Page 246 - Introduction to Electronic Commerce and Social Commerce

230 7 Social Commerce: Foundations, Social Marketing, and Advertising

Figure 7.5 The business model
and process of Groupon

participating merchants a certain number of sales. In other Benefits and Expansion
words, the customer would only get the discount if enough
people (hence, the “group” element) purchased that particular The major benefits to customers are:
Groupon. If Groupon did not meet that promised quota, there
was no need for the seller to honor the deal, nor was any com-
mission paid to Groupon, and the customer was not charged. • Steep discounts (50–80%).
Groupon charges advertising and promotions fees, usu-
• Discovery of new/specialized services and products.
ally a percentage of the revenue generated by the sellers. The • Deals related to the daily offer are presented by
retailers can use the system to promote their business, gain
Groupon.
new customers, and run sales during their slow seasons (e.g., • Useful recommendations provided to family and
running a promotion such as liquidation during the late sum-
friends.
mer). The initial process, a combination of group buys and
flash deal models, is illustrated in Figure 7.5. Today, it is
basically a flash (daily) deal. The reason merchants are will-
ing to offer a 50–80% discount to volume shoppers is that the The major benefits to merchants are:
merchants’ marketing and overhead costs are lower, while
their market share is increased.
Groupon’s business strategy is to work with quality mer- • Can sell larger quantities and liquidate merchan-
chants who are willing to provide substantial discounts. dise, quickly.
Groupon uses both traditional e-mail and social networking • Save on advertising and marketing expenses (e.g.,
(e.g., Facebook, Twitter, Pinterest) to promote the deals. Deals by using viral advertising).
are e-mailed directly to members when available, but those • Get repeat customers (if they like the deal and the
interested in current daily deals can go to the Groupon website service, customers will come back).
(Groupon Goods; groupon.com/goods). Groupon offers a • Lower customer acquisition cost.
“refer a friend” program, where the shopper can earn $10 for • Knowledge of and collaboration with vendors in a
every friend they refer who buys their first deal (see groupon. close geographical area.
com/referral).