Groupon: Making a niche

Groupon is a web site you can either sign up to receive emails or you can visit the web site which recognizes your general location and presents deals to restaurants and services.   Whether you receive an email with the deal of the day or discovered it by going directly to groupon.com, the deals have an expiration, where they disappear.  When I went to the page, it offered me deals from Providence, but I was able to type in my zip code and narrow it to my area  There were not that many deals as compared to Providence, but it was interesting to see the deals.

The way it works is that Groupon offers different deals each day for a local good, service or event in a city where it operates. Discounts range from 50 percent to 90 percent off. The promotion is only valid if a certain number of consumers purchase the deal within 24 hours.”1

Groupon is the one example that appears to be using a system of push v pull interaction.  What is a push v pull interaction?  “Hybrid Push–Pull strategy, usually suggested for products which uncertainty in demand is high, while economies of scale are important in reducing production and/or delivery costs. One good example of this strategy is the furniture industry, where production strategy has to follow a Pull-based strategy, since it is impossible to make production decisions based on long-term forecasts. On the other hand, the distribution strategy needs to take advantage of economies of scale in order to reduce transportation cost, using a Push-based strategy.”

An excellent example of how this works is offered here: “Our adventure begins when local consumer Bob visits Groupon.com and signs up to receive daily e-mails featuring deals in his city. One morning he opens his Groupon e-mail to find a deal for $20 worth of food from Eatsa Pizza for only $10. Bob loves pizza, but hasn’t tried this place across town, so he clicks “Buy” and enters his credit card information. The first big difference between a normal coupon and a Groupon is that Bob pays the discounted price up front, even before he’s in the restaurant. The $10 is split between Eatsa Pizza and Groupon itself, which usually involves both companies taking 50 percent [source: NPR].

The second big difference between a coupon and a Groupon is that Bob will only get the deal if 20 other people click the “Buy” button. This is the “group” element of Groupon. By setting a minimum number of purchases, Eatsa Pizza is guaranteed a minimum dollar amount of sales, or else the deal is off. In this case, Eatsa Pizza wants to make sure it gets at least $100 in sales (20 people x $10 – 50 percent) if it’s going to offer such a steep discount. To help reach the minimum, Groupon encourages Bob to share the deal with friends on social networks like Facebook and Twitter. Lucky for Bob, the deal “tips” in a matter of minutes, meaning the deal is on.”3

Groupon advertises deals for a 24 hour period, but there are often restrictions and there is not guarantee that the deal will be purchased.  Sadly, the company is not doing very well.  “Indeed, Groupon is worth more than it was ever valued as a private company. But barely. Groupon’s last round of private funding valued it at $4.75 billion. That was in 2010. When Dan published his story, Groupon was worth $4.9 billion. A 3% increase is not much of a return for investors in five years, especially for a high-growth startup.”4
I cannot think of an example where this has been used in any of my fields of interest.  In the field of librarianship, web design or Pampered Chef, I have not seen any interest.  I have never used Groupon, but when I was on the site the glass blowing seemed interesting.
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