TABLE OF CONTENTS
This is a long post (~17 minute read, according to Medium), so if you want to skip around, here ya go!
I vividly remember when Groupon took off. I was a student at NC State with a growing interest in entrepreneurship, and I came across an article called “Meet the fastest growing company ever.”
Groupon was a tremendous success in many ways. It served millions of customers and countless businesses. It went public and generated economic value for stakeholders.
But ultimately, at least in the restaurant community, the indelible perception of Groupon is something less than it could’ve been. It has become the poster child for a toxic form of discounting that is ultimately detrimental.
What happened? I believe (one man’s humble opinion) that Groupon failed to properly define its community. Groupon seemed to put the majority of focus on discount-buying customers, without thoughtfully addressing the needs of merchants.
What does this have to do with Premium? Well, sometimes it’s useful to define a product or service by first defining what it is not.
Let me just say this bluntly: Premium is not a “fancy Groupon.” Premium is a new kind of subscription that gets you out, about, and exploring your city.
We’re also a local community made up of members and businesses that interact with each other, face-to-face, thousands of times each month. It’s critical to understand that our community is more than just members, and it is meant to become a service that members and businesses both love.
If we can pull that off, we can actually make cities better. When thousands of people are trying new things every month and businesses are benefiting from steady streams of new, high-quality customers, the local economy is inevitably strengthened:
In every Premium newsletter you’ll notice a section that tells that story. Jointly, across Raleigh and Durham, the impact we’ve had over the last 15 months is truly inspiring.
SO, WHY A CODE OF CONDUCT?
It’s simple: the thousands of monthly interactions between our members and our partner businesses will make or break our service. If those interactions go well, we will continue to attract quality partners and quality members, which creates quality experiences for everyone. I’ve started referring to this as the “Positive Feedback Loop” of Premium. Here it is, from when I first sketched it out at my desk:
If too many of those interactions go poorly, quality partners will stop working with us. This will attract lower quality members, which will create lower quality experiences. The result is a negative feedback loop, or what I refer to as “The Groupon Trap.”
For our team, building that positive loop and avoiding The Groupon Trap is more important than keeping 100% of our members and businesses. Let me repeat that. Building a Positive Feedback Loop that creates better cities and avoids The Groupon Trap is more important to us than keeping 100% of our members and partners.
Over the last year, we’ve worked to deeply understand the factors that drive that feedback loop. The Premium Code of Conduct is the output of that process, setting a shared expectation for community interactions.
Opting in to the Code is a requirement for all new members, but the nature of attention spans and signup flows means that we need to keep things short and sweet on the website. For those who care to dig deeper, we decided to link out to additional context. This post is that additional context.
Before I dig into the Code itself, I want to address something that new and existing members may be feeling: “if it was necessary to create a Code of Conduct, I wonder how bad things must have gotten!”
I want to assure you that the vast majority of feedback about our community has been positive. Unfortunately, it’s human nature to dwell on the negatives. A partner could have 100 great interactions with our members and then have 5 members who spend no money, leave no tip, and are rude in the process, and it will ruin it for the other 100. The Code of Conduct is here to protect and reinforce the great behavior of the 95% and to send a clear message to the 5%.
For the first year of Premium, the vision and expectations were communicated piecemeal in ad hoc emails, and we sometimes contradicted ourselves with “deals-y” sounding language in our marketing. We’ve always had a vision to build a premium service with premium partners and premium members (hello, it’s called Offline Premium!), but that was never explicitly stated. Now, it’s time to be explicit. A community without a clear purpose and common set of values is just a crowd.
THE CODE OF CONDUCT, EXPLAINED
#1: I agree to be respectful
As basic as it sounds, it’s critical. Again, the vast majority of interactions within our community have been nothing but love, but in full transparency, there have been isolated cases over the past year where staff have disrespected our members, where members have yelled at or even threatened staff, and where members have been incredibly rude to us.
In a vacuum, those interactions are unacceptable, period. That said, we’ve given everyone involved the benefit of the doubt so far, because we had not yet made our expectations clear.
I remember one serendipitous day when I was frustrated by some feedback I’d gotten about a group of rude members, and I happened to watch a movie at Alamo Draft House that night. Before the movie started, Alamo made it unequivocally clear that if you were on your phone during the movie, they would kick you out without a refund. I realized in that moment that my frustration was unfair, because we hadn’t been clear with our expectations.
Raleigh and Durham are small communities, and respect and kindness go a long way. We expect our partners to be respectful to us as members, and for members to be respectful to our partners and to each other. For that matter, we expect you to be respectful to our team. That doesn’t mean that you’re wrong, or that you should be afraid to address issues directly, but the way you go about it matters to everyone involved.
#2 I agree to support partner businesses
I’ve never worked in the hospitality industry specifically, so I don’t really know what it’s like, but I can imagine. I imagine walking up to a table that I have served all night to bring them their check — it’s a check for $185 — and all of a sudden all seven people at the table tell me that they have a service called Offline Premium that will collectively allow them to take $175 off of their bill. After applying the discount, I return to their table with a $10 tab and they leave me a modest tip. That’s a true story.
When a business is giving a $15 or $25 gift card to Premium members, they are making a bet. In order for that bet to pay off, our community has to be full of quality customers who largely have never been there before, intend to spend money, and have a good chance of coming back in. Quick math: a $25 gift card across 2,000 members is $50,000 in face-value. That’s a big bet!
I remember when we started to dig into the numbers with our first couple of partners to see how the bets were paying off. The feedback was usually something like this: “this was an incredible partnership in terms of exposure and new customers, and it’s definitely something that we would do again at some point in the future, but I will tell you that there is a percentage of your members who go out of their way to spend the bare minimum. Some of them even pull out calculators to make sure that they don’t overspend! Even though it’s a small percentage, it’s very, very frustrating for us and our staff.”
We’re total data nerds, so my stance on feedback is always “trust, but verify.” Our team spent 2 to 3 months digging deeply into the (anonymized!) data across multiple partners to see whether these stories had merit.
Here’s some data from two anonymous partners. We crunched many, many more datasets than this:
If you think about this data from the perspective of the restaurant partner, the most frustrating interactions are the transactions where members spent $0. That’s compounded by the fact that, since there is no transaction in those cases, most of those members likely walked out without tipping.
I will admit that sometimes the lack of spending is and has been our fault. It can be hard to spend $25 on ice cream! But when we’ve partnered with a fairly pricey restaurant and members pull out calculators, the strong perception is that these members are simply takers; that they are cashing in on free food and will never be back.
You’ll never find a business like Chipotle on Premium. Or McDonalds. Part of being Premium means genuinely caring about the local business community. Local business owners are our neighbors. Their kids go our schools. Their best interests and the best interests of the community are tightly aligned. Our community needs to respect the difficulty of running a small business and make sure that we are doing our best, within our means, to take care of our local business owners. If our community is spending money with partners and treating them well, we’re rewarding them for betting on us, and we feed the Positive Feedback Loop:
One note before I close out this section. I understand that as members, we’re paying a subscription fee in order to have access to the value of our membership, and to a certain extent, that means that we’re entitled to use our Premium Offer however we want. While I tend to agree with that sentiment, the point of this section is to help our community understand the implications of our actions so that whatever we choose to do, we do intentionally, and with proper context.
*** UPDATE 7.18.2019 ***
After publishing this post and launching the Code of Conduct, there was a period of excellent and thought-provoking email Q&A with few of our members that caused me to make a tweak to the wording of the official Code of Conduct:
“I also don’t drink alcohol or soda, so adding a drink isn’t really my thing. I’m also a pescatarian, but mostly eat vegetarian which makes my meals cheaper. I find that I’m usually over eating just to spend the minimum amount (15–25), even with added appetizers and desserts i still just get right to the minimum.”
“as someone who is typically only using the offline premium perk for my own individual meal (most of my friends are also members of offline and receive the same perks), one average size portion/meal rarely exceeds the perk amount. Here are two very recent examples: [redacted]…I absolutely want to support local businesses, but I also don’t want to create food waste by ordering beyond what I can eat in one sitting.”
These comments (and others like them) helped me understand that there is a spectrum of legitimate reasons why someone may not spend more than the offer amount at a particular business, and those reasons aren’t immediately obvious to the staff, the owners, or our team.
I want to be very clear in saying that the spirit of this rule is more about mindset than overspending, per se. The mindset that we oppose is a mindset of “let me grab my calculator to make sure I order $24.99 worth of food,” and who prioritize penny-pinching over having a great experience.
As we enforce the Code of Conduct, It will be difficult to distinguish between people who are intentionally abusing Premium with the intention of just cashing in a free meal ticket and people who have legitimate reasons why they are spending less than the offer amount, but I am unequivocally committed to creating a fair system that can handle nuance.
By signing the Code of Conduct, you are not putting yourself at risk of being suspended from Premium for a single, ambiguous offense. We are much more interested in patterns of obvious behavior that are damaging to our partners and to the community.
As always, if you have additional questions about this particular section, you’re welcome to email me at email@example.com.
#3 I agree to support partner staff
In the early days of Premium, lengthy recaps with owners and staff after each partnership were the norm. After the first few meetings, we noticed a common refrain: “your members don’t tip.”
Nothing in the industry annoys staff more than not getting a tip when you deserve one. I remember having so many questions when this would come up. How many members don’t tip? Are they not tipping at all, or are they just not tipping enough? Are they really behaving differently from the general population, or is this just some sort of white lighter confirmation bias? How much of this is due to confusion about the pre-discount amount vs post-discount amount? What else is going on?
In the same way that we crunched the spending data, we also crunched the tipping data. Premium partners generally break down into two categories: sit-down, full-service restaurants ($25 Offers) and “fast casual”/cafe concepts ($15 Offers).
Since we’re all probably most familiar with expectations at sit-down restaurants, let’s look at those first. Here’s the data from two anonymous partners:
You can see that the staff was correct, even if they were exaggerating a bit. On average, we’re tipping less than the general population.
At first glance, you might think “but it’s just a couple of percentage points!” That’s true, but you have to take into account the psychology. We’re getting money taken off of our tabs already, and unfortunately the default is to look at a discounting customer with a little bit of suspicion. The ball is in our court to disprove that stereotype!
Imagine you’re serving at a restaurant and lots of groups of people start coming in who are all wearing purple T-shirts. Imagine that you wait on a group of purple-T-shirt-people, and they leave you a crappy tip. Then it happens again. Even if there are lots of other groups of purple-T-shirt-people that are tipping great, humans are notorious for overreacting to the negative. This has less to do with Premium than it does with psychology.
That said, there is still a real discrepancy. What’s going on here? We believe that it boils down to two things.
- Some of us are forgetting to tip on the pre-discount amount.
- Some of us are spending less than the Offer amount (e.g. spending $23.05 and redeeming your $25 Offer for a net bill of $0), leading to no transaction at all. With no transaction, there’s no real opportunity to tip. No one carries cash anymore, and most of us don’t think to have our cards run for $1 just to leave a tip.
Our vision for a Positive Feedback Loop demands that we correct this imbalance, and there are three simple fixes:
- Always tip on the pre-discounted amount. Now you know why you see this rule in the Code of Conduct.
- When at all possible, try to spend some amount of money so that you have an opportunity to leave a tip.
- Follow our new “suggested tip” guidelines. Starting July 1st, if we know what a partner’s average tip is from non-Premium customers, we will tell you in the Premium newsletter so that you have a reference point.
Ok, so that covers it for sit-down restaurants. What about fast casual and cafe concepts?
Frankly, this was the part where I was completely ignorant. Before Premium, when I’d pop into a place where I could buy a poke bowl, a coffee, etc., I used to think that tipping at all was extremely generous. That might’ve actually been true back when cash tips were collected in a jar, but in 2019, we have to look at the data.
Here’s the anonymous tipping data from two of our fast-casual/cafe-style partners:
You read that right. The average tip from non-Premium customers at these two fast-casual partners was over 9%! Whether or not you realize it, the expectation from staff at these partner businesses is that you will tip, and that 9%+ is the norm. That was honestly news to me.
But still, I don’t really believe that Premium members are any less generous, on average, than the general population. So, how do we correct the discrepancy?
Again, we can boil it down to the three same fixes we laid out above:
- Always tip on the pre-discounted amount. All of our fast casual partners qualify for $15 Offers, so some simple math to meet the ~10% tip target would be to leave no less than $1.50 tip. This can be frustrating because restaurant point-of-sale (POS) systems usually run the pre-calculated tip amount off of the remaining amount after your discount. What the heck did I just say? In simple terms, if you spent $17 with a $15 Offer and were left with a $2 balance, the default tipping prompt of 15% would be $0.30 when really you should be tipping about ~$1.50. Most modern POS systems like Square allow you to hit a “custom tip amount” button and type in your own tip. You should do so if possible. Other POS systems will change their defaults from 15%, 20%, and 25% to $1, $2, or $3 if the transaction is small. In these cases, your options are much easier. If a partner’s POS system makes it excessively difficult to tip, we understand if you don’t. We don’t want to create an excessive amount of work for you, and maybe some of our partners need to think about modernizing their POS systems!
- Always spend at least a little bit of money so you can run a transaction. This one was particularly important in fast-casual/cafe concepts because there were certain partners where more than half of us were not spending the minimum, meaning there was no transaction at the end and therefore no tip at all. As I said above, there are times when this is our fault because we’ve engaged in a partnership where spending $15 is actually difficult. But when possible, we do expect you to exceed the minimum so that you’re able to leave an appropriate tip.
- Follow our suggested tipping guidelines. Starting July 1st, if we know what a partner’s average tip is from non-Premium customers, we will tell you in the Premium newsletter so you have a reference point.
As with the spending section, hopefully you can see that the tipping component of our Code of Conduct is rooted in empathy, confirmed by data, and meant to feed the Positive Feedback Loop of Premium.
#4 I agree to give and receive feedback
I’ve been working on building products for 20k+ hours of my life, and maybe the most important thing I’ve learned is that continuous customer feedback is the difference between successful products and unsuccessful products. Our team goes out of our way to get feedback from members and partners and to be transparent about why we’re making changes when we make them.
But that type of feedback is only part of the picture:
To complete the “feedback triangle,” there needs to be feedback directly between members and partners.
I opened this post by introducing The Groupon Trap, and I truly believe that focusing on the relationship between our members and our partners is the most critical component of avoiding that trap. I also believe that partner-member relationships, like other healthy relationships, should be driven by mutual feedback.
When I was researching this problem space, I had an “ah-ha moment” where I realized that the community trust within services like Airbnb, Lyft, Uber, eBay etc., is build by mutual feedback and ratings. Millions of strangers would never be able to pick up millions of other strangers off the side of the road without trust, and that trust comes primarily in the form of mutual ratings. Millions of strangers would never be able to stay in the homes of millions of other strangers without trust, and that trust comes primarily from travelers reviewing hosts and hosts reviewing travelers. Mutual feedback and ratings make the trust go ‘round in 2019.
If that’s true, then the way to build mutual trust in our community over time is to allow members to review and provide feedback to partners, and to allow partners to do the same for members. Is every rating going to be a perfect, unbiased proxy for what happened in that interaction? Of course not! That’s why you need multiple ratings on a partner and/or a member before you can attempt to draw any conclusions. We’ve been beta-testing a rating system over the last few months and are starting to get a sense for where we should draw the lines. In full transparency, the rating system is not ready for prime time yet—there are still flaws that need attention.
For now, the important thing to know is that after every visit to a Premium partner, you will have an opportunity to rate them. That rating information will go back to Offline initially and then will be aggregated (anonymously) and passed along to the partner. By the same token, merchants will have an opportunity to rate members, and that feedback will go back to Offline initially before being (anonymously) aggregated and passed along to you.
I will be the first to admit that this type of transparency and feedback is a little nerve-racking for everyone involved, including me. What if someone rates me unfairly? Aren’t we giving up a lot of control? What if we falsely accuse someone of bad behavior? At the end of the day though, when I go to sleep at night, I passionately believe that to truly cultivate a community and not just a service where Offline is an authoritarian gatekeeper, we need mechanisms in place for healthy feedback.
So, to join Offline Premium, you must agree to give and receive feedback, and you must implicitly trust us to be good stewards of that feedback and to react to it fairly.
OK, WHERE TO FROM HERE? AND WHAT HAPPENS IF I DON’T FOLLOW THE RULES?
For the vast majority of partners and members, this new Code of Conduct means that you will continue to use Premium without seeing any significant changes. Hopefully, the only adjustment is that the Code of Conduct gives you important context about how to do the most good, as well as an additional sense of mission and purpose as a member. We want you to understand that each interaction is part of a larger puzzle that is making your city a better place to live.
For a small, small fraction of members, this will mean that at some point in the future you will get a warning email from us. That warning email will be triggered by ratings from our partners combined with ratings from our staff (from Premium events and/or support interactions). If you receive several, unequivocally negative ratings, we will let you know. In full transparency, we are still working out what the exact criteria will be, because we are very serious about fairness, and we don’t want to falsely accuse our members. Once you receive your warning email, you will have an opportunity to reverse the trend. If you continue to behave poorly, we will suspend your membership.
Since this is one cohesive community, the same goes for partners. If we continuously receive poor feedback on a partner, either because they are treating members poorly or because maybe they’re not a great fit for our audience, we will have an open and frank conversation with that partner about whether it makes sense to continue working together. If nothing changes, we will terminate the partnership.
Building a healthy community is no small task, especially when you can’t be present for every interaction, but it’s critical to the success and sustainability of Premium. I’ve spent a lot of time laying out the wrong ways to use Premium, but what are the right ways?
- Use Premium to explore.
- Use Premium to try new things.
- Use Premium if you care about your city and want to see the local economy grow.
- Use Premium if you want to get off your couch and get outside your comfort zone.
- Use it as an excuse to go on a date. To see a friend. To show a visitor how much you love your city.
- Above all, use it with the knowledge of what you’re doing—what you’re participating in. Be intentional with your actions. Be a good steward of your community.
If you read this entire post, or if you’ve been following Premium or Offline for a while, I want to sincerely thank you for giving us the space and the financial resources to experiment and try to get it right. We aren’t perfect, and we will make mistakes along the way, but I hope that you understand that our hearts are in the right place. We’re trying to do what’s best for our entire community, both partners and members.
As I said above, we love feedback. If you have feedback directly for me, you’re welcome to email firstname.lastname@example.org. If you have feedback for Premium in general, you’re welcome to email email@example.com
That’s all for now,
David (written on 6.19.2019)