{{ searchResult.published_at | date:'d MMMM yyyy' }}

Loading ...
Loading ...

Enter a search term such as “mobile analytics” or browse our content using the filters above.

No_results

That’s not only a poor Scrabble score but we also couldn’t find any results matching “”.
Check your spelling or try broadening your search.

Logo_distressed

Sorry about this, there is a problem with our search at the moment.
Please try again later.

Last week, in a deal that sounded too-good-to-be true, group-buying website Groupola was offering the new iPhone 4 for a mere £99, sim-free. Users had to simply register interest on the Groupola website, where they would then be emailed a link to buy the new must-have iPhone on Friday. 

With such a tempting deal on offer, on Friday morning, the Groupola website faced major meltdown, and that's essentially what happened.

A Groupola spokesman said 5m unique users tried to access the site between 9am and 9.30am. That number seems incredibly far-fetched to us but obviously the website fell apart as a result of the demand.

With thousands (if not millions) of users unable to access the site, it's unsurprising that a wave of angry consumers took to social media channels to voice their outrage on Twitter and Facebook. 

The process was mismanaged from start to finish, resulting in a PR fiasco for the company. So what could Groupola have done to avoid such an unmitigated disaster?

It all started so well. On Wednesday last week Groupola announced that it had purchased a number of sim-free iPhone 4 handsets and was able to offer them as a loss-leader, at a heavily discounted price. It made for some excellent PR: the offer was covered by a number of high profile sites, including Thisismoney.co.uk, The Guardian, PocketLint, and other prominent discount blogs. Users simply had to sign up for Groupola's daily deal alerts and then check their email on 1 July. 

On Friday 2 July, at 9.30 am - as "more than five million" users clicked on the link - the Groupola's website promptly crashed with users stuck at different stages of the buying cycle. Some were unable to visit the page itself, while others could not get through after clicking the "Buy Now" button. Others managed to enter credit card details only to find the site crashed before confirming their purchase. 

The sale started at 9.30am, and with people who were sitting at their computers before 9am unable to access the site, it is somewhat unsurprising that users smelled a rat. To compound matters, many users found that clicking on the link in the email simply took them to the Groupola homepage, leading people to believe that they had been sent the wrong link in the first place.

Groupola says that the high volume of traffic to the link resulted in "an auto-redirect to the next available page". However, another separate link was floating about on Twitter (that in fact allowed users to hit the iPhone page), and this led customers to believe they were being duped. 

On top of this, a series of other major failures led to the erosion of customer trust. The number of iPhones available wasn't disclosed until after the sale, when it emerged that only 200 were available. However, upon visiting the site, the site tracker in fact said that 202 had been sold. According to Groupola, this was merely a technical glitch.

This, coupled with the mixed messages that Groupola was sending out through Twitter and Facebook (initially telling customers to keep trying even though they could not connect to the site and later saying that the iPhones has been sold out when the website said they were still available) meant that customers were in complete confusion about what was going on. Perhaps worst of all, a rogue Twitter account with only a handful of Tweets and only a single follower (Groupola) sprung up on Friday morning, claiming to win an iPhone, leading to further accusations by customers that Groupola were trying to pull a fast one. 

And the series of disasters for Groupola didn't just stop there. One Twitter user claimed to have got through the buying process, only to receive an email from Groupola telling them that their order had apparently been cancelled. In addition, the broken unsubscribe link in the initial email certainly did not help matters. The fact that there appears to be no easy way to delete a Groupola account after the initial sign-up is also creating cause for concern. Subsequently, consumers have set up various Facebook groups to express their wrath against the site. Some publishers and partners have also withdrawn their support

Needless to say, the whole debacle has been a major PR fiasco for Groupola. Unlike other companies before them, Groupola did have the right channels (Twitter and a Facebook page) for crisis management to respond to customers, but the manner in which they responded could undoubtedly have been better. For example, replying to every single message over and over again (not dissimilar to Vodafone before them) using a copy-and-paste approach did little to convince customers that the company was being sincere. Other blog commenters on Bitter Wallet claimed that Groupola had deleted their Facebook comments

And in the latest development, Bitter Wallet goes even further, suggesting that Groupola is now astroturfing on its Facebook page getting staff to "pose as punters".

What can start-ups and discount sites learn from Groupola's mistakes?

From a customer acquisition point-of view, Groupola managed to gain an unprecedented volume of new registrations. The company was selling the iPhones as loss-leaders, which meant the strategy for the campaign revolved around the value of sign-ups and customers being higher than the £80k loss incurred purchasing all 200 phones in the first place. However, Groupola failed to recognise the value of customer trust and loyalty, and the value of long-term reputation. The key question here is, is there really any value in acquiring a high volume of customers, who don't trust you and therefore, are ultimately unlikely to transact with the brand again? 

Building customer trust is even more crucial for a recent start-up than it is for an existing incumbent. The group-buying concept works by offering a huge discount on products and services, but a certain threshold of customers need to purchase before the company takes money from your credit card and the deal goes through. Given that the concept is relatively new, there is a higher barrier for customers to overcome before making a purchase. In addition, entering credit card details before the customer knows whether the deal has gone through or not requires a higher level of trust than elsewhere online. 

Other group-sharing websites such as competitor, Groupon and private sample sales website, Vente-privee.com seem to understand this. In order to gain customer trust and fuel further future sales (thereby focusing on customer retention rather than acquisition), such websites must offer an impeccable level of customer service in order to compensate for the initial pain factor. 

For example, Vente-privee.com offers huge discounts on luxury brands and designer products. The downside is that the delivery time can take anywhere from six to eight weeks. However, many consumers are willing to purchase regardless because the private sales website is open and transparent about the delivery stages, and offers good customer service in return for having to wait a long time for delivery. 

In Groupola's case, the whole process was mismanaged from start-to-finish, leading to a catalogue of failures, making the company appear to be disingenuous and resulting in diminishing customer trust. According to Groupola's PR company, some winners from the deal have emerged, but perhaps this is too little, too late. In the end, Groupola fundamentally failed to estimate demand and prepare accordingly. It failed to prepare for such high volumes of traffic, which inevitably led to customer disappointment. 

Groupola released a statement on Friday, which is available to read here. An email was also sent to customers who could not purchase an iPhone. 

Photo credit: William Hook on Flickr

Aliya Zaidi

Published 6 July, 2010 by Aliya Zaidi

Aliya Zaidi is Research Manager at Econsultancy. Follow her on Twitter or connect via LinkedIn or Google+.

50 more posts from this author

Comments (12)

Comment
No-profile-pic
Save or Cancel
Avatar-blank-50x50

sara smith

It may be your view is about the tip of the iceberg that you have seen by looking at what has been written on the internet at the time you looked.

Have you asked Groupola to speak to a winner of an iPhone?

This may end up as brilliant marketing. It was brilliant to buy up as many pre-order handsets as posssible (assuming this is what Groupola did) and offer them for sale at £99. I wish I had done it. Simple. Obvious. Competitors who did not do it and missed out on millions of new email subscribers interested in deals missed out and have an axe to grind. Some of the negative publicity may be coming from them.

Thinka about flash sales that have gone before.

Clothing at Tesco undoubtedly benefitted from signing up 40,000 to its Facebook page using a very similar technique. At the time it had exactly the sort of coverage you cite in your article but has kept most of those followers and no doubt is seeing great sales from targetted marketing.

If this sort of thing was not profitable, companies would not do it. I suspect the vast majority that signed up will go on to take out other deals and it is only the minority who you are highlighting here who have quite rightly complained.

about 6 years ago

Aliya Zaidi

Aliya Zaidi, - at Mrs Aliya Zaidi

Hi Sarah, 

Regarding the negative publicity, the evidence points to the contrary. You only need to search for Groupola on Twitter to see the wave of negative commentary by ordinary users and consumers. In contrast, there is very little positive sentiment. So I think it's highly doubtful that this has been artificially instigated by competitors. 

We did get in touch with Groupola's PR company and we do have a list of winners as noted in the last paragraph above. As I said, it may have been better for these winners to have emerged earlier or for them to have received more publicity in light of the negative sentiment about Groupola on various social media channels. 

In addition, various comments have been deleted on the respective Facebook pages, leaving only positive commentary, particularly in reference to the BitterWallet story. This is simply bad practice; the lack of an open and transparent approach has been detrimental for Groupola's online reputation. 

We have yet to wait and see the true impact, but I suspect that the iPhone 4 deal may have backfired badly for Groupola. 

about 6 years ago

Avatar-blank-50x50

sara smith

Both of us are wrong talking about winners. This was not a competition. It was a so called flash sale. A headline saying this is a catalogue of major fail I don't agree with. It comes across as carping and not giving the business credit. Are you really saying the other deal sites would not have taken the huge increase in email subscribers, but they did not take risk to buy pre-order handsets. There is an element of sour grapes. I am thinking what I can buy up that is very in demand and offer for sale at vastly reduced price. As long as I make it clear the offer is limited, and to buy you have to subscribe, I can't see why this is such a catalogue of fail.

about 6 years ago

Aliya Zaidi

Aliya Zaidi, - at Mrs Aliya Zaidi

Sara, Groupola chose to implement a high profile campaign to harvest email addresses. As I've noted, some might say this was a success in terms of acquiring leads but Groupola simply under-estimated the long-term value of reputation and building long-term customer loyalty.

If such sites offer good customer service, this will increase the likelihood of repeat purchase. Groupola's strategy on the other hand was solely focused on acquisition, rather than retention.

By "winners", I mean people who managed to secure an iPhone 4. 

The fail lies not in the offer itself, but as I have laid out in the post above, the obvious lack of preparation and planning for such a high volume of users, and the lack of openness and transparency about what was going on. The response to consumers on Twitter did nothing to alleviate customer issues, and there were various mixed messages that led to the erosion of customer trust. It's not about the flash sale, it's about understanding how to resolve customer issues and employ an open approach. 

The fail also lies in deleting Facebook comments by BitterWallet readers, for which there is no justifiable explanation. 

There were simply too many mistakes, such as the auto-redirect, the technical glitch on the site tracker, etc, so it's not surprising that customers were left feeling deeply unsatisfied. 

about 6 years ago

Stephen Logan

Stephen Logan, Senior Copywriter at Koozai

Social media mismanagement should have ended with the Habitat fiasco. If you want to bury bad news, do so by adopting a positive, even apologetic tone. Deleting posts when there are irate consumers, an online cache and numerous blogs already on your case is as good as accepting blame. You might hide them on one page, but that just encourages people to go elsewhere and spread the bad news. If anything it would probably have been better if they had accepted it was a server problem, taken the negative comments, not astroturfed sites using their own Facebook profiles (a face meet table moment if ever there was one) it probably would have fizzled out eventually. They could even have encouraged some good news by offering more iPhones to those who missed out through a genuine online lottery. A very interesting summary Aliya, but somehow I don't think this will be the last social media fail that we see unfortunately. Lots of eggs on lots of faces as always, I don't think The Guardian will be too happy that they went with the original story now for example, one day somebody will crack this whole Internet PR thing.

about 6 years ago

Avatar-blank-50x50

Mike

Hi Aliya, you might want to look into this: at 9.40am, Mark Pearson (owner of Groupola) himself, posing as a buyer, left a message in the Groupola FB wall saying: "i just got one iphone! it's not a scam!". Until 9.50am, no other users claimed be able to buy the iphone, so when other users questioned the veracity of Mark Pearson's message and his identity, his profile and message was immediately deleted from the Groupola fan's page at Facebook. My posts were deleted and blocked from Groupola webpage at FB, but unable to unsubscribe from Groupola's mailing list. I already made a formal complaint to ASA. Hope others can investigate this further.

about 6 years ago

Avatar-blank-50x50

Alan

If what Mike says is true, then surely it was a scam, I mean, why on earth would the owner of Groupola need to astroturf to reassure people it wasn't a scam?

about 6 years ago

Aliya Zaidi

Aliya Zaidi, - at Mrs Aliya Zaidi

Hi Alan, 

I would also note the traffic report as shown in the Alexa image above. Here, we can see traffic roughly doubled, although according to the PR company, "5m unique users tried to access the site between 9am and 9.30am."

about 6 years ago

No-profile-pic

Anonymous

I wonder how many people will click "SPAM" the next time they get an email from Groupola. It's not like Mark Peason hasn't got form with dodgy practices in the past...

about 6 years ago

Avatar-blank-50x50

Alan

Agreed Aliya, there is no feasible way that 5 million visitors tried to access the site in that half an hour, nor in that entire week. It may have been better for them (groupola) to have claimed that their servers failed because of something that was impossible to verify, for instance, that they had been attacked by russian hackers or some such thing. It's interesting that there doesn't appear to be any PR floating about on the net that makes any metion of the 'fantastic' 200 iPhones that were allegedly sold. I would have thought that if this was genuine, then the PR machine would be in overdrive by now?

about 6 years ago

Avatar-blank-50x50

Jenny White

Groupola UK no longer exists--has been "absorbed" by My Vouchers.

over 5 years ago

Avatar-blank-50x50

Helen Catterall

These new entrants to the market need to realise that there are important guidelines that they need to follow, and that trying to cheat their way to increasing their market share in this way will only backfire on their brand in the long run, due to negative publicity like this.

over 5 years ago

Comment
No-profile-pic
Save or Cancel
Daily_pulse_signup_wide

Enjoying this article?

Get more just like this, delivered to your inbox.

Keep up to date with the latest analysis, inspiration and learning from the Econsultancy blog with our free Daily Pulse newsletter. Each weekday, you ll receive a hand-picked digest of the latest and greatest articles, as well as snippets of new market data, best practice guides and trends research.