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Groupon’s Deal: Expired

Groupon’s Deal Expired

Bobby Thwedt, Odessa Tiefel, Chandler Tracy

Saint Martin’s University

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Groupon’s Great Race To The Top

Company Background

Groupon Company launched in 2008 in Chicago, Illinois. Andrew Mason, current CEO,

founded the company with a vision to tie local small businesses to the promotional power of the

internet. He was a first mover in the rapidly changing arena of online marketing and business

communications. As a first mover he enjoyed the advantages that go along with that role. Rampant

growth led to Groupon’s status as a super success story. Operations spread across the globe. Within

just two short years it had the distinction of being the fastest company to get to 1 billion in sales ever!

The Deal-of-the-Day

What led to this great success was a new way to get deals in local businesses. This was in

a time period of severe recession when more people were seeking deep discounts. The way

Groupon’s deal-of-the-day model works is pretty straightforward. It advertises daily deals on its

online website, on face book, through emails, and on Google. The deals are from local small

businesses and represent large discounts Offers expire within a certain number of hours. An

individual can sign up for the deal with a credit or debit card. However, the deal only becomes

activated when a set number of fellow shoppers also set up to use the deal. At that point the deal

becomes active for everyone who wants to use it. If there are not enough takers the deal will not

go through and deal seekers are charged nothing. The revenues (after discount) are then shared

between Groupon and the vendor, at a rate of 50/50 or 60/40. The vendor makes little if any

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profit on that sale. However, they hope to gain long term repeat customers to increase business

over time.

Communication Success

According to Heather Campbell, of CommuniquePR.com, Groupon enjoyed first mover

advantages in the online daily deal market. They also put in the feet on the pavement outreach.

They invested in the kind of outreach and relationship building that creates trust and long lasting

business relationships. Initially, their communication strategy centered on using a potent

combination of; technology, customer service, and continuing outreach. With the entry of fierce

competitors they have responded by increasing the variety of their offering and upping marketing

How it works:

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PR to drive sales. They have moved into the mobile app arena as well. In 2011 the director of

communications was Julie Messler. Under her guidance, Groupon followed communications

strategies as shown in the table below.

Julie Messler’s Communication Strategy Twitter and Facebook

Know your audience:

Blog = more personable image

Language = chatty, and humorous

More people mobile = app offered

Social Media:

Flexible use of social media

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Use marketing to instill the usefulness of your

product:

Strive to find novel ways to show how Groupon

is useful and relevant to its customers

Live off Groupon for a year challenge at right, -

-individual bought only Groupon deals to

survive for one year

Website Comparisons & Demographics

Groupon struggled creating a clean, user-friendly site which is so crucial in portraying a

message to a company’s audience. In a simple contrast, we will compare Living Social and

Groupon’s websites in order to

show the lack of structure and

lack of a coherent target market.

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Living Social

Living Social is the leading competitor to Groupon. Their online site has a clean,

straightforward message. Living Social delivers their message in short, concise, tight messages

that attract all different ages. They promote travel, sports, relaxation, recreation, and many more

diverse, interesting deals for purchase. Living Social allows you to find deals for things that are

geared to lifestyle choices. Their offering brings you such things as; food and drink, health and

beauty, fitness, and household goods. As you can see, Living Social is a very structured and fresh

site. Vibrant colors, stimulating pictures, and few words deliver a direct message to the audience.

With deals in every city, consumers can choose the services, activities, and adventures they

desire.

Living Social knows their target demographics and markets accordingly. Anybody,

whether it is child, teen, or adult, can navigate this website to locate their desired deal. There are

deals for all different interests as well, in any desired city. The majority of those who use an

internet coupon site are most likely adults who have families. Living Social does an excellent job

of creating many different options for families; things to involve the kids such as dance classes

and things to do as a family such as a trip to the

zoo. Living Social portrays itself as one that

knows their demographic, caters to the needs of

an individual or family, and presents a clean user-

friendly site.

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Groupon

Groupon’s website is different. They essentially created the deal-of-the-day concept, and

were the first in the marketplace, but have struggled in evolving with their competition. In a one

word summary of the site, one may say “busy”. A potential buyer of one of these deals sees

muddled deals, clutter, and a tremendous amount of information. If mediocre images portraying

their message was not enough, they also added wordy text (twice) and gave location details to

top it all off. An example of the wordy text would be: “Up to 52% off Japanese and Hawaiian

Cuisine at ‘Ohana.” They then state the location at ‘Ohana, and the city it’s located in. The

benefit to Groupon being in the marketplace first is that they have a lot more businesses that they

contract with; making their visits to the site constantly raise by many more people looking for a

more diverse selection of deals. At best, Groupon.com is random in its selection of deals to

feature. Those who aren’t close to a major metropolis city struggle to find deals in their location.

This confusion on Groupon’s website shows their ambiguity and uncertainty as to a certain

demographic.

As we saw with Living Social, the website allows all different ages of users to access and

find deals that are particular to them. Groupon’s featured deals page is casual about this. Again,

the majority of users on these deal-of-the-day websites are people with families and Groupon

doesn’t do this. They apply to two different groups, males and females. Nothing to promote the

family or potentially more profit. The lack of targeting a demographic by Groupon is an example

of management’s poor communication strategy. Andrew Mason, the CEO, is labeled as arrogant,

but driven. To quote Forbes, “He’s not a people person and not very grateful– last year, he

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hosted a get together for the first 50 employees and not once did he say “thank you,” as if it was

an honor just to be spending time with him. These weaknesses, which ultimately led to the

environment that I could no longer tolerate, make him extremely disconnected from the only way

Groupon makes money– sales” (Forbes). Perhaps he should use his arrogance to boost the stock

price, oh wait, you need a market niche for that, and Andrew Mason does not have one.

http://www.forbes.com/sites/ericjackson/2012/08/14/source-of-groupon-problems-managing-

people/

Business Model Sustainability

Andrew Mason was a young man in need of greater vision, prudence, and focus. All of

these qualities may or may not have contributed to his lack of looking beyond the mark, focusing

on money first and customer second. It is the customer who has the money and if you charm the

customer, they will reward you graciously. For example, Groupon’s deal-of-the-day model does

not always allow certain buyers of a deal to receive the deal they bought. If the target number of

sales do not occur then the deal never becomes active. Of course, customers do get their money

back, but there is an assortment of disappointment when the desired deal falls through. Busy

people see their time as valuable and don’t want to feel they wasted time chasing a deal just to

see it fall through. This disappointment becomes associated with Groupon and leaves a less than

stellar impression.

Vendors also face tremendous pressure from Groupon to make deals cheaper, which

brings in foot traffic but less revenue. Because of the economy now days, business are turning to

Groupon to save them and Groupon is welcoming them with open arms. These businesses,

however, are finding that those who purchase their deals are one time users of the business and

then move on. So for a time, they may receive more foot traffic but they are barely making any

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proceeds from the customer because Groupon takes half and the business gets the other half.

This creates a reason for companies to steer clear of Groupon after a one time use with them.

Perhaps this is another reason why Groupon is failing. Miserably.

Communication Fails

While Groupon evidently has much strength to work with, it is falling down in its

communication with key stakeholders. Last year they went public but failed grossly to meet

investors’ expectations. This came after spurning a 6 billion dollar offer from Google! They

appeared greedy and foolish because of this. Then accounting errors from Quarter 4 of 2011

added up to a 65 million dollar loss instead of the 15 million profits previously recorded.

Groupon along with other web companies like Facebook have struggled with going public. In

order to succeed, they need to stop this downward spiral with their investors.

This came after the communications blunder of an odd assortment of Super bowl ads that

left many offended and confused. To some, these ads were funny and passed over as another

controversial commercial, but it had many activists up in arms. One ad was meant to be comical

and raise awareness to the plight of the Tibetan people, but ended up doing just the opposite.

Groupon had been sincere about using money to fund the causes highlighted in the ads.

However, this was not communicated either beforehand or in within the ads. Since the ads

seemed to make light of weighty issues and people did not know Groupon’s sincere intentions in

trying to help the causes, it came off as grossly insensitive. The only positives gained from this

mix-up are in order to be successful in social media you need to be edgy and memorable,

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instead or boring and bland, and they did just that. In this case they went beyond the edge

and just fell off the mountain. However, one of the biggest negatives is that this could have

greatly affected future business in China. It will be hard to explain their commercial when

they are seeking approval in the Chinese market. Overall, if you have to explain a joke, it isn’t

funny.

In turn this speaks to the quality of the leadership of the organization and their ability to

communicate effectively internally and externally. While they did turn to an outside marketer to

develop the ads, someone in charge had to sign off on them at the end of the day. This someone

(former director of communications, perhaps?) decided that those ads were acceptable and would

improve the brand image. Considering that this person and others subsequently abandoned ship

seems to suggest that Groupon was/is in need of new management, new direction, and new

communications strategies.

Communication Repairs

In communicating with investors and the public they did not apologize. Instead they

made excuses about being a young company finding its way. If building your brand is about

respecting your audience, maintaining integrity and credibility, and keeping a consistent message

across marketing mediums, then Groupon has failed to do so. This failure is pinned to the top

managers and specifically Andrew Mason.

Conclusions

In short, it is easy to sit back and criticize Groupon. However, it should be remembered

that Groupon has taken risks that paid off. They were the first to engage the small mom & pop to

the power of the internet. It is unfortunate that they have not stayed true to their roots, and have let

greed get the better of them. Companies can no longer rest on their laurels in the competitive

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marketplace today. Due to not developing a more organized, and better communication strategy

than the upcoming rivals they demonstrate complacency and a lack of care for the customer. Their

leadership left a bad brand image by appearing greedy and silly. Further, they failed to

communicate their value proposition to various stakeholders. Finally, they relied too much on

humor and it blew up in their face.

Unlike Comcast Groupon does not have a monopolistic situation so this could end up

really hurting them in the years to come as fierce rivals come into play. Theirs is a prime example

of how critical communication is as a key to business success. Communication is embedded in

almost every aspect of what an organization does. From leadership and management, to print,

online, financials, and face to face relationships, and more-- communication cannot be stressed

enough. It takes clear, well informed thinking to craft a great communications plan, execute the

plan the right way, and complete it with good follow up practices that show integrity.

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References

Campbell, Heather. (2011). Standing out in a Crowd: Marketing Lessons from Groupon.

CommuniquePR. Retrieved from

http://www.communiquepr.com/blog/?p=2736

Cohan, Peter. (2012). Why Groupon is Over and Facebook and Twitter Should Follow. Forbes

Magazine. Retrieved from

http://www.forbes.com/sites/petercohan/2012/08/20/why-groupon-is-over-and-facebook-

and-twitter-should-follow/

Dietrich, Gini. (2012). The Communication Crisis Groupon has Created for itself. Spin Sucks

Professional Development for PR and Marketing Pros. Retrieved from

http://spinsucks.com/communication/the-communication-crisis-groupon-created-for-itself/

Steiner, Christopher. (2010). Meet the Fastest Growing Company Ever. Forbes Magazine.

Retrieved from

http://www.forbes.com/forbes/2010/0830/entrepreneurs-groupon-facebook-twitter-next-

web-phenom.html

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Sloane, Garett (2011). Groupons TV ad blunders on Tibet. New York Post: News

Wong, Wailin (2012). Groupon stock tumbles to all-time low close of $2.76 a share. Chicago:

Tribune