How Effective are Groupon Promotions for Business
Marketing circles have been abuzz in recent with the skyrocketing popularity of social promotion sites. At present, Groupon is perhaps the best known and certainly the largest one of these sites. It features a daily deal for
each city it operates in, offering consumers a significant discount for a local business or event, such as $40 worth of sushi for $20, or a $175 facial at spa for $59.
- The numbers (U.S.): 1) 5 million subscribers; 2) 18 million Groupons sold in North America; 3) 700+ million dollars saved in North America; 4) $30 average Groupon; 5) 57% average groupon discount; 6)
$2.000.000.000 estimated revenue for 2010; 7) $500 million profit for 2010 (est.); 8) $6 billion last acquisition offer made by Google on Dec. 3 2010.
- Groupon coverage. Groupon is expanding in the U.S. and worldwide - launching Groupon Hong kong, Groupon Singapore, Groupon Philippines and Groupon Taiwan. With the recently announced Groupon Stores,
businesses can now create and launch their own deals whenever they want. Stores are launched in Chicago, Dallas, and Seattle for now - more cities and functionality coming soon.
- The competitors: 1) Groupon (website- groupon.com, founded - 2008, headquarters - Chicago, funding - $171 million, daily unique visitors (est.) - 750k, cities covered - 185); 2) Living Social (website- livingsocial.com,
founded - 2007, headquarters - Washington D.C, funding - $232 million, daily unique visitors (est.) - 450k, cities covered - 140); 3) Gilt (website- gilt.com, founded - 2008, headquarters - New York, funding - $83
million, daily unique visitors (est.) - 250k); 4) Buy With Me (website- buywithme.com, founded - 2009, headquarters - New York, funding - $21.5 million, daily unique visitors (est.) - 125k, cities covered - 26).
Respondents largely indicated annoyance at the barrage of calls they receive from these competitors on a daily basis, and most reported a lack of success when using them to offer a promotion. Phrases such as "rip off",
"imitators", "ineffective", were employed, and respondents told us that the competitors "never proved anywhere near the results that Groupon did", and that "Groupon will beat out the competition, it is still the 'Kleenex' of
the business model".
- Profitable vs. unprofitable. In a survey-based study of 150 business that ran and completed Groupon promotions between June 2009 and August 2010, it unearthed the following insights: 1) profitable - 66%,
unprofitable - 32%; 2) % clients buying more than Groupon value (profitable - 50%, unprofitable - 25%); 3) % clients repurchasing a second time (profitable - 13%, unprofitable - 31%); 4) % businesses running after
another Groupon in the future (profitable - 8%, unprofitable - 82%). Compared to those companies that saw profitable Groupon promotions, those that ended up with unprofitable promotions were reported as also having
significantly lower rates of "both spending by Groupon users beyond its face (25% vs. 50%) and return rates to purchase from the business again at full prices (13% vs. 31%)".
- Demographics. The typical Groupon subscriber is: 1) Female. 77% are women while only 23% of the subscribers are men; 2) Young. 68% of the subscribers are between 18 and 34 years old; 3) Single. Most subscribers
are single (49%) while only 33% are married, 12% living with a partner and 6% divorced/separated/widowed; 4) Smart. 50% have a bachelor's degree and 30% have a graduate degree; 5) Wealthy. Nearly 70% of th
subscribers have over $50.000 yearly income.
- Comments by business owners who ran Groupon promotions: 1) "happy for increased traffic" - Restaurant, Western U.S; 2) "I think it's brilliant. Quick influx of cash. great visibility for our business created amazing traffic
to the site the day we were featured. It's a great new client acquisition tool" - Service business, Northeastern U.S.; 3) "Most of the customers had never heard of our business before and were coming for the treatment
based on the deep discount of the service. They also did not feel as though it was necessary to tip the associates servicing them the appropriate amount because they were receiving the service at a discounted rate" - Spa &
Salon, Western U.S.; 4) "The downside of Groupon is that you never see the guests return because they are bargain shoppers!" - Restaurant, Southern U.S.; 5) "Customers constantly printed the same coupon... or copied
one coupon over and over and tried to use them after the original was redeemed. Our staff had to create an online monitoring web page to prevent multiple uses" - Restaurant, Southern U.S.
My Coupon Codes. The USA Number 1 Codes Website.
Sources: http://papers.ssm.com/sol3/papers.cfm?abstract_id-1696327; http://paulbutler.org/achives/groupon-math-data-scraping-to-estimate-revenue; http://techcrunch.com/2010/05/02/teardown-groupon;