Groupon: Everything you need to Know about Groupon

Groupon

Groupon: Everything you need to Know about Groupon

Groupon is a site that provides the public with coupons. Each day, the company broadcasts all the available coupons in your locality. It goes ahead to offer you the buyer with a 40%-60% discount if you use its services.

Brief history

Groupon was founded in 2008 but in 2011 it had a rough IPO despite its initial buzz. Soon after this, the company was unable to deliver the promises it made to its customers. It could no longer offer deals to its clients and also it could not lead customers to affiliate businesses.

The affiliate businesses became overwhelmed by the customers who bought at a discount and never came back. On the other hand, customers got unsatisfactory customer services to form these businesses which dented their image.

On top of that, copycats and competitors joined the wagon. Customer’s emails were flooded with daily offers. This unfortunate scenario made Groupon retreat and hide from the public eye. The challenges were overwhelming to a point that the company lost value.

Recovery path

After such a humiliating year, Groupon has been working to rebuild its once tainted image. In 2015, it elected a new CEO and also acquired its competitor LivingSocial. The company also decided to focus on the North America market rather than stretching itself too thin. Over the years they have created a very user-friendly website and a very responsive mobile app.

This is in a bid to keep the existing customers and attract new ones. In fact, the business is doing so well that Google offered to buy it at $6billion but Groupon rejected the offer.

How does it work?

For the customers

Groupon will provide you with daily updates on available coupons. The alerts are mainly sent by email. Ideally, the coupons are 50% discounts on particular products or at certain hotels and restaurants. If the deal is irresistible, all you have to do is buy the electronic card using PayPal or credit account. The next step is to print the coupon and take it to the specific store or hotel.

For businesses 

Groupon acts as middlemen. It receives commissions on each product sold. They promise the businesses that will generate the targeted number of sales on that particular day. Unfortunately, if Groupon does not meet the threshold agreed upon, it does not receive the commissions and the business can halt giving discounts.

Much more common, however, is the scenario where Groupon exceeds the targeted number of sales. The customers enjoy the reduced prices while the businesses enjoy the soaring number of customers. The company receives 50% of the coupon price.

Pros and cons of using Groupon

Pros

  1. Attracts new customers

Your business is in a position to reach to new customers who enjoy the discount and are eager to save some dollars. Customers enjoy buying your products at half the selling price. Groupon promotions do not cannibalize sales to new and existing customers.

  1. Helps move inventory

Groupon is a perfect platform to sell products that are moving slowly. Their price deals will ensure that your slow-moving products pick traction since customers not willing to pay high will by them.

  1. Advertises your business

A promotion through Groupon can be a great way to let new customers know about your business. What you offer and also where you are located. You get to lure new customers by letting them test your products. The concept behind this is that they will fall for your products and come back again for more.

  1. Builds relationships

Use the Groupon promotion to build relationships with existing and new customers. Use price deals to build long-lasting customer relationships. Instead of just using a one-off promo. For example, instead of offering $60 worth of drinks for $30, you can tweak it to $20 worth of drinks for $10 for the next three visits.

Cons

  1. Deals hurt the brand

Price promotions hurt the brand. How? The customers become price sensitive. When they purchase a product or service at a low price, they will become less inclined to buy the same product at the required selling price in the future.

  1. Price deals are not profitable

One of the chief disadvantages of using Groupon promotions is that you have to part with 50% of the coupon price. If you do the math, restaurants do not earn enough to cater to the customer service expenses. The split sharing can see your business make losses.

Verdict

Groupon is a perfect site for businesses that want to sell slow moving stock. It is also a perfect site where clients can buy products at low prices. It saves you the hassle of creating discount promotions hence letting your business focus on other important issues at hand. Through Groupon promotion, you present the customers with the flavor of your company’s product and leave them to buy what they like.

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