Cluster 2 Case Study

Groupon: Helping Consumers with Purchase Decisions

Question A:

Yes I have used Groupon.

Question B:

My purchase decision process was pretty simple. A group of friends and I wanted to try a painting and wine class, we heard from some other ladies that it was a really good time, so we stared doing some research on places. The most important thing to us was how much would it cost and if the business offered a painting that we all wanted to do. One of my girlfriends looked on Groupon and found that there were some places that offered what were looking for. After finding the Groupon, we went to that business’s website and looked to see what paintings they offered. We liked what we saw and bought them.

Question C:

My Groupon experience was great. It got us all out, which we desperately needed and got to venture into the city, which we hardly ever do. It was a lot of fun to do something new, different and creative. I have not gone back since then but we have been talking about doing another painting class again soon. I’m not sure if we’d go back to the same place or if we would try somewhere different to see what kind of paintings they offer. Overall it was a great place and I would recommend others try it.

Question D:

I have not considered using any of Groupons competitors. I go on Facebook pretty much daily, but don’t look for deals there. Honestly, if I want to do something new and/or was looking for a deal I will always check Groupon first.

Textbook Questions

1. Having an understanding of consumer behavior has helped Groupon grow from 400 subscribers in Chicago in 2008, to 60 million subscribers in 40 countries today by Andrew Mason’s want to try new things and go to new places. He found himself wanting to venture out of his normal activities. He started a website based on the idea that he could help people like him try new places by offering coupons to large groups of people. He thought that people would be more inclined to “try something new if the price was low enough, and that businesses would offer low prices if they knew they could sell a large quantity.” He came up with the concept that offers are only carried out if there were enough people to commit to participate in them. The company and concept of Groupon spread so quickly because of the power of the internet, being able to reach millions of people across the world and giving people the opportunity to get a good “deal” on something.

2. The Groupon Promise is “any customer can return a Groupon, no questions asked—even if they have used it—if they feel like Groupon has let them down.” The Groupon Promise affects a consumer’s perceived risk by making the consumer feel less committed. They know that if something comes up and can’t participate in the Groupon that they aren’t obligated to show up or use it. They can get a refund. A person might experience cognitive dissonance because for example they wanted to participate in an art class and purchased a Groupon but then later saw a similar Groupon and liked that one more. You again don’t have to feel obligated to do the one you already purchased; you can simply just return or cancel your Groupon without any hassle.

3. The five-stage purchase decision processes for a typical Groupon user are: problem recognition, information search, alternative evaluation, purchase decision and post purchase behavior. The problem recognition stage can be defined as the attempt to change the perception of a product or activity that your instincts would otherwise tell you not to purchase. Information search, is simply reviewing previous experiences that could relate to what you’d be participating in, doing research on the promotion or just talking about it with other people. Alternative evaluation is assessing value. Things to consider would be the cost of the Groupon, quantity and time restrictions. The purchase decision is made online and then confirmed when the deals tip. People consider from whom to buy and when to buy. Should I or shouldn’t I try something new. Is the time and price right in order to commit the purchase. Finally post purchase behavior, consumers will compare their experience with their expectations and decide whether or not they were satisfied.

4. Some of the possible psychological and sociological influences on the Groupon consumer purchase decision process are the recession. People are looking for deals since money is tight, making Groupon attractive to many people. Another significant factor is the relationship the target market has with social media, email and smartphones, which is how Groupon reaches its customers. Other influences could be location of a restaurant, buying gifts for people and finding entertainment activities.

5. There are three challenges that Groupon faces. The first has to do with coupons, some people buy them but never use them, while others use them but don’t become regular customers. On the flip side, merchants are worried that people that have used discounts at their establishment before might not want to make a purchase without a discount in the future. I think that if people have a good experience at an establishment they wouldn’t feel it necessary to always need a discount or a coupon. If you offer a good quality product or experience, people will pay. Unfortunately I feel that what people decide to do with their coupons is entirely up to them. Perhaps if there was some sort of reminder that their Groupon was coming up or that it’s about to expire maybe people wouldn’t forget to use it. Another challenge is managing Groupon’s growth. Something I would suggest doing is to try and stay ahead of the game. Having market researchers in each country where Groupon is being used could help to identify consumer behaviors and see what people are interested in and be able to satisfy their needs. Finally, that last challenge is competition. There are many manufacturers, large retailers, and small businesses that are jumping on the bandwagon and trying their own form of coupons. I think some ways for Groupon to stay competitive in the industry is to offer innovative ideas, stay true to the Groupon Promise and remain current with what the consumer’s wants and needs are.