Groupon - Reichheld’s Loyalty

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Groupon – Reichheld’s loyalty model
PROBLEM STATEMENT: Groupon’s consumer (end-user) value proposition of deep discounts on goods and services is attracting bargain shoppers who are inherently disloyal to the Merchant businesses offering the coupons. HYPOTHESIS: Groupon’s should change their strategy by offering fewer one-time discounts and put an emphasis on long-term value for repeat customers ANALYSIS PLAN / SOLUTION APPROACH: Reichheld’s loyalty model together with the Value Disciplines model was utilized to evaluate and identify Groupon’s and their Merchant Customer’s problems and opportunities. DATA USED / KEY ASSUMPTIONS: Data and resource materials include financial and business analysts’ reports sourced from WSJ, Seeking Alpha, Forbes, Slate, and VC. CONCLUSION: The results of the Loyalty analysis show that the deep discounts are attracting bargain hunters who are inherently disloyal customers; this type of customer are not who the Merchants are trying to attract. The goal of the Merchant customers is to attract new customers and convert them to repeat customers; Groupon’s strategy is to attract new customer through deep discounts. These strategies are discordant; the Merchants typically view their Value Disciplines as Best Product or Best Total Solution but Groupon’s bargainhunters are attracted by the Lowest Cost. Although there are concerns related to employee loyalty and investor loyalty, the problem stems from the above-described conflicting strategies. RECOMMENDATION TO MANAGEMENT: Groupon’s deep discount strategy is incompatible with the type of customers Merchant’s seek to attract. Groupon should change their deep-discount coupon strategy to align with the goals of the Merchant Customer. Groupons should shift their strategy by offering fewer one-time deep discount coupons and focus on further developing their rewards program to create long-term value tied to repeat purchases; this will not only help the Merchants attract the right customer but

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