Groupon: Helping Consumers with Purchase Decisions
McGraw-Hill Education
Kerin Chapter 5

What if you and your friends could try new things and discover new places at a discounted price? Andrew Mason, an Internet entrepreneur, answers this question with his company, Groupon. Groupon offers group coupons through deal of the day offerings from local and national businesses. Consumers love the concept, buying everything from restaurant certificates to yoga lessons to tickets to a museum. Mason thinks the Internet has the potential to change the way people discover and buy from local businesses.

Groupon actually started [inaudible] action, and the idea was to get those people together to solve kind of the world’s unsolvable problems, whether it was getting a bunch of people together to work with government or, you know, refurbish a local school, really accomplish anything that a group was looking to do.

Eventually, it kind of morphed into people were looking for deals. They were kind of all trying to get around how do we — how do we take this group and put it into this commerce channel, and so we kind of took the idea up [inaudible], and we made it into Groupon. [Inaudible] 2008, 400 subscribers all the way up to more than 60 million worldwide. We’re in more than 40 countries, and we’ve saved consumers more than $2 billion [inaudible].

Groupon is an easy way to get huge discounts while discovering fun activities in your city. Each day we feature a cool new experience at an unbeatable price in dozens of cities across the country. From restaurants, theaters, spas, stores and special events, we work with the best local businesses to offer one deal each day at an incredibly low price. Using Groupon is easy. Check in every day to see the new deal, or subscribe to our daily alerts and the deal will be emailed to

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you each morning. If you see something you want to do, sign up. If enough people sign up, the deal will activate. By requiring a minimum number of buyers, we can guarantee businesses lots of customers and insure that our subscribers receive maximum discounts. We call it collective buying power. When you find a deal you love, just enter your name and credit card. You won’t be charged unless enough people join for the deal to activate. To make sure the deal reaches its minimum, tell your friends, using Facebook, Twitter, email or carrier pigeon. When enough people join, we’ll send you your Groupon, which you can print and use like cash.

The biggest benefit to consumers using Groupon is that they have unbeatable experiences with it, and that’s everything from the customer experience — you’re getting an unbeatable discount that you can’t get anywhere else, with only the best local businesses. We’re vetting all of these businesses to make sure that you’re only working with the best of the best. The other thing is that for customers they have the Groupon promise, which means that at any time if we ever let you down or if our merchant doesn’t provide what they say they will, you can get your money back, no questions asked, which is really important, because it gives people a no-risk experience in shopping with them. The biggest benefit for merchants is that it’s an unparalleled marketing opportunity. You know, never in the history of the Internet [unintelligible] business has a merchant been able to connect with local customers online and translate that into real-world sales. Currently I’m having the best month that I’ve had in business in six years. I’ve actually had to hire more people because of the Groupon.

Before we ran our first Groupon deal, we had maybe 20 members, and then all of a sudden overnight we went from 20 members to 550 members.

I think Groupon has opened a door for a lot of local merchants who just would have never considered doing something online — you know, doing something with Google, doing something with Facebook.

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In addition to deal of the day offerings, Groupon also offers a service for merchants to easily connect with consumers on the go called Groupon Now. All you know is you want something awesome right now. That’s why there’s Groupon Now. It’s a new thing from Groupon that knows where you are and shows you all the great deals happening nearby. Just launch Groupon and instantly see great deals going on around you right now. Let’s see.

Part of the reason that Groupon has grown as quickly as it has is because we really understand consumer behavior, and in knowing that, we know that people want to engage with us when they want to do it. You know, our emails go out every morning, but maybe you’re not an email person. Maybe you want to check things on your cell phone.

Sometimes it can take a little while to people to activate as consumers. They have to see something — you know, you have to get comfortable getting the email. You have to see what kind of offerings we’re doing — are they really the best deals out there, something that you would want to purchase?

Price is kind of the activation point to give people a reason to subscribe and a reason to come back to Groupon again and again. But what we found out is that people aren’t as concerned about price as they are about working with a quality merchant and having a different experience that they can’t get anywhere else. You’re not only satisfying people’s needs for a budget or a certain amount of money that they want to spend on, you know, leisure activities, but it’s also that need to participate with your friends and do something fun in a group. If I say, okay, I want to go skydiving, here’s $99, I might be really scared, I might not want to do it, it might be a dare, it might be this, that and the other thing. But the fact that I’ve dropped $99 and put my money on the line means that there’s a pretty high likelihood that I’m actually going to go through and do this. This is advertising that really is driving consumers to go do

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something, so driving them from the online piece, the computers, and outside into the world to do something.

What you got there, honey? Just checking out today’s Groupon. It’s a doozy.

I think the price piece is very, very important. I think that with the economy being what it is, I think that that was the initial hook, and that continues to be the hook for people, that they know that this deal is — you know, 50 percent off, they’re expecting it. Our demographic when we started out was the earlier adopter. What we found is that as we’ve scaled and gotten sort of massive pretty quickly, we’ve been trending more towards — more towards kind of the mainstream. Our age has gone up a little bit. I think we’re now we’re, you know, more like 25 to 35. The median is probably, you know, early to mid-30s. Median household income is $60K plus, mostly female. I think there’s a couple of reasons for that. Number one is a lot of services out there that appeal to women, that make a lot of sense to [unintelligible]. Number two, I think they share information maybe a little differently than males do in terms of wanting to get the best deal out there and telling their friends about, “Hey, you’ve got to check out this spa on Groupon today.” When I saw this Groupon, I was really excited. At first I wasn’t sure if I wanted to spend the $70, because I already belonged to a gym. But I decided I wanted to get my butt kicked for two months, and this would be the thing to do. Right now most of the targeting we’re doing is around — is around zip code, is around [unintelligible] local stuff. Eventually, down the road, I think we’re going to be — we’re going to know, hopefully, as much as we possibly can about you, and we’re going to give you what you want. We really want the best deals, we want the best partners out there, and what’s hard is that the best partners out there don’t necessarily want to work with us, because they think that they’re doing okay. They think that they don’t — you know, they don’t necessarily need to do a

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Groupon. We’ve got to be on the phone, we’ve got to be emailing, we’ve got to be doing as much as we can to get them to sign up. [Unintelligible] Groupon [unintelligible] that we’re growing around the world, so that means taking best practices and things that we’ve learned to do, both for merchants and for customers, making sure that the Groupon experience is the same. We essentially created this beast, this daily deal space, this collective buying space. There’s a ton of companies that are doing it, from the smallest, you know, mom and pop to some of the big players out there, some of the biggest names on — you know, on the Internet. We don’t really think about it so much. It’s less external and more internal — how do we — how do we scale and grow and remain the sort of company that people — that people have a real ownership in, a real sense of this company gets me and they understand what I want, and they’re not just going to be spamming me with a bunch of offers that I would never ever purchase.

Groupon has been heralded as the fastest growing company of all time, and the reason for that is because we’ve solved this unsolvable problem, which is how do you engage with local customers and turn it into real-time sales? The model really works anywhere as long as you adapt for local community [inaudible]. All over the world, local merchants and national brands too are benefiting from this model of commerce.

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