Merchants are not happy...Are the buyers?


A Groupon happens between a Merchant and Buyers. - No Merchant! No Groupon!

1. Merchants Loose?
75% off existing Selling Price didn`t make sense, but inflating the price does. Caveat Emptor!

2. Buyers Loose?
Multi State Class Action Lawsuits accuse Groupon of selling gift certificates with short expiration dates.

3. Investors Loose?
If Groupon comes apart before the IPO, is it worth doing an IPO?

Sunday, October 10, 2010

Is Group Coupon Marketing Over Rated for Businesses?

Has Group Coupon Marketing been around long enough to establish a track record of success to warrant a $1 Billion dollar valuation?

In 2004 there approximately 24.7 million businesses in the United States of which 99.9 percent had fewer than 500 employees. These 99.9 percent are the prime targets for all the Group Coupon Marketing companies.Groupon states revenues of $200 to $400 Million for Group Coupon Event Marketing.

What percentage of these sales are one time sales and what percentage are repeat sales? Can the event ROI be so low that businesses cannot afford to do another Group Coupon Marketing Event. This is the question that needs to be understood respond to today's subject - "Is Group Coupon Marketing over rated for businesses"?   If the ROI which is a combination of  financial and more from an event is too low to repeat a Group Coupon Marketing event, will the Groupon Sales drop off dramatically over time, once all the Groupon companies have picked the low hanging fruit. Small businesses only engaging once?

A recent study states that "Groupon is Unprofitable for a Third of Businesses" according to study by Utpal Dholakia. He is the author of the study and associate professor of marketing at the Jones School at Rice, surveyed 150 businesses in 19 cities that completed Groupon promotions between June 2009 and August 2010. According to Dholakia’s data, Groupon promotions were unprofitable for 32 percent of the businesses surveyed and over 40 percent of those businesses indicated they would not run a comparable promotion again. (The study found that businesses with unprofitable promotions reported low rates of spending by users beyond the Groupon's face value as well as low rates of return at full price.) However, 66 percent of businesses told Dholakia their promotions were profitable.

This goes back to my first post and supported by CEO Andrew Mason claiming 97 percent of Groupon's business partners have asked to be featured in the company's e-mails again. Are we seeing marketing (story telling) at its best?

Why are the numbers from an actual study so different from published numbers on a website without supporting metrics? 

What are your thoughts?

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