As Marketing Director for Daytona Motorsport, I am responsible for the product mix and pricing and critically for the communication and promotion of those products (and prices) to the customer – whether they are a corporate entertainment event buyer, a petrolhead wanting a blast around the circuit or a Mum looking for a safe karting activity for her offspring.
Even after 21 years on the Board of the UK’s most successful karting company, I can happily admit that I don’t know everything about karting promotion and that I don’t always get things right. Over the last few months I have been watching the massive growth in Groupon Karting discount deals and trying to work out why some UK kart circuits are effectively giving away their product to attract customers.
On the surface the recent surge in massively discounted karting activities seems like a win-win for the customer and for the circuit. The customer gets 50/60% off a karting experience and the circuit pre-sells a lot of karting. But when you start to investigate the real numbers, the customer and the circuit don’t really win. Groupon does – and then only in the short-term.
In order to illustrate my point, I can point to recent Groupon karting discount deals where the customer is offered karting worth £32 for just £15. I am not going to harp on about the three Groupon karting discount deals that we know are being currently investigated by the Advertising Standards Authority and various Trading Standards departments. In these cases, Groupon and/or the karting circuit have created a unique product (ie one that cannot simply be compared to their standard priced products) and then given it a very high price so that they can then give it a huge discount to grab the customers attention. I fully expect all three current investigations to find against Groupon.
So back to my example, where Groupon sell a £32 karting session for £15; the customer apparently wins as he gets something like 30 minutes karting for half price. The karting circuit apparently wins as he gets 100’s or even 1000’s of “new” customers. But when you drill down you discover that Groupon keep half the revenue (plus the credit/debit card fees) meaning that the kart circuit receives approximately £7 for the 30 minute session. After paying the VAT of £1.40, the circuit ends up with £5.60 for the session. Oh and Groupon pay you in installments over the life of the vouchers…
After all these years in the business, I pride myself on having a pretty good take on the costs of providing karting. Even if you have never worked in the karting industry, I don’t think it will challenge many people to calculate that the costs outweigh the revenue. To help you get a grip on the direct costs: paying the sales person to take your groupon booking, paying the receptionist who signs you in and issues your race suit, paying the Race Director to give you your safety briefing, paying the marshals who monitor and keep you safe during your session, paying the mechanics to prep/repair the kart etc etc. We haven’t even got close to putting the petrol in the kart yet – and karting circuits pay £1.40 a litre just like you do.
So please take my word for it, the £5.60 doesn’t even come close to covering the direct cost of providing the session. Now factor in the overheads and each Groupon customer costs the karting circuit a lot of money.
“But Groupon introduces lots of new customers to the venue,” I hear you say. Yes, it does. Lots of price-conscious, coupon-waving customers, the majority of whom do NOT spend money on extras, do NOT come back and who have no loyatlty to your circuit. They will race at your competitor if they offer a Groupon deal.
Now, once again, please don’t get me wrong. I am all for taking advantage of a deal. I have the Vouchercloud app on my Iphone and it helps me get 10% off at local restaurants and discounts. But saving £5 at Strada is a win-win for me and for Strada. They still make a positive GP and contribution towards overheads from my visit. And yes, I go back – even without a discount coupon.
But the “deep discounting” that Groupon offers scares me. It scares me for the karting circuits that offer these deals. If they lose money on customers, then how do they afford to pay for new karts, replacement parts, quality staff and training etc? And thus it scares me for the customer!
Daytona believes that there is a place for discounting within the karting industry. We will discount Arrive&Drive, Open Races and even Corporate Events when it is appropriate – and crucially at the correct discounting level. But we also pride ourselves on providing the very best value for money, customer service, driver safety and exciting racing in well-prepped, evenly matched karts. I am looking forward to the next few months as we announce major investments in equipment at all of our venues.
There is no competition between value for money and making a profit, so that we can afford to offer the best karts and equipment.
There is a competition between deep discounting and investing for a safe, exciting future for the circuit and the customer.
Please do feel free to take advantage of Groupon deals. But spare a thought for the poor business owner who will probably not have a business for long…
Jim Graham
Marketing Director
Team Daytona