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Is the Groupon Phenomenon Over?

By Edited Feb 13, 2016 1 1

Groupon's Challenge

 

            As communication technology, specifically tracking technology through means of smartphones and social networking sites, is on the rise, it has become easier than ever for marketers to locate, attract and guide a buyer to local stores by offering them deals based on where they are. This phenomenon was no accident, as marketers attempt to segment their markets; they want to know everything they possibly can about their consumers. The question then becomes, how do you get a customer to willingly provide private information, such as their whereabouts? Groupon, a web based daily deals provider, does this by offering its consumers great deals based on their location. After all, who doesn’t want to save money and get some good ideas about fun and new things to do in their area? At first Groupon was red hot, however they are now running into some troubles. I remember receiving my Wall Street Journal a few weeks back, and Groupon was on the cover; but not for a good reason. Many of its top executives are leaving, investors aren’t happy as the stock has plummeted about 70% since the initial public offering,  businesses aren’t profiting off of their “deals” because customers don’t return, and many of the deals are redundant. While Groupon was among the first sites to offer “deals of the day,” other competitors also have gained a foothold in this sector, for example; consider Living Social. The question then becomes how can Groupon restructure, differentiate and position themselves to not only compete, but get a larger share of customers? The company obviously tries to draw on local and individual marketing, so then, why are they not reaching their customers effectively? Certainly this will be no easy task for the new marketing department.

One employee said of Groupon “When I was there, I felt like I was working in chaos,” the 33-year-old said. “My managers had no clue what they were doing. … There were too many chiefs and not enough Indians. … There were five layers of management above me.” She said her first month’s sales goal of $90,000 was “completely unrealistic.” The goal rose to $120,000 in a three-month period. Her commission plan changed three times, each time making it tougher to earn a living. She said one of her former colleagues who brings in $175,000 in deals in any given month makes $1,200 in commission on the total. She has concluded that Groupon is a fad that won’t last longer than a couple more years.” It’s interesting to see this information because a lot of the problems with Groupon are completely internal. However, this is not to say the company cannot bounce back, after all this year was the first year Groupon had to combat financial challenges.

Originally, I was obsessed with Groupon, and after talking to a few of my friends we found that there were two reasons that we didn’t like it anymore. First, is, when I search for deals they are often redundant. For example, I haven’t logged onto my Groupon account for about three months, today I did; and the same deals are there from three months ago. I live in New York City, so there really is no excuse for this because there are a million different things to do including dining, outdoor activities, museums, plays and theatre entertainment, comedy clubs and so much more. Secondly, some of the deals seem boring and just not worth it regardless of the price. For example, one deal they have is “Your Voice Vocal,” which offers one two hour session with a “seasoned voice trainer” for fifty dollars. In these economic times, I don’t think people are looking for these types of deals. I also think they are a little bit too lax in their communication with target consumers, when I logged on and checked “my groupons,” this is what they said, “Like vowels, you have to buy Groupons before you can use them.” As a consumer, I didn’t find this very funny; it sounds more like they are calling me an idiot. Lastly, I want to point out, after speaking with my local butcher who I purchased a Groupon from (Yore Butchers) about a year ago, I asked them if they would have another Groupon offering. The owner looked at me and laughed, he said, “Not only did we lose money, most of the customers never even came back.” The whole idea from Groupon for businesses is not to attract one time business, but to offer a deal that will attract and keep business. Groupon was at fault here because they were supposed to help him put a cap on how many groupons he sold based on his business, but they didn’t deliver on their promise. In essence it wasn’t an actionable plan, because they ran out of meat to sell! I can’t tell you how many times, from personal experience, I have done this. I would buy a deal on Groupon, and never go back. In my opinion they aren’t targeting customers who would be loyal in the future.

The original genius in Groupon was that they segmented their markets by individuals, or individual and local marketing and location, or geographical segmentation. This is still the case and they have even gone a step further to try and differentiate their segments by allowing consumers to create a profile which offers a range of categories that describe their personality and lifestyle. The consumer, then clicks on the hearts that apply to them and Groupon sends deals based on what they like to do. While Groupon is really good a segmenting on a local level, I think they need to build a sense of community. For example, they should offer students with good grades exclusive deals based on where their university is located. Based on a student’s grade they will get a better deal. This may spark some curiosity with the consumer, as they type in their grade and outing preferences, they will get a better deal. For instance, an A student could get 75% off of a deal of their choice; while a B student only gets 50% off the deal of their choice. By teaming up with universities they would be encouraging students to do well, while also offering them some leisure time at an affordable price (very necessary in this economy), and capture a large share of college student’s wallets. College students are probably the most accessible market to serve, because we can navigate the internet and use information technology to its maximum ability. We also look for good deals. We are also a substantial market, according to the census Bureau 19.7 million students are enrolled in college, and only 16% of those students are 35 and older. Not only are college students a substantial market, they are also differentiable. Groupon could offer deals to Hispanic, African American and Asian American students. Different students have different lifestyles, some have more of a partying mentality, and others are more studious. When I looked on Groupon there weren’t too many offers based on what college you go to, or what you are studying- however this could provide Groupon’s marketers some key information as to what your interests are. Certainly some students enter a degree they will end up dropping, but many follow through and their interests can even be captured in their choice of majors. Another thing I noticed is that Groupon is based mostly in large cities such as New York, Chicago, Miami and Los Angeles. While they do offer some deals to people in suburban and rural areas, it is often very limited. But many colleges are located in smaller cities, suburban and rural areas. For example, Binghamton has about 14,000 students enrolled, however Groupon doesn’t even offer any deals in this city. One might argue that there isn’t enough to do, however it is an up and coming city with a lot of college students who want ideas on what to do on weekends. By not teaming up with this university Groupon is willingly letting potential users walk out the door. Lastly, students are an actionable and half the time students will tell you if they like a certain strategy a site is using or not. They discuss this on their social networking sites, with friends and sometimes even the company directly. This leaves Groupon with great critics and potentially great brand ambassadors.

I do think Groupon can get back on its feet by going back to basics. In a largely competitive market they need to find ways to serve both the customers on Groupon and likewise the businesses on Groupon profitably.

 

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Comments

Oct 30, 2012 3:16pm
Marlando
H--I've never used or, truthfully, heard of Groupn before nowbut it seems like so many PR/Ad companies who get a taste of their own success and suddenlly fail to service their customers in any devoted way...And, any company that snakes around decent commissions (always a challenge to earn) will soon enough be known for that Gekkoism. Anyway, well written and two thumbs from me.
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