Our group’s focus is on assessing and presenting information about Groupon, including their marketing strategies and efforts, as well as their ethical and social responsibility practices. According to their letter to shareholders, Groupon’s mission statement is “To become the operating system of local commerce.” However, due to rapid growth, Groupon has encountered setbacks and the disappointment of their service users.
Instead of prioritizing growth, Groupon needs to pay attention to its stakeholders and enhance relationships with customers – both merchants and consumers – as well as investors. Our evaluation will cover the company’s objectives, goals, marketing strategy, marketing mix, and their ethics and social responsibility. Groupon, a Chicago-based company founded by Northwestern musical prodigy, Andrew Mason, had an IPO in November that valued the company at approximately $20 billion.
Following its initial public offering (IPO), the company’s stock value has significantly declined, now valued at only 40% of the IPO price. This decrease in stock value can be attributed to Groupon’s overall lack of profitability. Despite this, their U.S. division managed to achieve a profit margin of 12%, despite incurring substantial marketing and administrative costs. However, it remains uncertain what the actual profit was and there is even a possibility that they incurred losses. As a result, this company becomes intriguing from various perspectives.
Forbes has deemed Groupon the fastest growing company in American history. This rapid expansion has posed challenges for Groupon in building and sustaining trust among its users. Groupon’s official website asserts their company philosophy as treating customers with the same respect they expect to receive. This entails offering deals that Groupon employees themselves would be interested in, free from any added conditions, and delivering exceptional customer service. Ultimately, Groupon aims for their customers to have a positive experience and truly enjoy using their services.
“Groupons” are not a good way to achieve the goal of providing investors and shareholders with returns, as well as giving adventurous individuals the opportunity to try new things at a discounted rate and enabling lesser-known businesses to market themselves and attract new customers through their discount service. The Groupon website acknowledges that “gotchas” and hidden conditions that hinder the experience are undesirable in achieving this goal. Judging from the fact that Groupon became a publicly traded company shortly after its establishment, it is evident that the organization aimed to fulfill these objectives.
Groupon’s marketing department focuses on startup trends. Initially, Groupon heavily relied on Google Adwords, displaying their ads whenever someone searched on Google, leading to one-time purchases. However, Groupon’s marketing efforts are less prominent compared to larger players in the business and tech industry. Vanity Fair reports that Groupon spent $200 million solely on marketing in the first quarter of this year. A marketing strategy is essential for achieving a marketing goal through targeting specific markets and implementing a program. Groupon targets all consumers in the marketplace but faced challenges by offering deals to everyone who receives their daily email. This approach overwhelmed consumers with irrelevant discounts they had no interest in.
Groupon has become spam to many consumers, prompting them to continually refine their promotions in order to target specific markets more effectively. If they do not alter their marketing strategy, Groupon will have to invest millions of dollars to attract “one time customers”, as their excessive deal emails alienate potential returning customers. This could potentially impact their profitability adversely.
The success of Groupon can be attributed to their email marketing strategy, also known as direct marketing. They send numerous emails to their subscribers each day. As Groupon has grown rapidly, they have implemented segmentation within their email marketing program with the help of John Becvar, senior director of relationship marketing. The main goal of Groupon is to provide consumers with the best local deals possible.
The importance of considering geographical differences arises from the rapid growth of subscribers in both the United States and worldwide. To address this, Groupon implemented a strategy of dividing their subscribers into local metro sectors. This approach was subsequently expanded by further dividing the metro groups based on zip code. Groupon’s ultimate goal is to determine the location of their users’ residence, workplace, and shopping destinations, in order to provide them with the most suitable deals within their specific operating region.
Groupon implemented more targeted email marketing by introducing specific deals to different user segments. They now send emails dedicated to travel deals and same day deals. In order to cater to individual user preferences, Groupon also introduced incentives and a loyalty program for frequent users. This marks a shift in strategy, as before Becvar joined Groupon, all subscribers received the same deals regardless of their usage.
Customers can now receive extra incentives by using Groupon more frequently through the rewards program (Sutton). The rewards program was initially introduced as a trial in specific cities in 2011, but it has been accessible nationwide since May 2012. This program takes the form of a digital rewards card connected to customers’ existing credit cards. To benefit from this program, customers simply need to make purchases at Groupon’s partner locations. Once they accumulate enough transactions, they will receive additional exclusive offers from Groupon.
Groupon’s new promotional strategy aims to boost its sluggish revenue intake. CEO Andrew Mason states that although the preliminary dataset is small, pilot results revealed that Groupon Rewards customers exhibit greater loyalty compared to others (Raby). However, this Groupon rewards program lacks several elements of a loyalty program. Firstly, it fails to establish a personal relationship as customers are limited to shopping at stores listed on the Groupon website. Moreover, there is no continuous engagement, and the system only keeps track of totals without specifying when additional rewards will be received. One major missed element is in-house engagement since Groupon customers cannot view their accumulated points, indicating a failure to properly execute good ideas inspired by other companies. Nonetheless, Groupon effectively utilizes the marketing mix of product, price, promotion, and place.
Groupon offers a daily deal that has been negotiated with merchants, allowing customers to buy a product or service at a perceived discount. By creating an account with Groupon, the deals will be sent to your inbox every day. You can choose whether or not to purchase based on your interest in the product or service. The price offered by Groupon may vary depending on the agreement with the merchant.
Gap and Groupon collaborated on a successful deal that offered a $50 Gap gift card for just $25. This cost-effective marketing strategy aimed to attract customers to Gap stores and encourage additional purchases beyond the Groupon deal. The prices of Groupon deals vary depending on the products and services offered.
However, the prices and the percentage that the customer will save are presented. The price and percentage saved are disclosed on the list page to inform the customer upfront about potential savings, rather than enticing them to click the deal page. This strategy is intriguing as seeing the price alone may compel an individual to seek further information about the product or service. The promotion they employ is a daily deal delivered to your inbox.
They offer consumers a discounted price on products they use, which exemplifies the idea of customer relationship marketing. When signing up for Groupon, customers provide their name, email address, and location, allowing Groupon to utilize a database system for delivering tailored information to all users. For instance, the daily deal sent to your email will be pertinent to previous purchases made through Groupon as well as your location.
Groupon employs various methods to enhance customer relationships, including their mobile app. Through the app, customers receive notifications about new deals in their vicinity using GPS location services. This approach allows Groupon to consistently offer relevant deals and effectively communicate them to their customers. Additionally, Groupon actively promotes its brand through marketing and advertising initiatives at events, billboards, social media, and the World Wide Web.
During tough economic times, Groupon has flourished and benefited greatly from its mobile application for smartphone users. This app, available for free, provides users with numerous advantages such as locating local deals through GPS or searching for specific locations. When individuals perceive they are receiving a favorable deal, they are more likely to make purchases and spend money. Moreover, Groupon’s daily email simplifies the process of accessing and utilizing offers for consumers.
You can purchase your Groupon right on your cell phone and use it whenever you want, so you don’t have to go anywhere. The importance and accessibility of the place remain crucial. In the early days of Groupon and even now, efforts have been made to build credibility, establish a unique identity, enhance reputation, inform and remind customers about the benefits of using the service, and market additional products to existing customers (StartupNation). Groupon also relies on word-of-mouth marketing, which according to Seth Godin, is the most effective method because it involves delighting a small segment of the population and allowing them to act as the marketing department (Seth’s Blog). Groupon’s story is one of remarkable growth, struggles, and hopefully a lasting legacy of success and innovation for the city of Chicago.
This company has the potential to revolutionize commerce and impact the lives of millions. Hopefully, they prioritize their stakeholders over rapid expansion in the future. Groupon’s downfall may stem from the fact that initial investors received a discounted premium on the stock. They quickly sold it after going public, as experienced investors know that Groupon stock is not a long-term investment. The initial investors seized the opportunity to bet on it at the IPO price and swiftly sell it.
Groupon may appear attractive with its appealing facade and clever email coupon promotions, but the truth is that the company is internally chaotic. Additionally, investing in their stock carries significant risk for small investors. Notably, key investors such as Eric Lefkofsky, who withdrew 400 million dollars, Brad Keywell, who withdrew 156 million dollars, and even the CEO himself removed 10 million dollars. This totals to almost 600 million dollars that has been drained from Groupon. These actions could be indications that Groupon is facing significant difficulty. Former Wall Street analyst Henry Boldget has even stated, “I would not consider Groupon’s IPO under any circumstances.”
