Business 10th Edition by Ferrell,Geoffrey Hirt,Linda Ferrell

Exercise 13

Groupon Masters Promotion to Become a Popular Daily Deal Site
In 2008, a startup company called Groupon launched an innovative business model. The model works in the following way: Groupon partners with businesses to offer subscribers daily deals. These deals are provided through the Groupon website, e-mail, and mobile devices. Groupon deals are similar to coupons, but with one major catch. A certain number of people (a group) must agree to purchase the deal. If enough people purchase, then the deal becomes available to everyone. If not enough people purchase, then no one receives that particular deal. In this way, Groupon has made the idea of coupons or deals into a social process.
The model quickly caught on with consumers. In many ways, Groupon lowers the risk for consumers when purchasing a new product because the product or activity costs less than its regular price. This encourages consumers to try out new activities such as skydiving or dining at a certain restaurant. Groupon also alerts consumers about deals that they were not aware of beforehand. Making consumers aware of products is one of the major purposes of promotion.
When it first started promoting Groupon deals, the company used social media sites such as Twitter and Facebook. One of the advantages of this type of advertising is the chance for an Internet ad or posting to go viral. With just a simple click of a button, an Internet user can inform his or her friends about the deal, spreading awareness of the company or product. This word-of-mouth marketing has been proven to be one of the most effective and trusted forms of promotion.
The benefit for businesses is the possibility of attracting repeat customers. By offering deals through the Groupon site, businesses are able to get consumers into the store. If consumers have a good experience, then they might return or tell their friends about the business. Groupon, therefore, acts as a type of conduit that brings consumers and businesses together. Bo Hurd, national sales manager/business development, describes how this works for businesses. "We're going to get the word out there, and then we're actually going have these people decide that they want to come in and try your services. And then it's up to you to actually convert them into long-term, full-paying customers."
Because Groupon depends on businesses as much as consumers, it must get businesses to agree to offer deals through its site. Groupon engages heavily in public relations to make its name known among companies. Personal selling is also very important to Groupon's promotion mix. Groupon's sales force uses phone calls and e-mails to contact businesses in the major cities in which it does business. Because it wants to offer the best deals, Groupon will generate leads by looking at review websites such as Yelp and Citysearch. By looking at how consumers rate certain businesses, Groupon can get a better idea of which businesses to target.
The introduction of rival deal sites such as Google Offers and Living Social is requiring Groupon to continue innovating. The firm has begun to invest in new product offerings, such as Groupon Now! Groupon Now! is a mobile app that provides time-specific deals to consumers based on their location at a particular moment. Each new product that Groupon introduces requires adaptations to the promotion mix. For instance, promoting Groupon Now! to businesses resulted in some challenges. At first there were two separate sales teams, one for Groupon's daily deal service and another for Groupon Now! The problem was that both sales teams would call up the same business, essentially duplicating the sales calls and making the business feel overwhelmed. As a result, Groupon changed its structure so that now one sales representative will offer both products during the sales call. Because promotion is an easier variable to modify than distribution or product, Groupon was able to adapt part of its promotion mix to increase its effectiveness.
Groupon's ability to master different forms of promotion has contributed to its success as a company. However, recently the company has faced some challenges. After becoming a publicly traded company in 2011, Groupon's net earnings were on the decline, and its executives have a reputation for buying back large amounts of stock. In 2013, CEO and co-founder Andrew Mason was forced out of his position by the board of directors. Furthermore, the previously successful business model is being called into question as the high customer acquisition costs are depleting profits. In order to address this issue, the company launched a service called Deal Builder that allows businesses to create their own deals on the company's site, eliminating the need for salespeople for this service. Going forward, it will need to continue to communicate its value, particularly of new products, to both businesses and consumers. 44
How has Groupon effectively used personal selling, advertising, and public relations to market its products?