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Groupons - What Are They and How Do They Work

By Edited May 11, 2014 0 0

Groupons are localized deal-of-the-day offers that utilize collective buying power to acquire and distribute discounts and savings. The idea for Groupons was initially conceived by Andrew Mason whose idea garnered the attention of former boss Eric Lefkofsky who provided the initial funding to get Groupon off the ground.

Groupon initially began in a single market – Chicago, but quickly spread to Boston, New York and Toronto Canada. As of August of 2010 Groupons are now being offered in over 90 US cities and 21 other countries around the world! They're adding new cities all the time and submissions for new locations can be submitted directly through their website.

So how do Groupons work? Groupon coordinates with vendors to offer one Groupon Deal per day (per localized market). This offer works something like an assurance contract. A certain number of people must sign up for the deal and once the minimum threshold is met – everyone gets the deal. If the minimum threshold is not met, the deal is cancelled.

This model is beneficial to individuals and retailers alike. For individuals, Groupons can provide significant discounts for much desired services and products that tend to be much larger than typical ads.

For businesses this model provides a certain level of protection and risk mitigation (insufficient volume means the deal doesn't have to be honored). It's also a way to get good publicity and mass market sales promotions to new customers.

Groupon was designed to be a contingency based, risk-free alternative to conventional advertising. This means no out of pocket or up-front expenses for businesses. Groupon only makes money when the advertiser makes money keeping a small portion of each Groupon sold and paying the rest to the advertiser. This type of exposure also has the secondary effect of driving internet traffic to the vendor's (and related) websites further increasing the value of utilizing Groupon.

The Groupon model relies heavily upon social networking, friend sharing and word of mouth but so far does so very successfully. The Groupon site features its own discussion group (forum like) where users can interact with each other as well as obtain customer service.

As a further incentive for signing up with Groupon, you can earn $10 (in Groupon Bucks, not actual cash) for every person you refer that signs up. Groupon Bucks can be used towards any Groupon purchase and they never expire.

To make things even easier Groupons are also manageable and redeemable by mobile phone allowing you to find and take advantage of deals on the go. This also makes the process paperless which adds a green element to using Groupons.

Last but certainly not least Groupon integrates with Twitter and Facebook allowing you to quickly and easily share desired Groupons instantly with family and friends. To top it all off, signing up with Groupon is totally free.

I've used Groupon myself and so far have no complaints. I like and enjoy the fact that the deals are local to me. As there's a different deal every day it's allowed me to be exposed to local business I might not have otherwise and at a discount to boot!

Bearing in mind all that Groupons have to offer - you have nothing to lose and everything to gain so go out there and get your Groupon!

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