General Rental Center nets 371 customers with half-price propane

When Darick Hemphill, owner, General Rental Center, Springfield, Mo., set out to put an ad on the Web offering a half-price deal to fill propane tanks, nobody else at his store thought it was a good idea. Determined to try something new, he pressed on, researching Groupon and his marketplace as well as doing the math. In the end, 371 unique customers had purchased propane from his store through the online ad and he had found another method of marketing his business.

Hemphill had first run across Groupon during routine Web surfing awhile ago. He was intrigued, but then found out the service was not available in Springfield. When Groupon was in the news late last year for turning down an acquisition by Google, he checked again and discovered that the company had just started servicing his area.

Groupon.com and similar websites negotiate deals with local businesses to offer services or products for at least 50 percent off the regular price. Users find out about the deals via a free daily e-mail or from social networks where the deals are posted by other users. To buy the deal, users click on the offer and purchase it with a credit card. After users buy the deal, they get an e-mail with the receipt and instructions on how to print the Groupon coupon.

“I was trying to make people aware that I sell propane at my South Campbell location. Due to some lucky buying decisions, I had a really good margin to sell propane refills,” Hemphill says.

Deals must “tip” before they can be sent to users. Businesses and the Groupon site will set an amount of sales that must be achieved before the deal is a go. For instance, if the tip number is 30, then 30 users must buy the deal to “tip” it. Once a deal is tipped, the offers are sent out to buyers. If the deal does not “tip” within a specified time, the deal is off. Nobody gets charged and no one gets the deal. A countdown clock is included on the site.

When a deal goes through, Groupon pays the business that made the offer while retaining a percentage of the sales, usually about 50 percent of the revenue.

“It costs 50 percent of the revenue to run the ad. It is a higher percentage of actual sales as opposed to normal advertising, which has a set rate for speculative sales,” Hemphill says. “Most businesses I have seen count the transaction as an advertising expense. The key question is, ‘Can you convert the Groupon sales into repeat customers?’ That is why we are giving normal coupons when they come in, so that we can track the actual dollars of sales generated by the 371 propane refill buyers.”

The company’s participation also seems to have generated new customers even without the coupon. “We’ve had several people come in who heard we had propane because of Groupon, but they did not get online in time to buy from Groupon,” he says.

Before Hemphill’s ad was posted, he also did research to make sure Groupon would accept his business. “We have good Facebook reviews, Google reviews and a strong Web presence. I spent a few days brainstorming about what products we could give away for half off and still be OK. Then I hounded Groupon. I called and left messages until I was able to speak to a live account manager for my area. She was very hesitant to do a propane ad. It honestly isn’t a very exciting product,” he says.

Once the ad was placed, Hemphill says he started watching the Web like a hawk. “The ad started at midnight. There was not one darn sale from midnight to 5 a.m. I was seriously worried and disappointed. They began releasing e-mails about 6:30 a.m. and in one five-minute period, we had 10 sales. After that, I was either answering calls about the ad or checking the website. As of 5:30 p.m. that day, we sold 271. The ad ran until midnight and 371 was the final count,” he says.

Research was an essential part of the process, Hemphill says, because the ad couldn’t be changed after it was released. “I goofed. I used Google to find out how many gallons were in a 20-lb. tank. The first and second search results were wrong, but I relied on those numbers to set the refill price, so I lost more money on the deal than I was hoping for. At first I also wanted to run our ad before Christmas and I should have insisted on it, because I think we would have sold even more.”

Not everyone at the rental store was thrilled about the idea, he says. “I was fighting everyone to do this ad. My parents thought it was a dud idea. My staff was not thrilled, either. After our ad was accepted on the site, I attended an online class to help me prepare our staff for the rush. I am so glad I did,” he says.

The best part about the Groupon ad, he says, is accountability. “When I advertise in the newspaper, I have no idea if anyone reads it. Everyone who came into my store was a unique customer who owned a propane tank and thus I know I hit a target market.” In addition, Hemphill drafted a press release he sent to all local media about the Groupon ad, which led to a mention on TV and in an online story. “We just got a bonanza of free advertising,” he says.