Groupon Inc. - Daily Deal or Lasting Success?

Groupon, Inc.:

Daily Deal or Lasting Success?

Cindy Roldan

November 22, 2016

MGMT 479: Strategic Management

Groupon, Inc.:  Daily Deal or Lasting Success?

        Groupon was created in 2006 by Andrew Mason through an idea brought upon him through much frustration while trying to cancel a call phone contract.  Trying to bring together people in similar situations he began working on a Website that would use social media based on the “tipping point” principle.  He named the company “The Point” and designed it as a tool for raising money for causes.  This idea lacked focus on any one plan it was too broad to be successful but had potential if executed correctly.  Mason found his niche by finding the most effective campaigns that gave consumers buying power through coupons, discounts, and online deals.  All this revolved around the “tipping point” concept benefiting both consumer and merchants giving them large-scale sales and market exposure.  (Wheelen, 2015)  

The name is based on groups and coupons hence the name “Groupon” launching in 2008.  The company grew at an extraordinary rate and was estimated worth over $1 billion after just 16 months.    By 2010 they had over 150 markets in North America and 100 markets international and were declared by Forbes magazine to be the “fastest growing company ever”. (Wheelen, 2015)  

Eventually Groupon fell into trouble its stock fell 84% on August 31, 2012.  Merchants were not happy with the general model having concerns with low level of repeat customers and heavy discounts required.  It also faced fierce competition as their business model could be easily simulated they were competing with offline coupons, newspapers, traditional media as well as companies offering online daily deals like DailyDeals.com, Bloomspot, and Eversave to name a few as well as those that focused on particular categories such as religion, pets, and so on.  The international market contributed to its annual loss and felt the effect of foreign exchange rates.  Groupon had a total net loss in income every year since the beginning.  They really had to take a hard look into their operations and decided not to pay dividends but to retain them in order to increase foreseeable expansion in the future. (Wheelen, 2015)

Resources:          Brand name        Merchants

Online access        Information tech platform        Intrusion and pattern detection tools

Secure Socket Layer        Daily Deal Strategy        Market share

Over 150 markets        Subscribers        Corporate offices

Capabilities:

Data Analytics                Aggressive Subscriber Acquisition Strategy                Marketing

Small Business Consulting        Expansion Into New Markets                 

Core Competence:

Brand Name                 Daily Deals                National Deals                Groupon Now

Groupon Goods         Groupon Getaways        Grouponlive                Groupon Rewards

Variety of Products

Finding of Facts:

Fact #1:  Merchants uneasiness with general model.

Merchants were uncomfortable with the general model since they had to give heavy discounts required by Groupon and in return still having a low rate of repeat customers as their concerns.  (Wheelen, 2015)  Keeping both the customers and the merchants happy is the only way for Groupon to succeed.  Groupon made substantial initiatives through engine marketing, advertisements, referral programs, and increase of referral by word of mouth.  Making investments also in building merchant partner relationships by offering better customer service, requesting feedback from merchants to make sure they met their objectives.