Ecommerce is a prime example of how technology makes people’s lives easier. Within the past few years, many corporations have transformed traditional online shopping into a means that controls the way customers purchase goods. It is human nature to look for a bargain, and typically when people find a deal they purchase it without putting much thought into it. Andrew Mason used these principles to build Groupon, a company that sends out promotions available for purchase to group members. Mason may have developed a company that is valued at $3 billion dollars, however “[t]he business is pretty easy to copy. The technology involved isn't especially sophisticated; you mainly just need a bunch of salespeople to cold-call as many restaurants and nail salons as possible” (Stone, MacMillan).
Mason needed to create a competitive advantage, thus he decided to take Groupon to a new level through a spin-off program called Groupon Now. Instead of being emailed a daily deal, a user will open this program and be presented with two options: “I’m hungry” and “I’m bored”. Groupon Now will be able to locate where the user is and give them a time-specific daily deal. Mason claims that, "we want people to think about Groupon every time they walk out the door”, and he feels that through Groupon Now this will be possible. Groupon Now will manipulate the time people chose to dine to help restaurants gain customers at usually slow times. Rob Solomon, Groupon President, said, “the true promise of Groupon Now is to help eliminate perishable inventory—food ingredients, labor hours, and anything else that's wasted if not used immediately”, which will persuade companies to participate in this program.
Groupon Now sounds like an excellent program for people who need to run out and grab lunch without breaking the bank. However restaurant managers like Nick Pinelli are concerned because “there's no reason for customers to come in all the time if they can always get a discount. That's the reason we like Groupon; it's only a one-time deal" (Pinelli). If customers can continually get a discount, they will never be willing to pay full price, but will rather wait for the Groupon Now to come out again. Groupon also is failing to recognize that they are leaving too much up to small business owners. The managers or owners of businesses are responsible for uploading their deals, however they already have incredible amounts of work to worry about. As a subscriber to Groupon, I know I get really excited when a good deal comes out, mainly because it is exclusive. If the deal is available a lot, will customers still be interested in buying it? It will eliminate the thrill factor.
Groupon rejected a $6 billion dollar offer from Google last summer, and now with the launch of Groupon Now, it is projected to be valued at up to $25 billion. I definitely will look into Groupon Now after it is launched in April, but I am very skeptical about it. I think that the concept is great, however there seems to be a lot of minor issues that could arise which will in turn bring down its value and use.
MacMillan, Douglas, and Brad Stone. "Are Four Words Worth $25 Billion for Groupon?- BusinessWeek." Businessweek - Business News, Stock Market & Financial Advice. 17 Mar. 2011. Web. 21 Mar. 2011.
Parr, Ben. "Groupon's Ambitious Plan to Change How and When We Eat - CNN." CNNTech. 18 Mar. 2011. Web. 21 Mar. 2011.
I agree with Hayley, I don’t think Groupon is thinking through this new program well enough. Although it sounds awesome from a customer point of view, it does not seem to benefit the participating companies. The great feature about Groupon is that there is such a variety of deals. Since you are able to set your account to your town, you receive very relevant and convenient deals in your area. With that said, a lot of the deals come from small, family-owned businesses looking to expand their customer base. Small businesses don’t necessarily profit off of these promotions, they are in it for the after-sale loyalty.
ReplyDeleteRecently, my parents and I tried out a new diner in our area. The bill came to $25 and our Groupon was for $20 (the deal was pay $10, and get $20). Curious about the program works, my dad asked the manager how they benefit from the online deals. The manager explained that they only get $3 out of the $10 on each Groupon. That means that Groupon gets 70% of the profits. The manager also added that they had a lot of new customers come in with the Groupon, so he was happy with the success of it. The diner did not participate in the promotion to immediately profit off of it. Groupon allowed them to advertise their diner and expand their customer base. By allowing customers to try their food at a cheap price, customers might be more likely to return if satisfied.
As it is, I think some people are too focused on getting deals rather than discovering new stores and restaurants. However, I agree that the development of Groupon Now would only enable more routine exploitations of the promotions. I must admit, being able to get a promotion instantly rather than just daily, is very appealing. I just don’t know how small businesses can maintain such good deals.
I think Groupon is well on their way to further developing their program to cater more towards the customers’ wants and needs. My only concern is for the welfare of the businesses. How will they profit from such frequent promotions?
I had never heard of Groupon before reading this post, and I was immediately intrigued by the concept of it. I love discounts, as most people do, and I am constantly looking to find a way to save money on my meals and clothing shopping. I would definitely be more likely to eat or shop somewhere if there was a possibility that I could save money. Also, making it available through e-commerce is the most efficient way to reach consumers, both for the consumers and the restaurants. However, I think that they are right in saying that "the business is easy to copy." When my email box is bombarded with emails from my favorite stores with new discounts, as much as they are great, I am getting about fifteen of them a day. I start to just delete them automatically because there are so many of them and it doesn't make it special anymore. It makes sense to move Groupon to a more mobile form that will detect where you are and offer you a special. I am a user of Foursquare and I think that it is very similar to it, but with one distinct difference. With Foursquare, you are rewarded with a discount after checking in multiple times to the location. On Groupon, it seems that you are just offered the discount. With saying this, I agree with what Hayley and Carolyn said. It would be more work for the businesses to deal with this, and it wouldn't make the deals special anymore, even when they aren't getting the bulk of the profits. In essence it is a good idea, but as Hayley pointed out, there are a lot of things that they need to work out in it for it to succeed.
ReplyDeleteIt unanimous that everyone loves a deal, discount, pretty much anything free. However are these deals a consumer’s right or a privilege? Personally, I feel as though deals function better as consumer privileges. Hayley seems to back up my opinion when she mentions the exclusivity factor to a deal. People like to be rewarded for their customer loyalty, having filled out a questionnaire, being a student or teacher or any other feat they have in order to receive a certain “deal” from a store or restaurant. Groupon Now eliminates this reward because it is making the coupon accessible to anyone. If the deal is being offered to anyone, companies may experience a lack of effort from their top customers, which, ultimately, leads to a decrease in revenues. The “bargain hunters” seem to be the only ones coming out happy and on top. Groupon President, said, “the true promise of Groupon Now is to help eliminate perishable inventory—food ingredients, labor hours, and anything else that's wasted if not used immediately”. This seems to be a ploy to get the companies on board with the immense deals that are being distributed. I would be interested to see how drastically Groupon reduces the amount perishable waste of a restaurant. Hayley states “however there seems to be a lot of minor issues that could arise which will in turn bring down its value and use”. I took the time to look into some of the consequences GroupOn faces from such “minor issues”. I came across an article. In the past year GroupOn has faced about eight lawsuits regarding false and ineffective advertising. In addition to running faulty URL links,
ReplyDelete“Groupon runs ad copy with phrases like: “It’s like San Francisco at 90% off.” The tour company says those ads are effective in getting people to click through even though Groupon isn’t offering tours at 90% off. By getting people to click through frequently, Groupon’s ads are seen as more efficient and effective by Google—which raises the price for good ad placement by other companies, like S.F. Comprehensive Tours, even more.”
Clearly GroupOn must not only fight against these claims, but fix them in order to operate smoothly, with integrity, but most importantly, to work peacefully with the companies they are “dealing” with.
http://paidcontent.org/article/419-groupon-is-becoming-a-lawsuit-magnet/