How does Groupon work?
Groupon is one of the first and by far the most successful ‘deal-of-the-day” websites, although there are a lot more now than there were a couple of years ago. Through their model, businesses offer a discounted gift certificate to put their name out there and try to gain new customers. It could be seen as an alternative to advertising, one that is also much cheaper.
From the perspective of a business looking to use it, it’s a simple idea. You offer a particular deal at a discount in an attempt to draw in potential consumers. Groupon will then take a cut of the money received.
There are a few very good reasons as to why Groupon is thriving. To show how great a business model it is, the company turned down a $6 billion acquisition offer from Google. They know exactly how great it is and this action proves the level of trust and faith in the model.
No up-front costs
Merchants will not be expected to pay any up front costs to get on the site, it’s therefore worth signing up to get a feel of the site.
Deals are localised
This means that you can choose exactly what regions you would like to target, thus making it easy as a local business. This model is actually perfect for local businesses, especially those worrying about how to create more awareness.
High levels of exposure
For those who might not be sold on the idea of Groupon, it needs to be seen for what it is – a great way of giving your company more exposure. Yes, by offering a discounted price, you aren’t making anywhere near as much money in this instance; but there is always the chance that first time buyers will come back again or buy more than the particular discounted product (if this is what is being offered). The opportunity is also there for word of mouth to spread if the consumer liked the service.
In fact, it can sometimes be TOO good…
Take these two examples, both deals ended up receiving so much attention that it actually backfired.
Cupcake calamity Website discount deal leaves baker swamped orders 102 000 cakes wipes profits - dailymail.co.uk
Groupon voucher deal ‘cost Hove firm thousands - bbc.co.uk
This shows the sort of interest and demand that can be created simply through Groupon. Although future businesses don’t need to worry about this as you can actually cap the amount of vouchers you offer so that this precise thing doesn’t occur.
Great for targeting younger consumers
Demographically speaking, it is great for targeting younger consumers. The 18-34 age group, as a matter of fact make up around 70% of the users taking up Groupon offers (according to their official website). This information is exceptional from a marketing perspective, in most cases Groupon could be used by those looking to target this specific market. Although this doesn’t mean that no one over this age ever uses the site!
To put it simply, Groupon works at drawing in new customers. You tailor a campaign which means you put up exactly what you want, therefore it suits your business needs completely.
Author Oliver Adams
Toxic Creative – RESULT DRIVEN DESIGN & MARKETING
We’re based in Northampton and are experts in all aspects of graphic design, website design and marketing, from dynamic websites and printed literature to logo design and brand development … we do it all.
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