The LaFontaine Automotive Group has become the first in the U.S. to offer a Groupon car voucher deal, reports Crain’s Detroit Business. Its Highland, Mich., dealership, LaFontaine Buick GMC Cadillac, completed 2010 as the nation’s top seller of all three vehicle makes. A Groupon discount is expected to boost sales considerably.
Groupon: From facials to autos
Online discount coupon service Groupon, which is known for half-off offers for day spas, hotels and restaurants, will delve into the automotive market for the first time as a result of its partnership with LaFontaine Buick GMC Cadillac. LaFontaine General Sales Manager Robert Milner admits that while he was initially reluctant to be the first U.S. auto dealer to try Groupon, the recognition that comes with setting a precedent is welcome.
“We’re dipping a toe in it,” said Milner.
How the LaFontaine Groupon offer works
Groupon users can purchase a LaFontaine voucher good for $500 toward the purchase of a vehicle, redeemable in 2011. The voucher costs $199. Profits from the LaFontaine Groupon car deal will be split between the two companies.
Because the deal will cost LaFontaine Buick GMC Cadillac $400 each, Milner says the dealership has capped the Groupon deal at 150 total vouchers. The cost per transaction is comparable to standard advertising expenses per vehicle.
Groupon expands its horizons
Because the LaFontaine Automotive Group deal is the first of its kind for Groupon, the coupon company is optimistic.
“Since the beginning, Groupon’s goal was to give service and structure out of the norm to local businesses and so that the local users would be able to shop with a discount,” the company said in a press statement. “Groupon started with local businesses and went to spas and hotels and thought the next step would be to go to a car dealership.”
Milner told local media that if the Groupon car voucher deal goes well, LaFontaine Automotive Group may extend future offers to its entire 14-franchise dealership fleet.
LaFontaine deal presents potential problem for Groupon
Harvard Business School professor Dr. Ben Edelman noted that while the potential take for Groupon when dealing with auto sales may be great, such partnerships aren’t problem-free.
“This voucher is for a very small portion of the cost of a car or lease, so it’s basically an agreement to buy or lease a car from LaFontaine,” Edelman said. “That’s poor negotiating because the dealer could take advantage of that by offering the same car for more money.”
Standard Groupon operating procedure has been that prices for goods and services are already clearly posted for customers. Considering that it is somewhat unclear at this time how the car voucher will be applied, Groupon is exposed to somewhat more risk than normal.
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