One of the more intriguing stories in the marketplace as of late has been the pending IPO for the internet coupon site Groupon. Over the past year their company has gone from receiving valuations of up to $30 billion to potential bust. But what is the true value of the company and what value have they brought to the table? Are they actually able to alter buyer behavior and help businesses build customer loyalty?
Like most human beings, I started to analyze this thought by thinking on my past experiences working with online coupon sites that e-mail me every day. Currently I am signed up to two sights (Groupon and LivingSocial) and my initial thought after saying their name is simply “spam.” I feel as if a majority of what they offer is mediocre at best and not relevant to my personal tastes. However, they occasionally offer something that is a fantastic deal that I can’t pass up. I think it is funny that the first thing I do every morning is check my e-mail to see if Groupon actually has something good for me, yet I am disappointed almost every day. But not enough to unsubscribe to their spam. Not yet anyway.
I don’t believe that Groupon’s website builds customer loyalty. Most businesses use their services hoping that consumers will come back after trying their product or services. The fact of the matter is that I like to buy things on Groupon that I feel are a good value but then I feel as if they are overpriced when I don’t have a coupon. Suddenly paying $80 for a massage isn’t as attractive knowing that I can wait for Groupon to have another deal in the near future. Over the past year I have purchased 10 coupons and have yet to become a repeat customer at any of those businesses. More often than not I bought these coupons because they were a good deal for businesses that are normally out of the way or too expensive. More often than not I feel as if the things they offer are discretionary spending and need to entice me
A recent article in the New York Times sheds even more light on this topic. According to their findings, 80% of all Groupon subscribers have never bought a deal. In addition to that, their sites are promoting bargain hunting from all consumers. In the New York Times article, they cited several businesses that regularly receive calls asking if they are willing to match prices from competitors. To make matters worse, recent research from Boston University and Harvard has actually shown that the coupons attract consumers that are harder to please and more likely to complain on cites such as Yelp. They went as far as to state that this cost a business up to 1/2 star rating on these services. In the end it sounds as if promoting their business on Groupon has actually caused more harm than good and it will be interesting to see if this is a growing trend among Groupon customers.
Thoughts?
-Chris Gabriel
I agree with this in some cases, but I do believe there are exceptions! I don't buy too many deals from these sites, but when I look back at my purchase history from Groupon and Living Social, I actually have become loyal to two of the companies which I bought deals from. One was a hair salon - I was looking for a new place, found a great deal, really liked the stylist, and now I go back there for full price. The other was for a local company that does CSA food baskets. I paid a discounted price for my first week, and now I have a basket delivered each week at full price. So both of those companies gained a new customer! I think in some cases these deals can be great for creating awareness. But you're right, perhaps it's not the majority of deals.
ReplyDeleteThe other deals that I think are successful are those deals that get you in the store where you're bound to spend more money than your coupon is worth. For example, I recently bought a $20 Whole Foods deal for $10, because I knew I'd eventually go there anyway. But once I'm in the store, I'm sure I'll end up going over my $20 goal (it's Whole Foods afterall!). So I think these deals can be a good tactic to get customers in the store to spend more money.
I probably agree with your overall point. However, these are just some "bright spots" that I wanted to highlight.
My first instinct is to say placing a groupon is a great way to introduce new customers to your business. Yet the more I think of my experience with these types of tools the more I wonder is it worth it. First, does it really attract repeat customers? I vary slightly from Chris where I would say my experience is 50/50 on if I become a repeat customer.
ReplyDeleteThe other angle is traffic flow. If the groupon works to draw customers to an otherwise slow time, it has the potential to gain additional usage of fixed assets. However, if it causes a rush during a limited time frame that the company has not expected it could lead to poor customer experience.
In all, I think a company has to believe enough in their product or service and believe that one try will lead to return customers. Otherwise it is most likely not a sustainable business in the first place.
Alyssa Thomas
I'm still new to the groupon experience, but I enjoyed one great deal in Charleston, SC over the summer. Since I had that experience, I have not purchased anything else. SO I guess it's a once in a while type thing for me to. I don't see this being a long term success.
ReplyDeleteRonald Williamson
I believe that, for the most part, the problem with erosion of brands comes into play when sites such as Groupon and LivingSocial keep bringing up promotions over and over for the same company or even for products or services under the same category. As we have discussed in our marketing classes and as you pointed out from your own experience, people get used to the discounted price and sit and wait for the promotional period to, in many cases, stockpile the products.
ReplyDeleteOn the other hand, it would be interesting to know the redemption rate of coupons from these companies. Historically, the redemption rate of regular coupons has hovered around 1%--but most of these coupons offer discounts in the cents as opposed to dollars, which would indicate a much higher redemption rate.
So given the number of people reading about the daily coupons, at least some retailers are getting a bang for their bucks if their redemption rate is lower than or close to 50%, which shouldn’t be crazy for some types of business that use this promotion. Some people will doubt that a company will be getting such low redemption rates but here is an example from a company that experienced a 56% redemption rate from a recent Groupon promotion.
Luis De La Cruz