How I Missed The Opportunity To Invent Groupon
There’s a good chance that you’ve heard of Groupon, but what you probably didn’t know was that I was almost the person who invented it. While I will never get credit for missing what many may consider an opportunity of a lifetime, I thought I could at least share a short story about my failure to connect the dots. I tell this story in the hopes that it will possibly help you to see opportunity staring you dead in the eye next time it does.
A Master Salesman
While attending community college in Alexandria, Virginia I often found myself hanging out at my friend Brandon’s house. There was absolutely no social life to be had while attending community college and Brandon’s house always seemed to be the most entertaining. I could hang out there, listen to my Brandon spin records, and more importantly, his dad was unopposed to the occasional consumption of alcohol no matter the person’s age.
Letting us all consume alcohol probably wasn’t Brandon’s dad’s strength, but I soon found out what it was. Brandon’s dad was regularly at home as he only worked a few hours a day. One day I struck up a conversation with him to learn more about what he was up to. He told me about the business that him and his friend ran in which they sold discount cards for gas stations door-to-door. Clearly it wasn’t the most impressive or glamorous job title that I’ve heard, but after telling Brandon’s dad that I considered myself a pretty good salesman he decided to put me to the test.
Selling The Deal Of A Lifetime
The next day he took me out to Sterling, Virginia to go canvas a neighborhood. On the way to our destination we stopped quickly to pick up a stack of cards from the printer that we were going to sell. At the top of the cards it read “$50 for over $1,000 worth of service” … a deal of a lifetime. The cards had various discounts that could be redeemed at the local Exxon down the street and had a ton of great deals:
- A free radiator drain and fill
- A free tire rotation with the purchase of an alignment
- A free state inspection
- Two free oil changes, and more… The bottom line was that only a few benefits in, you had already covered the cost of the card. In other words, it was a no brainer. I had no idea how they were convincing the local gas station to let them sell these cards but I didn’t care because in my first day on the job (which lasted for approximately 2 and a half hours) I pocketed a whopping $400. They let me keep all that I could sell! At $160 an hour, it wouldn’t be hard to guess that I was back at it the next day. Best of all I had sold more than my friend’s dad (which I’m sure didn’t make him happy).
After giving me a taste of the business, him and his business partner started taking a cut from me but I could have cared less. Even with a 50% cut I figured I would be pocketing upwards of $80 an hour which was far more than the $10 an hour I was making at Home Depot. I was glowing when I came home each day to tell my mom about the incredible sums of money that I was pocketing. She couldn’t believe it. She also wasn’t surprised to hear it when Brandon’s dad was no longer asking me to join them.
I’ll never quite know why they stopped bringing me along but my guess is that they wanted a bigger piece of the pie. Alternatively they couldn’t convince any more gas stations to complete a similar deal. Prior to my winning streak coming to an end Brandon’s dad brought me along once while they pitched a dry cleaning service on a similar offer. “We’ll create a coupon card similar to this one”, (as he handed a sample of the gas card we had previously been selling), “and the end result is that you’ll end up with more loyal customers who will bring you a lifetime of recurring business”.
Interestingly enough they couldn’t convince the owner of the dry cleaner that the deal would be worthwhile as he’d had a bad prior experience, but they had no problem in trying as hard as possible to close the deal. I soon realized that the selling skills weren’t necessary to close the customer (they were buying a deal of a lifetime), all the hard work was done selling the businesses to agree to our marketing services.
Any Deal Is A Deal
While Brandon’s dad may have wanted to sell a product that no customer could refuse, there’s now an entire industry built on a similar business model. Groupon, LivingSocial, and competing services get businesses to provide discounts that you can go and sell, “writing it off” as a worthwhile marketing investment. For Groupon and LivingSocial they don’t need a deal of a lifetime, but they still need 50 percent off which is almost an offer no rational consumer can refuse.
While it was hard to get most businesses to complete the deal multiple times (once you’ve been exploited you typically don’t want to have the experience again) there was an entire state to exploit. Brandon’s dad later told me that he had even expanded to other states. The only problem for Brandon’s dad was that he couldn’t scale the business beyond him and his friend. Had he or I recognized the opportunity, one of us most definitely would have invented Groupon: it was the exact same business.
There was only one limitation to the business: many businesses failed to serve as repeat customers. For Brandon’s dad it didn’t matter because it was a totally untapped market. If you were to approach the same businesses nowadays you’d hear that both LivingSocial and Groupon representatives called them multiple times each day. While I didn’t get a cut of revenue from LivingSocial or Groupon, I regularly reflect back on the simplicity of the business that Brandon’s dad had developed and kick myself for not seeing the bigger opportunity.
The lesson learned is pretty straight-forward: if you ever stumble upon a business where you’re pocketing money hand over fist, don’t give up when your source suddenly cuts you out of the deal. Figure out a way to turn it into something much bigger.