A Reading (UK) cake baker potentially lost up to £25,500 from its profits this year because of a poorly conceived collaboration with a discount voucher website Groupon.
Need a Cake in Woodley is run by Rachel Brown and has made a loss on over 100,000 cupcakes they made to fulfil a Groupon voucher deal. The US based Groupon is a ‘crowd deal’ website offering vouchers to subscribers on anything from restaurant meals to spa treatments. The deals are only available if a minimum number of people sign up. And the minimum number did sign up to buy 12 custom cupcakes for only £6.50, a massive 75% discount on the normal price of £26. The problem was there was no upper limit on how many vouchers could be offered.
8,500 users signed up to buy the cupcakes which meant the bakery lost between £2.50 and £3 on every batch it sold.
The owner had to employ 25 agency staff at a cost of £12,500 to help the 8-stron team with demand and fund the extra distribution costs.
Steve Consalvez, partner and spokesperson for Need a Cake, said: “The business has been going for 25 years and following the Groupon discount offer, the company has realised it isn’t the way to go forward as it has wiped out profits for this year. However, it will be continuing to build on its successes in 2012.”
A stark lesson in the importance of good deal planning and also the power of internet marketing. Perhaps Need a Cake expected like so many to use the offer as a marketing tool and was prepared to sell a few boxes of cupcakes at break even or below cost but the demand was far more then they expected. Its a small business version of the infamous Hoover flights offer from the early ’90s and a warning to other business to look at the business merits of any offers conceived.
For safer, more reliable business marketing advice talk to us at AsOne. With over 10 years experience and over 300 business going from strength to strength AsOne can guide you through the digital marketing minefield.