, Groupon could increase long-term profits; in the wrong hands, it could spin out of control and spell disaster. Rakesh has posted at least twelve blogs in the last month dissing social network coupon sites Agrawal’s headlines read like The New York Post: “Why Groupon is Poised for Collapse”, “Why I Want Google Offers and the Entire Daily Deals Business to Die” and “Groupon Was “The Single Worst Decision I Have Ever Made as a Business Owner.”

It’s too bad that Rakesh clouds his argument with tales of woe from merchants who didn’t know what they were doing when they bought in to Groupon. Some businesses shouldn’t consider them at all. Agrawal writes about a woman whose Groupon was her “single worst business decision”. She believed a predatory sales rep who promised her the moon. She should KNOW her average sale price and realize that the Groupon was a losing proposition. It’s sad, simple math.

Some of what was sold to that coffee shop owner was NOT in line with Groupon policy. Businesses are allowed to ‘cap’ Groupons within reason. Timing is another issue: this coffee house was deluged because of a nearby event. I would have pushed the Groupon button during a slow time. Felix Salmon on the other hand, thinks Groupon is sprinkled with Strategic Business Fairy Dust. What other promotion guarantees a threshold level of customers who are willing to pay for your product or service in advance? Salmon cites a study by Utpal Dholakia of Rice University, where 65% of merchants offering a Groupon said that the offer was profitable for them IN AND OF ITSELF. Determining the appropriate offer(s), business cycle timing, pricing, minimums and maximum number of streamates coupons–Salmon acknowledges “Its very easy to screw up these things.” This might explain why another study cited in Megan McArdle’s blog claims that “32% of Groupon merchants lost money.” Does that mean they lost money inside the promotion (it’s called ‘advertising, and yep, sometimes, you lose money), or in the long haul (which is the point of marketing, advertising and promotion).

It’s kind of like the debate about the National Debt. One group says it’s a spending problem, another yells it’s a funding issue. Both sides have their points, and that makes them both wrong to dig their feet in (but that’s another huge issue, isn’t it?). Government, like Groupon, is a tool, and instead of serving us, government has devolved into a system where the tool has escaped our hands at full throttle. Someone’s gripping Groupon right now, and I bet he’s sweating. With the August budget default deadline looming, government’s problem looks like a loose chainsaw that could cut us off at the knees. We Americans look very much like the woman at the coffee shop who lost a bundle on her Groupon. Groupon’s fate is as exciting as it is tenuous.

I stand by my assertion that, used wisely in the right hands, Groupon is a great tool. Like government, it wields too much power and it has ‘mushy numbers’. If you have ever read their merchant agreement, you’ll understand. The ‘mushy numbers’ issue is the strongest reason to pass on Groupon as an investment. In their filing for an Initial Public Offering, Groupon uses their own “Adjusted Consolidated Statement of Operating Income (CSOI).

Here’s how this accounting scheme works: If Groupon takes $25 from a $50 Groupon under CSOI, GROUPON IS COUNTING $50 AS ‘TOP LINE’ REVENUE. The money paid to the merchant is the “cost of revenue”. It’s kind of photoshopping your head shot for a Jasminlive dating site, not bothering to mention you are covered with skeleton tattoos from the chest down. In my last Groupon post, I promised to list three reasons to avoid Groupon as an investment. Their intentionally murky accounting might be enough. That’s reason number one.

Problem two is ironic: it’s the same problem their merchant clients face: the crush of success. Poorly trained employees, like the one who misled the coffee shop owner, could topple Groupon as other daily deal clones fill the fickle void. Third, as a Groupon client, I can attest to the DIMINISHING VALUE OF THEIR DEALS. When considering a place for my last New York City haircut, I looked at Groupon (and their new sub-site Groupon NOW), and found a better deal just walking into a few salons around Chelsea.

I am put off by the prospect of other daily deals sites trying to sell merchants once they show up on Groupon (Janet Rufin, the happy hair salon owner alluded to the open can of Internet worms her successful Groupon opened). Fancy number-crunching, the sheer volume of new employees, the importance of good strategy, increased competition with a low threshold of entry, diminishing value, a draconian contract and a new group of ad salespersons on merchants’ telephones…uh, no thanks.

And, if the US Government finally decides to tax Internet businesses and to look at Groupon’s accounting, the CEO might want to offer a Groupon for Groupon, giving ALL the revenue for that transaction to Uncle Sam. Groupon’s upcoming IPO is a shaky deal. Sometimes the tool gets to humming so loud we forget to turn it off, and the engine just blows. If I were you, I’d steer clear of Groupon and Washington, DC until the fiscal cannon is fired.

Pick up your PEN for Free Expression (and Free Seminars)

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Sometimes I’m tempted to lay my pen on the table and demand that it do tricks. That’s me, the crazy lady at Cafe Grumpy’s berating my writing instrument out loud. “How tough can this be? There are only 26 letters, less than a dozen useful punctuation marks. Sit. Roll over. Write like Junot Diaz, Dammit.” The only trick my pen does reliably is ‘play dead’. Last night at the opening event for PEN’s World Voices Festival of International Literature in New York City I kept my pen in my purse or it would have jumped right off Pier 61. Head first, no floatable eraser.

Dubbed ‘Written on Water’, last night’s themed readings took place at Pier 61’s Lighthouse. It’s an apt metaphor for one of PEN’s key missions: to encourage people to speak out against censorship and condemn the suppression of freedom of expression. (See http://www.pen.org) PEN’s event this week focuses on China, Russia and the Middle East. There are forums about the challenges and opportunities of the blogosphere and even a late night conversation about Wikileaks.

Waiting for the headliners last night, I thought I heard a tiny bird chirping through a mislaid sound system. Then I realized the wistful wail was a creative seating call. The audience moved from the bar to metal backed chairs that faced the general direction of Mecca. The chirping accelerated. It wasn’t a caged bird. It was a violin, a live woman. Czech violinist and vocalist Iva Bittova created a riveting minstrel vortex down the center aisle. Heads turned, searching for a source or familiar context.

At moments, Bittova’s music was distinctly Muslim, then Slavic, subtly Indian–wait, was that Hebrew? The virtuosity, the channeled joy, the spontaneity and whimsy. By the time Bittova had finished her promenade, the audience had been kneaded into submission. We were ready to rise to the spoken word. Words rose. They sang, danced, twirled and wept in at least five languages, with one empty chair for the writers whose words broke up on black rocks of censorship before making it to this Lighthouse.

The fleshy houses that carry great literary minds never cease to inspire. Salman Rushdie tended a labyrinthine word garden; Malcolm Gladwell grated a stout rake over clean prose. It’s always a relief to see that talent–and the discipline to develop and sustain it–does not always adorn the physically lovely. In person Rushdie looks like he could wear a white apron as the scrubbed patriarch of a Brooklyn bodega, Gladwell might be the not-too-distant cousin of Art Garfunkel. Gioconda Belli’s convincing voice might mean she’s related to legal orator Melvin, and Hanif Kureishi has more mischief in his eyes than a liberated jinn. Kureishi stole the show with his story of a young Indian coming of age in a suburban house of earthly delights.

Mircea Cartarescu did not care-to-rescue a spoken translation; his swarthy Romanian pheromones wafted into the psyches of all the women and about a third of the men in the ballroom. Who needed to read the English translation on screen? Amelie Northomb in a black top hat looked as though she’d escaped from Hogwarts and might go up in a puff of magic eyeliner smoke at any moment.

Wallace Shawn looked like Wallace Shawn. Finally, over dark water, Iva Bittova returned to close the program with a short but powerful celebratory crescendo, a coda for violin and voice.

Before I went to bed last night, I buried my bic in the program for the PEN festival, rolled it up tight and put it where the sun don’t shine: my writer’s notebook. I’m letting the plastic ink pipette out only if it promises to do tricks. If it refuses to write for me, I’m forwarding it to one of the word magicians I saw last night. Any one of them would make that little ink-filled bastard jump.

Pogo looks at Chris Hedges “Careerist” Editorial

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The only humans who are not contributing to the circumstances of economic and social destruction are the people who are already suffering from the consequences of those of us who are. At the risk of sounding like a Republican, I think, given half a chance, those poor souls would become willing consumers and in turn, conscious or unconscious destroyers themselves. Chris Hedges says, “The greatest crimes of human history are made possible by the most colorless human beings.” It’s true, the world’s spin cycle has washed the brightest hues of humanity from most of us. In real life, we are easily overwhelmed and obviously over-washed.

It’s not just the bureaucrats and cynics–we all “do the little chores that make vast, complicated systems of exploitation and death a reality.” We all contribute, in ways small or large, to a planet hell-bent on hurtling itself toward self-destruction. The complexity of modern life has obscured the cause and effect of simpler times, when losing a crop meant starvation, and when the mistakes could be attributed to a limited population…these days, buying a product that was advertised on TV during a Penn State football game could be considered ‘contributory’ to the culture that supported a monster.

There is incredible danger to finger-pointing, Mr. Hedges, unless one is looking in the mirror while flagging the finger. Does Hedges have a computer or car or TV made by oppressed workers far offshore? Did he use fossil fuels on the way to work today or consume a Monsanto-modified food? Is his classy casual shirt crafted by well-paid workers, crafted from unbleached, vegetable-dyed cotton? Did Chris step over a homeless person on the way to work today?

Anyone who consents to paying taxes knowingly feeds the beast. The behemoth has about 20 million government-paid heads in the USA alone. Sharpen your sword, Chris–and break your accountant’s pencil. Our choices are few: worry, or shrug, or go nuts. The soulless bureaucrats exist so Chris can opine and I can shine: because I cannot support myself as a writer, I am a jeweler, a purveyor of one of life’s little luxuries. All my diamond cutters and importers signed the anti-blood-diamond Kimberley Accord, every one of them.

I recycle gold, I sell estate diamonds, I donate to charities and walk to work. I still understand that my actions breed suffering. The Kimberly Accord has huge flaws. The man-made soles on my ergonomic shoes may have destroyed an aquifer in China. The environmentally disastrous proposed Pebble mine in Alaska may be an indirect result of my counseling folks to diversify from paper investments.

I just hope that little acts of kindness and charity mask the moderate evil I abet. At a time when we need to recognize our own contributions to destruction, to bridge gaps and build coalitions, let’s not make the bureaucrats throw more paper covers over their sins. Instead, pass out Freedom of Information Act forms outside Wall Street firms, raise money and strengthen statutes for whistleblowers, force companies to pay fines, and vote with your dollars. But forgive yourself, at least a little, for not being chased by a despot or starving on the fringes of a desert, or dying from a preventable disease.

All Chris Hedges would have to do for me is a quick re-edit to his TruthDig column today. Just change THEY to WE, and THEM to US. Just because we’re part of the problem doesn’t mean we can’t mean a little something to the cure.

MATH SUCKS and Spits me Out: Pttoey!

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As lousy as I am at the subject, I admit it: everything is math. Great battles of brains and brawn involve occupied territories as small as an office cubicle or as large as The Middle East. The language of conquest? Math, fueled by passion, followed with pain. Sets and subsets are the fulcrum of politics: interest groups are blatantly statistical and in constant flux. The mathematics of politics means that a subset that spews truth or venom can wield the balance of power, leaving the larger sets on both sides scratching their brackets.

In matters of the Spirit, it’s pivotal. I always preferred to envision Christ’s cross as the intersection of man’s ascendent nature on the horizon of the physical universe. I am tempted to draw an arrow at the top of the cross’s vertical line and a caption at the bottom that reads: “Fragile: This End Up”. Rosary beads, the Four Yugas, the Star of David, the Zen of spaces and voids: more math. Number, as mathematician Tobias Dantzig attests, is the language of man. Sadly, in the practical workings of such things I claim illiteracy.

My mathematical blindness is not allegorical. It’s literal. I deserve a handicapped parking sticker for number blindness. When I see groups of figures on a page, I have three choices: defer, deflect, or distract. I am not kidding. If my husband is not in shouting distance to serve as human calculator, this is how I add: How much is 17+9+6? I have to add 17+10, subtract one, which leaves 26, then I add four so I can land on an even number and take a breath before getting to 32.

I actually stopped writing this to double check my addition on a calculator. Stop laughing. I am ashamed. I have special needs when it comes to numbers. The only time I do slightly better with numbers is when you put a dollar sign in front of them. Even so, I have a ‘tip calculator’ on my Droid, and if I ever get breast implants I want to know if I can order a rack with a pre-installed backlit calculator in the cleavage.

You can probably tell by now that my mathematical blindness has resulted in verbal overcompensation: if a question has only one right answer, just shoot me. If the question has several answers that require verbal defense, move over, William Jennings Bryan. I’m on your tail. Just because everything IS numbers, I don’t see why our system of higher education has made math a required torture for people like me. No one forced the math genius in college try to decipher Rudolf Steiner or Noam Chomsky, but I had to be impaled on statistics until my palms bled. It was REQUIRED. Frankly, it nearly crucified my entire college career.

I am all for a skilled workforce and honed reasoning skills. Our math education, however, needs to behave like a good computer program, where students are taught that there are lots of ways to access information and perform tasks to achieve laudable goals. It is the discipline of the mind that makes math useful in everyday life, and this discipline can be acquired without advanced calculus. In the twenty-first century, math is an academic iron gate. If, due to genuine mathematical blindness like mine, a talented student is left rattling the numbers on the wrong side of success, it’s akin to casting aside a priceless treasure in favor of a $10 calculator. A non-linear mind is a terrible thing to waste.