Hey Groupon... What were you thinking?
If you follow tech stocks at all you might know that Groupon shot up like a rocket yesterday after another rumor that they were a Google buyout target. And today GRPN is tumbling back to Earth with those rumors being "less than true".
I ask what were they thinking because they turned down an offer of $6 billion from Google about a year ago. Groupon's market cap is less than half that... what were they thinking?
Crazy... But then again, the fact that people got so interested in this business model (which is essentially just email marketing with a huge sales team) was crazy to me in the first place.
Coming from a daily deal company i can tell you the business model is hard to sustain & be succesful. You are always looking for new business owner to run a deal on your site. As Adam stated its all email marketing, so for a business to give up 30%-50% of the deal value which is already discounted 50% on a semi regular basis is not going to happen. Business owners are figureing out that if they could compile there own email list they can do the same & not have to give up such a huge stake of there already discounted value. For the business owners who run deals on as many sites as often all they are doing is loseing money! Consumers know that certain companies always have deal up so why pay full price just wait for another deal to go live. The entire pitch to a customer is " YOU PUT UP AN OFFER TO HELP DRIVE IN A LARGE GROUP OF PEOPLE WITH THE INTENTION THEY TRY YOUR SERVICES AT A DISCOUNTED PRICE THEN COME BACK & PAY FULL PRICE NEXT TIME"
I agree with this. However, I'm not so sure the hopes are purely pinned on return customers. I think that a great big chunk of consumers/restaurant-goers in particular, are particularly terrible at getting their deal's worth! People think "Oh, I have this sweet deal. I can order drinks!" THIS is where the companies who run these deals make their money. Drinks are at marked up through the roof!
In any case, God bless LivingSocial and Groupon. I just so happen to be these restaurants' worst nightmare, as I order the amount the deal allows and then I cut myself off. It's the only way to dine in style!
Yeah... technology and marketing are always the same.. what is old is new and what is new is old. My wife worked a the 1999 version of Groupon... Lifeminders. They sent out daily "minder" emails to millions. The went public and then imploded when the markets fell apart.
The interesting thing is that many of the employees went on to use the concept to do extremely well with affiliate marketing. Out of the ashes of Groupon will be some nice businesses that find the profitable niches in the daily deal craze. I think one of those niches will be filling under used inventory. Off hours restaurant reservations, middle of the day physical training sessions, etc...
I think I agree with chad...err... both chads lol. If you consistently discount your products then people become conditioned to always expect a "deal" or discounted price. Look at JC Penny's sales model. For years and years they sold product because people say their "sales" every weekend. In reality the prices they set were normal during the weekend, but they raised the prices during the week to make the "sales" seem worthwhile. The "deals" showed up because of good advertising. Then JC Penny stopped the "sales" and set everything to the normal price all the time. Sales plummeted. People became conditioned to expect the "deals" but when the "deals" didn't happen, they didn't shop there anymore & went to the competitors.
I also agree that with the fall of one company the more profitable and sustainable niche businesses will rise. Only time will tell what happens though.
For all us in Rochester look at Bill Greys. We all know you dont go there without a buy one get one coupon. Never pay full price for two of the same item when you can BOGO.
Well put Eric. Complacency is everywhere in life and change scares people and sometimes pisses them off. Specially in the food and retail industries. "What?? they are charging this now" It could be a single increase of a dollar and people will cause a fuss. I have to also agree with Jenna that people like the "restaurant goers" and the "Sunday paper crew" are the ones that will keep Groupon in business until they get the third and final offer from Google. Which then they will most likely take. Deal or No Deal (lol)
I think groupon may still have a chance, but then again its just a ruse to spend money... in this economy thats difficult.
I've worked at a daily deal company too (one that flopped pretty quickly, for a number of reasons) and frankly I'm astonished that Groupon and its imitators are even still around. I thought two years ago that the bottom would fall out of the daily deal market within six months. There is a lot of evidence that most daily-deal coupon users are savvy, like Jenna, in that they use exactly the amount of the deal, do not buy extras or get sucked into the plus-sell, and that they do not return -- or that they were already regular customers. So Groupon et al. does very little to drive profitable new traffic into a restaurant or service.
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