Case Study: Santa Fe Sports Shop Scores Big With Groupon

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When Santa Fe Mountain Sports owner Dan McCarthy first got a call from Groupon, he wasn’t sure what to expect. Despite some initial trepidation, McCarthy was able to craft a deal that cost him very little and was purchased almost exclusively by new customers. All things considered, he says Groupon deals are the cheapest way he’s found to get new people through the front door at his shop.

How did your Groupon deal come about?
Well, they called me out of the blue. Santa Fe wasn’t even listed as one of their places. They had Albuquerque, but they didn’t have Santa Fe as an option for Groupon members. I think we were one of the first [businesses] that did it here, but because I was a member and I was already aware of the benefits.

So now that you ran your first Groupon, how would you rate the experience?
I think it was very positive. We had 82 responses. We sold a tune-up on a bicycle for half price. The regular price was $50, [Groupon customers] paid $25 and [Groupon] got half of that. At first glance, that sounds like we’re losing money. But the bottom line is that we do lifetime service for anyone who buys a bike from us. If you had bought a bike from us, you’d know that. [Customers] know they never pay for tune-ups. So for these people, if they didn’t know that and they paid for the tune-up, they were 99% new customers. For us to get a new customer in the door and have them pay us to do that, we feel like there was no bad news to that. I would consider it a huge success and I would do it again in a heartbeat.

If you were to run another offer, would it be with Groupon or one of its competitors?
One of the agreements that we signed with [Groupon] was that we would not [run another coupon] for as long as the offer was in effect; we wouldn’t purchase things from other sites.

So how did the actual deal itself come about? How did you decide to offer a bicycle tune-up, as opposed to a discount on merchandise or anything else?
Well it was the end of the ski season, so I wanted to do a ski tune-up and make it only last for a month, but [Groupon] told me they would not do anything for less than six months, so that’s what we did. That was okay because it was the beginning of bicycle season here and it ended up working just fine. [Groupon] also couldn’t get the coupon placed for close to a month. So, three or four weeks and the timing would have been bad for a ski tune-up, because ski season would be over by that point. That’s all we do is skis and bikes. It’s pretty easy. Giving away labor like that for less than full retail was the easiest thing we could do – easier than giving away something we paid hard dollars for.

It sounds like the financials worked in your favor. Did you run the numbers beforehand and know what to expect when you ran the deal?
We set a maximum of 200 [coupons]. I didn’t want to do any more than that. I was still skeptical at the time, but now I would say not to set a maximum. I would just let as many people buy it as there were people who wanted to pay for it. Eighty-two was a manageable number, and we were able to get the work done in a timely fashion and hopefully made a good impression on all those people. We’d like to hope that we retain some of those customers.

If you look at what we spend on advertising in all venues and look at what it costs to get a customer through the door, I would put this at No. 1 because obviously it didn’t cost us anything other than a little bit of labor. And [Groupon] paid us. They paid us $12.50 [per coupon].

This interview has been edited for length and clarity.

Stephanie Miles is a journalist who covers personal finance, technology, and real estate. As Street Fight’s senior editor, she is particularly interested in how local merchants and national brands are utilizing hyperlocal technology to reach consumers. She has written for FHM, the Daily News, Working World, Gawker, Cityfile, and Recessionwire.