Groupon Case Study

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1. Coupons have been around forever, so why has Groupon become successful? I believe that Groupon has become successful for many different reasons. First of all, Groupon was the first to transport the traditional “Coupon clipping” to the online world. This opened many opportunities. It was something new, exciting to consumers that they hadn´t seen in this way. So Groupon had a first mover advantage even though they only connected already existing ideas and technologies in a new way. By being online Groupon could reach many, possibly millions, of people at once. This was a strong argument when Groupon talked to local merchants. As most of these merchants did not have an extensive marketing budget and were not necessarily familiar with new online marketing techniques, this was a great opportunity for them to attract customers without a big investment. Groupon was very smart to lure local merchants by forgoing any up-front payments and letting them decide about specification of the offer such as the tipping point: the merchants thought they had nothing to lose. Groupon also realized very fast that local merchants respond well to face to face interaction and instead of just trying to make business over the phone and via e-mail Groupon started to build a sales force of accounts executives based in local markets. Furthermore, Groupon was very aggressive when it came to negotiating discounts. Opposed to regular coupons that might vary in the percentage of discounts given, Groupon only gave out vouchers with a radical discount of at least 50%. Being able to find such high discounts on a regular basis for many different products and services all in one place, made Groupon very attractive to consumers. It was very convenient that the offers were local but not limited to a certain store or product/service. And the offer was also very simple to use for consumers. They pay for the voucher online at their Groupon account and take the voucher to the merchant where they will get offered item/ service. Secondly, the whole concept of Groupon was very different to the regular “coupon clipping”. As the name hints, Groupon is a mix of the words group and coupon. The group part is an important variable. While coupon clipping is something everyone does individually and in privacy, often it is regarded as an embarrassing act and related to “being poor”, Groupon is a group activity. People have to bond together in order to get a certain offer. It is nothing embarrassing. It stresses the power of consumers bonding together to achieve a discount. Groupon, being online, attracted a very different audience than the regular housewife that clips coupons. It reached young, educated and relatively affluent people. Groupon also found a new way to introduce coupons to this kind of audience. They did not simply place boring, informative coupons on their site but they hired special editorial staff to make the coupon descriptions entertaining as well. The new target audience responded well to this approach of mixing real benefits with entertainment. Another important factor is that this audience is highly connected through social media such as facebook and twitter and they love to share information with their friends. Groupon hugely profited from this interconnection of their audience. The typical Groupon user values peer-opinions very highly and Groupon enables them to share their purchases and

interests on vouchers with their peers through social media. The smartly integrated concept of the “tipping point” strongly facilitated this sharing. In order to get a certain discount I really want, I can increase my chances if I share this opportunity with as many people possible and social media makes this as easy as never before. Another factor that contributed to Groupon´s success was that offers were very limited in terms of time. When Groupon started out there was one offer available per day and therefore this offer was only valid for 24 hours. This has a...
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