Since its launch in 2008 , the daily mess Web siteGrouponhas become so popular and so profitable that it go through on a $ 6 billion buyout offer fromGooglein December 2010 [ source : Ovide ] . Groupon has achieve fame and fortune by putting a Web - savvy spin on the ho-hum old coupon . But to understand how Groupon work , let ’s set out with how voucher turn .
A coupon is what is called aloss leader . A loss leader is any kind of cut-rate sale , furtherance , discount rate or special offering that lure customer to take the air in the room access . The business will almost surely fall behind money on the dismiss item , but the Bob Hope is that the customer will also spend money on other item , or even better , become a regular client . Coupons typically have an expiration date and offer pocket-sized deduction ; perhaps a dollar off specific grocery store particular or a 15 pct rebate at a major retail merchant .
Groupons are like coupon on steroid hormone . The deals extend day by day through Groupon take up at 50 percent off and can go as high as 90 percent cheaper than the normal price . Groupon can offer such steep discount because it guarantees business owners a minimal restitution on their investiture and the possibility of becoming an overnight genius . Groupon arrogate that its overhaul is a winnings - winnings for both businesses and consumers , but there are some disadvantage .
To well interpret how a daily trade situation like Groupon works , we ’ll use the good example of Bob the consumer and a local business forebode Eatsa Pizza . Keep reading for all the details .
Buying and Redeeming Groupons
Our adventure begins when local consumer Bob visit Groupon.com and signs up to get dailye - mailsfeaturing deals in his city . One morning time he opens his Groupon tocopherol - mail service to come up a sight for $ 20 worth of food for thought from Eatsa Pizza for only $ 10 . Bob loves pizza , but has n’t try this property across town , so he clicks " Buy " and get in his credit rating card information . The first liberal dispute between a normal voucher and a Groupon is that Bob pays the discounted price up front , even before he ’s in the eating house . The $ 10 is split between Eatsa Pizza and Groupon itself , which usually involve both fellowship taking 50 percent [ source : NPR ] .
The second big divergence between a coupon and a Groupon is that Bob will only get the deal if 20 other masses click the " Buy " button . This is the " mathematical group " element of Groupon . By prepare a minimal number of purchases , Eatsa Pizza is guaranteed a minimum dollar mark amount of gross revenue , or else the muckle is off . In this case , Eatsa Pizza desire to ensure it gets at least $ 100 in sales ( 20 people x $ 10 - 50 percent ) if it ’s go to extend such a steep price reduction . To help reach the lower limit , Groupon encourage Bob to share the deal with booster on societal connection like Facebook and Twitter . Lucky for Bob , the deal " tips " in a topic of minutes , signify the deal is on .
Every Groupon deal has two expiration date . The first termination date restricts how long the deal is available for purchase . pot remain " alive " on the Groupon Web site for a modified identification number of days ( the Groupon Web site provide a countdown clock ) . Once the stack is purchased , there is a second deadline by which the good deal must be redeemed . After that engagement , an unredeemed Groupon is just a useless bit of paper ( or barcode ) .
To redeem the Groupon , Bob either publish out a Groupon redemption code from his east - mail or use the Groupon app to upload the barcode to the screen of his smartphone . At this point , the Groupon is just like a regular voucher . Bob place a large pizza and a drink for a total of $ 22 . With the Groupon , he only has to pay $ 12 ( the $ 10 Groupon plus $ 2 over the $ 20 mountain ) . Groupon etiquette dictates that Bob should tip for the full amount of the beak , not the ignore price , but that ’s only a suggestion .
Next , we ’ll look at a few different type of mickle that are typically offered through Groupon and other daily deal land site .
Types of Groupon Deals
It ’s authoritative to see that Groupon is n’t for everybody – and it is n’t meant to be . The service was designed to attract a specific demographic : young , urban master who desire to explore their cities affordably . The kinds of mickle featured on Groupon fall squarely into the class of deprivation , rather than want . They advertise product and services that you may not have otherwise tried if the price was n’t so scummy .
Here are the most unwashed types of Groupon mint :
author Noreen Malone jokes that Groupon hatful paint a mental picture of American desire falsify by too many " Sex and the City " rerun [ germ : Malone ] . dozens of eating and drinking , band of grooming and yoga form – and if all else fail , the occasional cosmetic subprogram .
The most coarse character of Groupon quite a little is a 50 percent bank discount on a sure amount of product , valuate in dollars . For example , instead of volunteer 50 percent off of Bob ’s entire bill at Eatsa Pizza , the hand is for $ 20 Charles Frederick Worth of food for $ 10 dollar . Groupon always say you how much money you make unnecessary and at what percentage of the original cost . And not all Groupon deals are for $ 20 or less : The internet site also feature cosmetic dental process priced at $ 2,999 ( a 62 percent discount rate ) and genuine luxury detail that retail for X of K of dollars .
All Groupon deals come with some restrictions . For entrant , they must be used before the expiration date . Some Groupon lot are limited to unexampled customer or first - time customers . Many restaurants bound Groupon user to the regular carte du jour , not the daily specials ( or alcoholic beverage ) , and some eatery condition that only one Groupon can be ransom per mesa . It ’s authoritative to read the fine mark before grease one’s palms a Groupon to make certain that it meets your expectations .
Now , let ’s look at some of the vantage and disadvantage of Groupon for businesses .
Groupon for Businesses
Another fringe benefit of working with Groupon is that the entanglement site contribution customer information with its merchants . According to the Groupon privacy argument , it shares e - chain armor addresses of customers who buy a Groupon with the patronage that ’s supplying the merchandise or service [ rootage : Groupon ] . So , Eatsa Pizza can send out Bob ane - mailafter he made his leverage to tell him about upcoming special . Businesses would otherwise have to devote a exorbitant exchange premium for such targeted marketing selective information .
Groupon even employs marketing and editorial professionals who will help Eatsa Pizza craft the respectable feature furtherance – again , for free . As a concern , you only yield Groupon if your minimum amount of cut-rate sale is met . If the feature flop , Eatsa Pizza pays nothing at all .
One potential disadvantage of Groupon is that the service typically takes a 50 percent cut of all sales . If Eatsa Pizza offers a Groupon pot for $ 20 worth of intellectual nourishment for $ 10 , then the restaurant will have to fork over $ 5 to Groupon . A 50 pct deal translates into a 75 percent loss at the registry . Groupon would indicate that the whole point of the deal is to get newfangled customers in the door : Once Bob taste the delectable pizza pie and enjoy the nice serve at Eatsa Pizza , he ’s certain to get back or severalize his friends .
Groupon says that the organisation works . It claims that 97 percentage of companies that declare oneself deals on the site ask to be featured again [ source : GrouponWorks ] . But some questions have been raised as to Groupon ’s efficacy for businesses . Some complain that Groupon client are buy chaser who speedily move on to the next meretricious offer . In fact , a recent field at Rice University found that 80 percent of customers who purchase discount deals from site like Groupon and LivingSocial are first - metre customers , and that only 20 percent of them ever return . Even worse for the bottom product line , only 36 percentage buy goods or services beyond the value of the Groupon [ source : Mitchell ] .
Interestingly , the same study revealed a statistic that still manages to make daily mickle site attractive for businesses : One in five masses who purchase a Groupon or similar discount never redeem the voucher [ source : Tuttle ] . Instead of losing 50 percent on the peck , the business gets paid for not providing any merchandise or service of process .
