• 09.17.10

Is Groupon Too Good to Be True?

The service established itself as a hub for service-seeking bargain-hunters, but is it becoming a haven for bait-and-switch hucksters? CEO Andrew Mason tells Fast Company how he’s responding to new complaints.

Is Groupon Too Good to Be True?

Groupon set out to challenge the old adage, “You get what you pay for.” The company’s quickly learning that might not always be the best thing. 


The site features businesses hoping to lure a quick, loyal clientele by slashing prices on services for a limited number of “Groupon” buyers. The thought being that, once someone experiences the service, they’ll pay full price again—or tell a friend. But that’s not always what’s happening.

Groupon users are reporting customer service horrors and openly questioning whether the site is perpetuating a bigger fraud. Some have pointed out on message boards and Facebook pages their experiences with sellers who offer 1,000-plus “Groupons” for services at cut-rate prices but don’t have the resources—and perhaps never intend—to follow through on promise deals. Groupon has responded to many of these cases, and we’ve covered the business angle on the dark side of Groupon before). And part of the deal—and the case with recent Groupon partner, Gap, for example—understandably involves giving up a bit of personal information to participating company marketers. But some tell Fast Company they’ve had to perform complex and annoying feats to earn the Groupon discounts they bought.

Take the recent North Coast Music Festival in Chicago. Groupon offered a deal on tickets, to be picked up at the event’s gate. Then came the hoops. Customers were forced to walk several blocks and take a tour of a new bar in town. They were herded like cattle up the venue’s stairs, around the bar, through the seating area, out to the back deck, and down the rear stairs into an alley. Many were vocally complaining.

Groupon CEO Andrew Mason tells Fast Company he had “no idea” of the forced tour.

Then, there’s the potential for fraud. A photographer from Georgia was raked over the coals after seemingly trying to use others’ photos to promote her photography business. Dana Dawes Photography offered a supposed $500 photo package for $65, generating some $75,000 in revenue. Customers noticed the hijacked work and began calling out the fraud on Groupon’s message board. A few hours later the deal was yanked and money was refunded.

“When you’re working with local businesses you can’t fact check everything. Some bad deals are going to make it through. The real question is ‘How are we going to respond to it?'” Mason says.


The lack of control is the missing kink in Groupon’s otherwise shiny armor. A company that lives by the community will die by it, too. It only takes one bad experience for a customer to walk away—and tell everyone what a bad time they had. 

Chris Allen, an analyst with Accenture, says customer satisfaction is as much about getting good service as it is how the deals are delivered. Companies have a responsibility to set customers’ service expectations and follow through on them. “A company has to appropriately set expectations around an event,” he argues. “If not, they are definitely putting themselves at risk.” Bottom line: there’s room for another company to snatch business away from Groupon if they can guarantee a better experience.

Mason says the photography incident is proof that Groupon’s system works. Users were able to ferret out the fraud and the deal was revoked. Also, he explains, companies offering deals go through a rigorous screening process–Groupon turns down seven businesses wanting to offer a deal for every one it accepts. Finally, there’s the Groupon Promise: If a customer feels they got burned, they get their money back. “We pride ourselves on eliminating gotchas but we are brokering deals for other merchants–we can’t fully control that side of the experience,” Mason says.

Ultimately, the community policing, refund policies and screening process don’t mean much to someone like Tara Gallagher. The 38 year-old mother of two used Groupon to pick up a few tickets for a White Sox game. The deal offered a two-hour all you can eat and drink party before the game began and decent seats. The problem was the massive line for Grouponers at the stadium. The 45-minute wait slowly pilfered the Groupon’s supposed value, and even worse, left her feeling like a sucker. “Usually, it only takes two minutes to get into the stadium,” she says. “I’m seriously going to have think twice before I use Groupon again.”