Groupon's Business Model: Social and Local CASE 4.3

CASE STUDY 4.3

GROUPON'S BUSINESS MODEL: SOCIAL AND LOCAL

QUESTION 1: How does Groupon take

advantage of social networking and location

technology?

Since its launch in 2008, the daily deal Web

site Groupon has become so popular and so

profitable that it passed on a $6 billion buyout

offer from Google in December 2010.

Groupon has achieved fame and fortune by

putting a Web-savvy spin on the boring old

coupon but to understand how Groupon works,

let's start with how coupons work.

A coupon is what is called a loss leader. A loss leader is any kind of sale, promotion,

discount or special offer that entices customers to walk in the door. The business will almost

certainly lose money on the discounted items, but the hope is that the customer will also

spend money on other items, or even better, become a regular customer. Coupons typically

have an expiration date and offer modest discounts; perhaps a dollar off specific grocery store

items or a 15 percent discount at a major retailer.

Groupons are like coupons on steroids. The deals offered daily through Groupon start at 50

percent off and can go as high as 90 percent cheaper than the normal price. Groupon can

offer such steep discounts because it guarantees business owners a minimum return on their

investment and the possibility of becoming an overnight sensation. Groupon claims that its

service is a win-win for both businesses and consumers, but there are some disadvantages.

Groupons was using their strategies to take advantage of some culture that interested with

discount.

Nowadays, social, local, mobile are three words marketers are hearing more and more these

days. Sometimes we may even hear them uttered together in one breath as SoLoMo. With

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Groupon's Business Model: Social and Local CASE 4.3

an increase of users relying on mobile phones, tablets and their accompanying geo-location

technology, businesses today are increasingly finding the need to think locally.

QUESTION 2: Do you think

this business model is viable?

Why or why not?

In our opinion, this business

model is still viable because the

increasing the numbers of social

networking user that will increase

the numbers of Groupon's

customers. Other than that, increasing the online business will helps this kind of business

model to growth healthy.

Besides that, these are the other reasons why this business model is still viable.

Ability to get more profit

Currently social connectivity is proven as a platform to selling goods and services on

the internet

Inexpensive deal

Groupon serves 500 markets in 44 countries

Groupon also need to strategize the marketing and business in order to maintain their

profits

Groupon also need to maintain and increase competitive advantage for their products

and services

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