I guess everyone has witnessed the success of Groupon and the majority of web geeks have been successful pioneers in adopting this service. As of Mar 7, 2011, according to the Groupon footnote, an amount of $1,373,874,542 has been saved, or in other words, bought. Tracing back to the first news release of Groupon back in Nov 2009, this 1.3 billion figure is very impressive. Plus the rumor that Google was once interested in Groupon and even put a 6 billion bid which was turned down, as well as the rumor that Groupon is planning an IPO, not to mention thousands of Groupon clones everywhere, I guess it’s safe to say Groupon succeeded.
So here is the question, what are the key factors that affecting Groupon’s success?
- The business model - a perfect rephrase of coupon. Think about two options, “this is a $30 coupon and it’s can be applied to any purchase that’s above $40″ in contrast to “save 50%, spend $30 and get $60 value of food”. Which one would you choose? Of course the magic word “save 50%” but in reality, these two options are the same. The way groupon did it successfully attracted the users.
- The business model – profit sharing. After a consumer placed an order for the $30 coupon, what percentage does Groupon take? I talked to several business owners who tried to sell on Groupon and the answer is a whopping $15, or half of the price. In other words, Groupon reaped the majority of the benefits.
- The business model – promoting niche businesses. You may wonder why does Groupon dare to collect such a huge share of profit? Groupon mostly does business with “soft service”, or in other words, business with relatively low fixed cost and hence the price may fluctuate a lot. By reducing the price and tapping into the crowd source of Groupon, the business can get more attention and much more products/services than they used to.
- The marketing strategy – media exposure. Groupon got lots lots lots of help from the world of journalism. Famous tech blogs, newspapers, information hubs and discussion boards all brought Groupon in the headline. As a result, consumers buy it!
- The marketing strategy – more and more ads. For those major cities, Groupon spent tremendous amount of money on location specific ads on Google. You can also spot Groupon’s presence on mobile ads. All these solutions are precisely targeted at Groupon’s potential customers.
- The sales strategy – raise the price and offer a discount. During Valentine’s day, the flower delivery service showed up unsurprisingly on Groupon with an much elevated price. With Groupon coupon counted in, the price of flower is exactly the same as it used to be. Someone exposed that Groupon salesperson often suggested fake discount to promote their business.
- The users perception – easy to use. Within four clicks, a new user can easily spot the “buy” button and finish the transaction.
- The users perception – increased user stickiness. Groupon release deal on a daily basis which encourage users to visit back. To make it more effective, Groupon has those neat email reminders about “your purchased deal is about to expire” to invite users come back again in an extremely friendly way.
Groupon is an albeit successful example and according to a recent article, Groupon is planning to roll out more exciting services. Excited!