• Should races use GroupOn?

    The email “daily deal” market has ballooned over the past year. The leader, GroupOn, is on the verge of an IPO. Various niches have formed as others try to improve on GroupOn’s model by being increasingly more local or more specialized. Races have found their ways onto these sites, and while providing a bargain for those buying, do the races really make any money on these entrants? And how do those that registered at full price feel about this?



    I subscribe to a bunch of these email lists, and regularly purchase services from them. Over the past few months, I’ve seen the Slacker Half Marathon, the BeachPalooza, the Naked Foot 5K, and the Colorado Endurance Conference advertise on these email lists. In the case of Slacker, the offer was a $25 entry into the half marathon, normally $50, among other offers. For BeachPalooza, it was a $25 entry to the 5K, normally $55. For Naked Foot, a 5K entry for $20, normally $40.

    Normally these email marketing vendors offer their customers a 50/50 split. So for the Slacker Half Marathon’s sale at $25, Slacker would get $12.50 and GroupOn would get $12.50. It’s negotiable, if GroupOn is light that week, Slacker could negotiate a more favorable split, or if GroupOn thinks that they’ll sell a lot, maybe they’d allow for a less favorable split. I recall looking at the Slacker sale mid-morning and seeing that it had sold 133, so let’s assume that they sold at least 150 entries to the half. 150 x $25 = $3,750, split evenly that’s $1,875 for each party. For Slacker, that’s of course $12.50 per entrant then.

    Assuming the Slacker course can accommodate an unlimited number of entrants, fixed costs are irrelevant. Entrants up to a certain point will receive a t-shirt, and let’s assume that each finisher will get a medal, and that the race may pay the timing company based on the number of entrants, that leaves just a few bucks per entrant to cover any remaining costs.

    I’ll assume they’ll still turn a profit on each entrant then, but aren’t there better options to get 150 entrants, options that would allow Slacker to gain those same entrants at a higher rate? Why not lower the entry fee, not clear to $25, but to $30-35 maybe, pay RunColo to email our growing list of emails for something far less than $1,875, and then raise the registration back to the normal $55 after the one week (or day) period? More money would go to Slacker, hopefully a similar number of entrants would sign up, less money would go for advertising, and the race’s profit would increase.

    GroupOn of course has more email addresses than RunColo or any other running-related lists, but these running-related lists go to…runners. Given the same offer, the buy-rate when sent to runners should be higher. Decrease the offer a bit to incentivize the race, the buy rate would decrease, but the race’s profit would be maximized. It’s a complex equation worth a lot of thought, and one that races should consider. They could perhaps justify a lower profit per entrant with the goal of making up for it in increased sponsorships. Whether for- or non-profit though, every race wants to maximize the money they collect.

    And of course, the other question is – how does someone that paid for $55 for an entry to the Slacker Half Marathon now feel? Often credited to PT Barnum, the memorable quote goes, “there’s a sucker born every minute.”

    GroupOn
    Living Social
    Denver Post Daily Deals
    Weekly Plus Denver Deals
    Westword Voice Daily Deals (Denver)
    Zowzee (Denver)
    Zozi: Deals on Unique Activities
    Deals to Locals (Arvada)
    Comments 2 Comments
    1. ESCO's Avatar
      ESCO -
      Great post.

      Another thing to consider is let's say Slacker sold 150 slots at $12.50. How many of those people who bought that deal would have paid full price had they not been offered the discount? I'm guessing at least 25% of those people who bought the deal were planning on running anyway, perhaps more, one could always compare the people who bought the deal to participants from last year's race. If 38 runners (25%) purchased the deal and would have paid full price, that's ($50-$12.50 = $37.50) (lost revenue per participant) for a total of $1425 in lost revenue.

      Another big one that you left out was the Colfax 5K did a similar deal. I think it appeals more to first year races, as it would allow you to boost your numbers for your first year in hopes of increasing the turnout for future years.
    1. Todd Straka's Avatar
      Todd Straka -
      I have to imagine its like any other email list you are on where you get and early discount code. If you are willing enough to get on the lists then you deserve the discount. If you aren't then you miss out on the opportunity just like you miss the sale price a day late at the store. And next time you will be wiser about looking around for the coupon/sale. To Simon's point, I am willing to guess that some of the runners were probably on the fence about doing the race, or are willing to run it because of the discount. Just like I am willing to try a new massage therapist from such a deal. Hopefully for the races themselves, the larger number of entrants usually helps secure better sponsors and more repeat runners the following year
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