How McDonalds Will Make Their Money Back From Groupon

Kyle Reed // @kylereed

About a month ago, McDonalds offered a Groupon deal that seemed way to good to pass up.

One dollar for three movies!

As I looked at this deal and thought about how fast this will take off I wondered why McDonalds was willing to give out such a great deal and lose so much money. Then I realized they will probably make more money off this deal then they will lose.

How? More on that later.
First let me tell you a story about Beats by Dre headphones and Groupon.

Around the first week of January, Groupon ran a deal in Chicago for some Beats by Dre (tour) headphones. The deal offered the headphones for $60. That was almost 50% the original price. The deal was almost to good to be true. Well, actually it was to good to be true. I ordered my pair, paid my money and then started the waiting game. After weeks of waiting I found out that the company (monster) that was offering this deal decided to cancel all orders because the response was much larger then they expected (Incidentally I got the same pair of headphones for cheaper. Here is how). Basically, they are losing money on this deal which makes it not worth the discount. Sound shady? It was. But on closer examination, it was more about laziness then losing money.

Let us get back to McDonalds. They, on the other hand, have approached the idea of using Groupon in a different way. Flipping the model of Groupon on its head, they offered a reverse coupon. What is a reverse coupon? A coupon that pays the company back. You are wondering, how could this be possible? To find that answer you have to go back to the premise of Redbox. The goal is to offer cheap, convenient movie rentals in locations that are already selling another product (IE Walgreens, Grocery Stores, or McDonalds). So Redbox offers up a three for one deal but knows that the only way to redeem this coupon is to go to a location to get your movie. This creates potential business that would not have been without the coupon. Another factor that plays into all of this that Redbox knows, people are busy. The odds of half of the coupon users having late fees makes up for the cost that was “lost” in the initial offer of the coupon. The return of investment on this deal has huge potential and Redbox comes out with more brand loyalty and new fans.

The difference between McDonalds and Beats by Dre (Monster) is that McDonalds does not need Groupon, Beats by Dre obviously does. You might not think this to be true of Beats by Dre, but I would argue the cancellation of their product shows they do. These headphones have been built on hype and price. They are expensive and Dr. Dre endorses them, this  produces the idea that they must be great. Enter in the Groupon add, people start to think “half off some amazing headphones, why wouldn’t you purchase them?” So you have to ask, what is the win for Beats by Dre? There is none. Any time you offer a coupon for half off a product that you claim is quality (they claim that with their pricing and commercials) you send a mix message to consumers. Notice that Apple never apologizes for their pricing and never offers coupons. Why? Because they don’t need to. The demand is so great that the products sell themselves free of any coupon codes.

Redbox, on the other hand, offers this coupon for their customers to say thank you and enjoy. They understand that groupon is not about scoring new business but about building brand loyalty. And many others have success stories using groupon as well.

Let me land this plane.

I think often times we are are tempted to use hype to build something. We are tempted to make a couple of quick sales to get us ahead. The problem with all of this is that often we miss out on some things.

Does this sound like you?

No direction, just action.
No intention, just high hopes.
No attention, just reaction.

I do not want to discourage you from doing anything. I just know that it is easier to “use” (groupon) something because everyone else is, to say the something because everyone else is, or to write something because everyone else is. But it is hard to just be you.

So today when you are thinking about reacting, try to start directing first. And as you continue to work on your dream continue to do so in a way that is more about producing and less about selling.


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Kyle Reed

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I create websites, conversations, and ideas. Advocate for the 20 somethings. Looking to connect everyone to a mentor. Married to my best friend, Ginny. I like my coffee black and my dog Jack. I currently live in Nashville and work at Sony Music/Provident in Nashville
  • Graham

    Nicely done sir.

  • Ben Read

    This is a great post, and your landing totally makes sense. Ive been wrestling in my head about the difference between having vision and being a dreamer, and this totally correlates with what I have been trying to express.

    • Kyle Reed

      ya I have been wrestling with this as well

  • David Mehrle

    Great post! I think your landing was exactly what people need to hear. The idea that we have no direction, no intentions and no attentions makes total sense. We have to pay attention and not just become another noise maker in the arena of church.

    • Kyle Reed

      which is interesting that a major company struggles with that as well