Groupon hbs

But the hard truth is that without restrictions, Groupon is definitely dead, if not today, then tomorrow or at some point in the not too distant future. Interestingly, there are signs that this might happen: time-restricted discounting has been reintroduced into Groupon Reserve.

Case study groupon business model

Give it a 2. Of course, it may not survive without restrictions either because perhaps this was just a revolution that was never meant to be. Groupon earned revenue by taking a percentage of every Groupon sold. Did it have a sustainable business model? Here is where restrictions come into the picture. The challenge Groupon faced was earning profits. Ideally, business owners want to restrict discounts to off-peak periods so that some demand shifts from peak to off-peak periods. Nearly all service businesses face seasonal demand think of restaurants, theaters, museums and are often unable to serve all customers in peak periods e.

The challenge Groupon faced was earning profits. In an attempt to become profitable, Groupon introduced new products and strategies; however it had yet to succeed.

Groupon case study summary

Further, the benefits to both customers and merchants are likely to drop as the market is flooded with look-alike offers and the advantages of using one site over another decline. Lefkofsky must now guide Groupon forward. The model is based on individual transactions — users do not subscribe to Groupon; rather, each payment is transactional. But a business model that imposes this kind of misalignment is not sustainable. The user interface for Groupon offers no particular advantage, as the offers come by email. The model does build a form of relationship, but not an embedded or particularly sticky one. Here is where restrictions come into the picture. Using a diagnostic quiz that grades the business model on sevearl factors, each on a scale of 1 to 7, I scored Groupon like this: There are relatively few switching costs in the Groupon model — a customer signs up for free, the process is not onerous or difficult, and there is no customer loyalty, special discount, or other anti-switching incentives built into the program. So why do most deals on Groupon and other similar web sites feature no time restrictions, and why are an increasing number of web portals removing activation thresholds?

Here is where restrictions come into the picture. Because, unfortunately, what is in the interest of the business owner is not in the interests of Groupon and its competitors. Rita Gunther McGratha Professor at Columbia Business School, is a globally recognized expert on strategy in uncertain and volatile environments.

Groupon hbs

With unrestricted discounts as is now typical for Groupon customers with discounts will come in droves during peak times, and the profit of the merchant may even decline since regular customers are substituted with coupon-bearing customers. Groupon sold coupons called Groupons which purchasers used to acquire goods or services at discount prices from participating merchants. Groupon is poised for its debut as a public company. Groupon does have a strong network externality effect, as its business relies on hundreds of representatives who sign up hundreds of retailers. And if demand in off-peak periods is too low, they will want to close down the business on these days. Nearly all service businesses face seasonal demand think of restaurants, theaters, museums and are often unable to serve all customers in peak periods e. The model is more or less standalone at this point although it could be extended to national campaigns and might be a competitor to firms such as eBay. But the hard truth is that without restrictions, Groupon is definitely dead, if not today, then tomorrow or at some point in the not too distant future. The discounts available through Groupon coupons used to be subject to a host of restrictions, e.

Merchants liked Groupons because they paid nothing for advertising through Groupon unless a customer made a purchase. The model is more or less standalone at this point although it could be extended to national campaigns and might be a competitor to firms such as eBay. This may seem like a backwards step.

With unrestricted discounts as is now typical for Groupon customers with discounts will come in droves during peak times, and the profit of the merchant may even decline since regular customers are substituted with coupon-bearing customers. Ideally, business owners want to restrict discounts to off-peak periods so that some demand shifts from peak to off-peak periods.

groupon case study pdf

Of course, it may not survive without restrictions either because perhaps this was just a revolution that was never meant to be. Groupon does have a strong network externality effect, as its business relies on hundreds of representatives who sign up hundreds of retailers.

Groupon business model

Groupon sold Groupons by utilizing a large sales force which contacted individual merchants to sign them up. Groupon earned revenue by taking a percentage of every Groupon sold. That is, with no activation threshold and with deals active always, Groupon itself gets the best deal… And the merchant gets a raw one. Lefkofsky must now guide Groupon forward. Of course, it may not survive without restrictions either because perhaps this was just a revolution that was never meant to be. Nearly all service businesses face seasonal demand think of restaurants, theaters, museums and are often unable to serve all customers in peak periods e. With unrestricted discounts as is now typical for Groupon customers with discounts will come in droves during peak times, and the profit of the merchant may even decline since regular customers are substituted with coupon-bearing customers. It spent heavily on marketing to acquire customers, who showed signs of becoming tired of receiving discount offers, and merchants, many of whom found that offering Groupons only brought them unprofitable customers. Email Abstract Internet coupon site "Groupon" grew revenues rapidly and went public, but struggled to impress investors or operate profitably. Academic research has consistently found that running a deal using Groupon or one of its competitors has two main implications for a business: more customers in the short term but lower favorability ratings. Say a 2. Ideally, business owners want to restrict discounts to off-peak periods so that some demand shifts from peak to off-peak periods.

Give it a 2.

Rated 5/10 based on 8 review
Download
Can Groupon Save Its Business Model?