Staff Reporters
Nov 12, 2015

Groupon needs loyalty more than deals

BRAND HEALTH CHECK: Reliance on short-sighted discounts, with poor customer experience, has damaged the brand.

Time for a rethink
Time for a rethink

In September, Groupon was forced to shut down operations in seven countries including the Philippines, Thailand and Taiwan—marking a sharp reversal for the tech company. At its business peak, Groupon had rebuffed a multibillion-dollar buyout offer from Google to pursue its own path as a publicly traded company.

In recent years that path had become more difficult and culminated in an ongoing turnaround effort. Rich Williams, COO at Groupon, announced job cuts, international closures and company restructuring in a Groupon blog post.

Shares have plummeted nearly 80 per cent since the company went public in 2011, and about 50 per cent this year alone. Struggling with slowing growth, Groupon is restructuring operations, but what else can the brand do to revive itself?

DIAGNOSIS 1
Krishna Krovi
MD, Asia-Pacific
Adknowledge

The initial success of Groupon was founded largely on its novelty and its emphasis on directing customers to local businesses.

Anecdotal evidence suggests that some small businesses struggled to cope with the volume of business its coupons created, and also failed to factor in the fall in margins if all the coupons available were redeemed. This resulted in businesses being reluctant to use Groupon, leading to less attractive deals.

The other challenge was converting acquired customers into regular customers. In most cases this never happened as the customers remained loyal to the deals and not to Groupon.

The burgeoning progress of the business and low entry barriers also created competition as new players entered the market. 

Groupon’s early entry into the stock market made initial investors very wealthy, but it also put pressure on the company to look at short-term revenue instead of focusing on strategically shifting the business into more profitable, sustainable verticals.

To survive in the long term, Groupon has to invest in new verticals and right-size its team. The business also needs to further target its core customers, and better customise and personalise its deals to be on in the right place at the right time. 

DIAGNOSIS 2
Kim Douglas
VP and MD, Southeast Asia
SapientNitro

As everyone knows, the thrill of getting something cheap dissipates very quickly when the experience leaves you disappointed.

Groupon’s business model was never going to stack up. Focusing on price always works in the first instance, but the poor customer experience was always going to stand in the way of loyalty.

Once a person reaches a certain income threshold they start to prioritise their experience of the product. Price will remain important, but it ranks lower in the overall consideration.

In Groupon’s case the discount brought millions to their websites, and thousands bought vouchers. Unfortunately the experience came handcuffed to so many blackout dates and limitations that it lost all its appeal. The majority of Groupon’s customers were so underwhelmed by the many, many sales conditions involved in redeeming their vouchers, and almost zero customer experience, that they chose never to return.

To stand any chance of success in the future, Groupon needs to focus on creating a product that turns an inherently fickle customer into a loyal one. This will mean creating a product that serves customers in a way that far exceeds their expectations and provides a better experience than any other competitor.

 

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