Jessica Rae Velasquez
Groupon made huge waves in the business world when they first started with their concept. Groupon launched in 2008 with just a few dozen employees to over 350 employees with in a year and a half. Groupon was reported to be worth $1 billion dollars in just 16 months in to the business. When they were just two years old, Groupon surprised the business world by turning down a $6 billion buyout offer by Google. Critics where divided by Groupon’s decision not to sell because virtually vulnerable and they have no barriers to entry. As great as Groupon sounds they are facing a massive problem; their business model is easy to copy. Andrew Mason, the founder and CEO of Groupon estimates that there are over 2000 direct clones worldwide but he insists that there is only a handful there are relevant. The biggest threat to Groupon’s kingdom is LivingSocial, although significantly smaller than Groupon, which raised $40 million since launching in 2009. LivingSocial received its biggest boost when Amazon has decided to invest $175 million into the company. Despite the severe competition, Groupon does not seem concerned because they believe large-scale success demanded a degree of operational sophistication that few could match. Groupon’s unprecedented growth and success have mainly come from two factors: focus on local merchants and a self-imposed limits to a single promotion each day. This combination helped the company to deal with minimal scale and resources and thus to increase the attractiveness of its initially rather small community. The best choice Groupon made was to establish their business models by cities and offering deals from local merchants has increased their attractiveness for their early subscribers. Many local merchants have tight marketing budgets who are struggle to reach customers found the allure of an outsourced online promotion with no up-front expenses very compelling. This alone became the single source of success for Groupon. Many people first learned about Groupon through their family and friends. To encourage word of mouth Groupon offered $10 towards future purchases for each referral. Groupon became very popular among young, well-educated, unmarried and relatively affluent customers. The main reason Groupon became appealing to consumers was that its saved them money as well as its convenience and variety. With Groupon offering deals locally, consumers are able to find fun and exciting activities locally without having to travel worldwide. Many consumers feel like a tourist in their own hometowns because they are able to try new thing through Groupon that they otherwise will never find. Merchants Behavior:
The research provided in this case study shows that Groupon is indeed good for merchants, but in all fairness Groupon is not some miraculous one-size-fits-all marketing tool – and so no one should expect it to be so. Selected research shows that Groupon equips merchants with the technology and buzz to attract high caliber consumers. Consumers that, on average, spent 40% to 60% over face value of the any given voucher, and made repeat visits to the newly discovered merchant. Ninety-five percent of merchants said they would run another deal with Groupon – granted the other 5% were significantly disappointed with their Groupon experience. Some merchant complaints included claims that Groupon deals cut into their margins significantly so as to leave them in losses, the overall customer experience deteriorated with the increased traffic created by the deal and that deals created confusions as to lead to a poor initial customer experience. That is the argument that Group is not good for merchants. In selected circumstances, Groupon is probably not the best marketing solution, but we do not believe that provides grounds to say Groupon is overall bad for...
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