Groupon Analysis
Major Issues
- Labour intensive business model creates scalability challenges
- Huge amount of competition : on paper coupons, similar sites, big players (amazon, facebook, google) , living social, international markets
- Easy business to replicate
- Vendors not necessarily bought into the model (Merchants are not making money on daily deals (55%), 36% of customers spent beyond the voucher value (pg. 30))
- Customers are simply not loyal
Strategic Alternatives
1. become a niche player and dominate it
2. Understand the customer better - create loyalty based on their personal interests + pare down sales force by selling off some international sites where competition is high (ie. china with 3k sites).
3. Create a new type of deal which generates loyalty / bounce back + pare down sales force.
Recommendation
Options Grid Option 1 Option 2 Option 3
Description of Option Become a niche player and pare down its sales force Create a more customized option for customers + pare down its sales force (by selling off some of the international subsidiaries) Create a new type of deal which encourages loyalty – ie. multiple visits
Overall Assessment Do not recommend:Risk of becoming another me too player like gilt, woot , etc. Recommend: they need to pare down their salesforce in order to get to profitability. Additionally, they have a huge customer and vendor base already. Do not recommend:
Consumers are not loyal and there is not inherent proof in the market that consumers are interested in actually being loyal to a brand advertised on Groupon. Additionally, it is unclear whether this is a financially attractive option for the vendors (ie. bounceback offers)
Strategic Fit Low: completely opposite from their current strategy of having a wide offering, catering to multiple market segments High: Groupon already has the infrastructure (sales people, website backend (customer tools), and customer / vendor lists Medium: can leverage existing vendor and
- Labour intensive business model creates scalability challenges
- Huge amount of competition : on paper coupons, similar sites, big players (amazon, facebook, google) , living social, international markets
- Easy business to replicate
- Vendors not necessarily bought into the model (Merchants are not making money on daily deals (55%), 36% of customers spent beyond the voucher value (pg. 30))
- Customers are simply not loyal
Strategic Alternatives
1. become a niche player and dominate it
2. Understand the customer better - create loyalty based on their personal interests + pare down sales force by selling off some international sites where competition is high (ie. china with 3k sites).
3. Create a new type of deal which generates loyalty / bounce back + pare down sales force.
Recommendation
Options Grid Option 1 Option 2 Option 3
Description of Option Become a niche player and pare down its sales force Create a more customized option for customers + pare down its sales force (by selling off some of the international subsidiaries) Create a new type of deal which encourages loyalty – ie. multiple visits
Overall Assessment Do not recommend:Risk of becoming another me too player like gilt, woot , etc. Recommend: they need to pare down their salesforce in order to get to profitability. Additionally, they have a huge customer and vendor base already. Do not recommend:
Consumers are not loyal and there is not inherent proof in the market that consumers are interested in actually being loyal to a brand advertised on Groupon. Additionally, it is unclear whether this is a financially attractive option for the vendors (ie. bounceback offers)
Strategic Fit Low: completely opposite from their current strategy of having a wide offering, catering to multiple market segments High: Groupon already has the infrastructure (sales people, website backend (customer tools), and customer / vendor lists Medium: can leverage existing vendor and