Groupon

Topics: Business model, Merchant, Subscription business model Pages: 2 (647 words) Published: December 18, 2014


Introduction
Groupon is a company that mainly conducts business operations online on a website. The company features discounted vouchers on its website that subscribers can purchase and use at local and international companies. The company started operating in 2008 in Chicago and gradually expanded its services to other parts of the world. This paper explores various issues presented in a case study about Groupon to determine whether its business model is sustainable or not Analysis

Based on the information provided in the case study, Groupon’s business model is not sustainable. There are several problems with the company’s business problem that make it unsustainable. Firstly, a deal between a Groupon and a merchant can lead to more problems associated with overwhelming demand (Williams, 2014). A good example is the Yokohama’s local restaurant where a successful deal with Groupon led to an influx of too many customers. As a result of the overwhelming demand, the restaurant’s quality of products and services was affected, leading to customer dissatisfaction. The main problem with Groupon’s business model is that it does not cap deal subscriptions to a reasonable number to avoid incidences of overwhelming demand. A merchant may even end up losing the loyal customers due to dissatisfaction with the quality of goods and services (Williams, 2014). Despite making responsive deals with merchants, the problem makes Groupon’s services less attractive due to the expected end results.

Secondly, Groupon’s business model does not guarantee an increase in the number of loyal customers for merchants in the long-term. Many merchants seek for the services of Groupon with the aim of increasing the number of loyal customers. However, the deal can hardly enhance the loyalty of new customers. After using their discounted vouchers, customers are usually turned away by the full retail price and they may not return until they get involved in...
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