On Internet Business

Business Profile: Groupon

Posted by Michael under Business Growth, Online Retail

Groupon is taking the bargain world by storm. The company offers a single ‘Groupon’ daily in each of the cities it serves, and the groupon (contraction of group coupon) is based on an online assurance contract that contains a tipping point algorithm. This means that if a certain number of people sign up for that day’s offer, then the deal becomes available to all of them, but if the tipping point isn’t reached, nobody gets that deal. Retailers love the concept because it means their risk is massively reduced and Groupon profits by taking a share from the retailers. Groupon, which bought out its European rival MyCityDeal a couple of years ago, has 11 million subscribers in 22 countries and is available across the UK in 37 cities from Aberdeen to York.

But now the model has evolved from single daily offer per city, per day into something called a Personalized Deals initiative which means that subscribers in several US cities will get deals tailored to their personal tastes and previous purchase record. As the Groupon blog puts it, ‘Personalized Deals will start out dumb, but like a baby dipped in some sort of mutating ooze … get smarter quickly. As Groupon gets to know you better, we’ll target your inbox with scarily accurate deals and scarily accurate hand-drawings of you.’

Marketing to the Individual

What does this mean? It’s a huge change in the nature of marketing, allowing retailers and service providers to increase the number of deals made, but with no control over who they’re made to. That power lies in the hands of the intermediary (Groupon) which uses the details supplied by its subscribers to avoid wasting their time, which is one of the biggest complaints people have about advertising and marketing – when it’s done via mass media, it reaches many more markets than the target ones.

This also allows Groupon to have more masculine deals on offer to men – while women have driven the growth of Groupon through social networking, the masculine market can be better serviced through less ‘sexy’ but more man-friendly offers, like power-tools and hardware deals.

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