This is where I'd hope trademark law kicks in. Here's hoping Loopt gets what's rightfully coming to them.
It would be impossible for Loopt to enrich itself at the expense of the local businesses. A local business wouldn't take the deal unless they felt it was to their advantage-- unless it was a "win-win" scenario.
Let the businesses decide what's at their expense.
Suppose Loopt posts some deal, like this one with the bi-rite creamery, and then bi-rite is like "heck no!" What will the user think? They will think "bi-rite sucks, what the heck, those jerks aren't honoring their commitment. Dicks."
It is waaaay too much to expect users to have a thorough understanding of what's happening here.
Put another way: For myself, I like to underpromise and over deliver. Loopt here is making the promise, and then saying "Hey, so your users now have this expectation. It's your choice whether you meet it, which may not financially tenable, or fail to meet their expectations, damaging your brand."
I want to attribute this whole thing to Hanlon's Razor, but it's hard to believe that a bunch of professionals are so brazenly callous about the use of others' trademarks.
Loopt is building a mailing list of people using the business's brand name and causing customer service issues for them.
I've forward to this to some friends in the payments space. This might be considered credit card fraud because they are also taking people's credit card numbers in conjunction with a service they can't commit to delivering.
Having said that, some businesses will likely go for this, and the legal penalties will probably be lower than your profits, so kudos!
Obviously, it doesn't work for us unless it works for both of those groups [consumers and businesses]
And sometimes those companies take offense: http://37signals.com/svn/posts/1650-get-satisfaction-or-else
If Loopt explicitly allows companies to opt out (and prevent the creation of deals for that company) then perhaps the service might be beneficial (companies that opt in to stay may get valuable feedback of what the consumer wants/would be willing pay for).
I may be willing to pay $3 for a latte from my favourite coffee shop... but you're damn right I'm going to vote yes on $1 coffee. Why wouldn't I? This is going to result in a lot of businesses needlessly offering discounts to existing customers for little discernible benefit. On top of this, it sheds no light on the effectiveness of pricing structures, since there's nothing in the system that encourages the discovery of pricing equilibrium.
I've spoken to a couple of business owners who have done Groupons - they see it as a marketing expense that seems to have greater returns than many traditional methods (coupons books, junk mail, etc). But Groupon works in a way that this idea does not: it gets new customers (whether or not they're good new customers is besides the point).
As soon as a business wants to opt out, we block them permanently in the system and remove any pending deals. We're changing the product right now to make the language more clear, and we're not going to use any trademarked images until the business approves the deal. We're going to make it really clear that a business hasn't approved a deal until they do.
We've certainly gotten negative feedback from a few businesses, but in general people seem excited about this--word of mouth is a great referral, and businesses understand that. The promise of u-Deals, if it works, is that your best customers become your big advocates.
Should we have gotten this right from the beginning? Yes, and I'm sorry we didn't. We've gotten things wrong in the past, and we're going to get things wrong again. As always, we'll try not to get the big things wrong, we'll do everything we can to make it up to our users, and we'll get it fixed as fast as possible. That's the nature of trying new things, and it's how the world gets better.
Always, always, ALWAYS Opt-in.
Using the names of others to promote yourself until they tell you to stop is unethical and possibly illegal.
This is a stain you can never cleanse from your business. Everyone will always say 'Loopt? Wasn't that the company that used other companies without the approval?' And that's if you're lucky.
Because it if goes any further and a company gets a bad name from this, it'll be 'Loopt? Wasn't that the company that destroyed the reputation of Company X?'
Saying you were 'trying to iterate on it' is not enough. Saying you're trying to fix it is not enough. You need to outright admit how wrong it was and publicly apologize to every company you did this to.
I think if we use the name of a business in a "Loopt users want a deal at Place X. If enough users express interest, Loopt will talk to the business owners to try to make it happen" that's ok. But we definitely shouldn't imply that a business has given any sort of consent before they have, and we shouldn't use their logo or images.
There's no way this should be an opt out. Loopt is trading on the business's good name and offering a "deal" that doesn't exist.
It's inconveniencing the business and potentially damaging their relationships with customers to the benefit of Loopt.
It's just plain wrong and indefensible.
(Author of the original post.)
Or really any service where a business might be capital constrained and where economies of scale exist.
The only problem here is the deceptive presentation. If the site was crystal clear about how it works then you wouldn't have to apologize to anybody. There's nothing wrong with a bunch of people getting together to ask for group discounts.
Just be upfront about the scheme. I think people will go for it.
Seeing it in the flesh - it feels wrong. It's passing-off.
Anyway, I think judgement should maybe be postponed. This could easily be an awkward mistake. The overall intent doesn't seem nasty. The execution, particularly clear messaging, has just (perhaps) been done absentmindedly. It shouldn't be too late to clean this up. Let's see if they do.
The fundamental problems as I see it just starting with user persective: 1) I put in effort as a user to create a deal - with the high chance of no payoff - why would I ever do this the first time, let alone the second time 2) I have to wait for other people to join - so gratification is at best delayed 3) Very likely the deal will not be accepted by the merchant.
The ideal model for coupons would be take out the high cost of sales in this business. And getting businesses to go to a website and submit their deals by themselves. Of course SMB are notoriously slow to adopt new technology (many still advertise in YP). But over time, they will get there as well and the winner will be whoever is there when SMB begin making the move.
If you got ten of your friends together and put in bids on Loopt for a few different pizza places, it's not too different from the GPO process. You are basically saying, "I am willing to buy 10 pieces from you at this discounted rate." It makes me wonder if most of this talk about brand erosion etc is mostly alarmism.
If they fail (which is likely for any startup) then it's because the idea wasn't a good. It stands to reason that they can make this clear to both parties: consumers and businesses. If they didn't at this point then I am sure they'll fix it because ultimately everyone actually will be angry. The market will answer so you need not worry. I am sure Loopt has done a sufficient amount of customer development before exhausting all their engineering bandwidth, marketing resources, and product focus--meaning you should consider giving them the benefit of the doubt.
Let businesses decide. It's not something you're capable of proving. Loopt likely is gaining more feedback about it then you realize.
I saw plenty of writhing away from the blame (It's a bug!), instead of admitting his mistake and apologizing publicly.
I saw a lame joke written by Sam in this thread (shortly pulled after by the author) that was something to the effects of "I wouldn't help clean his house, he clearly doesn't like me".
If I saw all this and I was on the board, I would've already called a quick board meeting to replace the current CEO.
I repeat... I have nothing personal against Sam. Never met the guy.
