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A. Do you agree or disagree with the statement that “Groupon has no sustainable competitive advantage”? Please explain your point of view. B. How does Groupon add value to the companies whose offers are sold on the site?

A. Do you agree or disagree with the statement that “Groupon has no sustainable competitive advantage”? Please explain your point of view. B. How does Groupon add value to the companies whose offers are sold on the site?

Principles Of Marketing
Principles Of Marketing
17th Edition
ISBN:9780134492513
Author:Kotler, Philip, Armstrong, Gary (gary M.)
Publisher:Kotler, Philip, Armstrong, Gary (gary M.)
Chapter1: Marketing: Creating Customer Value And Engagement
Section: Chapter Questions
Problem 1.1DQ
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A. Do you agree or disagree with the statement that “Groupon has no sustainable competitive advantage”? Please explain your point of view.

B. How does Groupon add value to the companies whose offers are sold on the site?

**Case Study 2-2 (Continued)** Around the time of the IPO, analysts and observers alike claimed that Groupon's business model was not sustainable. In addition to the large number of retailers who found their deals unprofitable, observers noted that Groupon does not produce anything of value, and it isn’t adding value to the retailers. Further, there are no barriers to entry to stop competitors. In May 2011, more than 450 competitors offering discounts and deals included LivingSocial, another daily deal site; restaurant.com, a site for restaurant gift certificates at a deep discount; and overstock.com and woot.com, sites offering discounted merchandise, not to mention deep-pocketed competitors like Amazon.com. But Groupon added to its business strategy with mobile capability and new services. In February 2012, it purchased Kima Labs, a mobile payment specialist, and Hyperpublic, a company that builds databases of local information. CEO Andrew Mason saw significant growth potential in providing new features to help customers personalize offers and avoid deals they don’t want. In May 2011, in a few cities, the company launched Groupon Now, a time-based local application that gives customers instant deals at merchants nearby using location-based software, then in 2013 it integrated this functionality into its main platform. Groupon seems to have done something right. As of the third quarter of 2018, it had worked with over one million merchants and sold nearly 1.5 billion Groupon coupons; it operates in 15 countries and 500 markets. Its app is the third most downloaded retail app in the United States and is the sixth most popular iOS app of all time.
Transcribed Image Text:**Case Study 2-2 (Continued)** Around the time of the IPO, analysts and observers alike claimed that Groupon's business model was not sustainable. In addition to the large number of retailers who found their deals unprofitable, observers noted that Groupon does not produce anything of value, and it isn’t adding value to the retailers. Further, there are no barriers to entry to stop competitors. In May 2011, more than 450 competitors offering discounts and deals included LivingSocial, another daily deal site; restaurant.com, a site for restaurant gift certificates at a deep discount; and overstock.com and woot.com, sites offering discounted merchandise, not to mention deep-pocketed competitors like Amazon.com. But Groupon added to its business strategy with mobile capability and new services. In February 2012, it purchased Kima Labs, a mobile payment specialist, and Hyperpublic, a company that builds databases of local information. CEO Andrew Mason saw significant growth potential in providing new features to help customers personalize offers and avoid deals they don’t want. In May 2011, in a few cities, the company launched Groupon Now, a time-based local application that gives customers instant deals at merchants nearby using location-based software, then in 2013 it integrated this functionality into its main platform. Groupon seems to have done something right. As of the third quarter of 2018, it had worked with over one million merchants and sold nearly 1.5 billion Groupon coupons; it operates in 15 countries and 500 markets. Its app is the third most downloaded retail app in the United States and is the sixth most popular iOS app of all time.
**Case Study 2-2: Groupon** Groupon, Inc. successfully raised $700 million during its initial public offering (IPO) in the fall of 2011. This elevated the company's valuation to approximately $13 billion, which was remarkable given its relatively short lifespan of three years. Opinions on Groupon’s business model vary; while some critics argue that it lacks sustainable competitive advantage, others admire its innovative approach with significant potential. **Business Model and Operations:** Groupon specializes in selling discounted coupons for various events, services, and other popular items that consumers may wish to purchase. The company operates by encouraging customers to sign up for daily email alerts showcasing local deals. These promotions, known as "daily deals," are available for purchase only if a specified minimum number of purchases occur, offering discounts typically at 50% off the “retail” price. For instance, a health club membership valued at $100 may be offered for $50 on Groupon. A purchaser of this deal pays $50 to Groupon, receives a printable certificate, and uses it at the health club. In this framework, Groupon retains 50% of the transaction amount, equating to $25 in this case, and remits the remaining amount to the hosting retailer. Effectively, customers enjoy a 50% savings, while retailers offer a total discount of 75% to lure consumers. The business model allows Groupon to gain revenue from transactions and capitalizes on the 'float' — the period between sale and the actual redemption of the coupon. **Retailer Dynamics:** Retailers benefit from Groupon promotions not only through immediate gains but also via breakage — scenarios where coupons go unredeemed. By driving new customer traffic, retailers can upsell and encourage repeat business. The heightened attention from an association with Groupon also plays a significant role in boosting sales. **Case in Point:** For instance, in August 2010, Groupon held its first national deal offering $50 worth of Gap merchandise for $25. This initiative successfully resulted in the sale of over 440,000 coupons, leading to substantial earnings for both Groupon and Gap. However, this strategy isn’t universally beneficial; smaller vendors and businesses sometimes face challenges managing an overwhelming influx of coupon redemptions. A local business reported an $8,000 loss due to excessive redemptions from a Groupon promotion. Further insight from a survey of 150 retailers indicated that only about 66% found Groupon promotions profitable. In conclusion
Transcribed Image Text:**Case Study 2-2: Groupon** Groupon, Inc. successfully raised $700 million during its initial public offering (IPO) in the fall of 2011. This elevated the company's valuation to approximately $13 billion, which was remarkable given its relatively short lifespan of three years. Opinions on Groupon’s business model vary; while some critics argue that it lacks sustainable competitive advantage, others admire its innovative approach with significant potential. **Business Model and Operations:** Groupon specializes in selling discounted coupons for various events, services, and other popular items that consumers may wish to purchase. The company operates by encouraging customers to sign up for daily email alerts showcasing local deals. These promotions, known as "daily deals," are available for purchase only if a specified minimum number of purchases occur, offering discounts typically at 50% off the “retail” price. For instance, a health club membership valued at $100 may be offered for $50 on Groupon. A purchaser of this deal pays $50 to Groupon, receives a printable certificate, and uses it at the health club. In this framework, Groupon retains 50% of the transaction amount, equating to $25 in this case, and remits the remaining amount to the hosting retailer. Effectively, customers enjoy a 50% savings, while retailers offer a total discount of 75% to lure consumers. The business model allows Groupon to gain revenue from transactions and capitalizes on the 'float' — the period between sale and the actual redemption of the coupon. **Retailer Dynamics:** Retailers benefit from Groupon promotions not only through immediate gains but also via breakage — scenarios where coupons go unredeemed. By driving new customer traffic, retailers can upsell and encourage repeat business. The heightened attention from an association with Groupon also plays a significant role in boosting sales. **Case in Point:** For instance, in August 2010, Groupon held its first national deal offering $50 worth of Gap merchandise for $25. This initiative successfully resulted in the sale of over 440,000 coupons, leading to substantial earnings for both Groupon and Gap. However, this strategy isn’t universally beneficial; smaller vendors and businesses sometimes face challenges managing an overwhelming influx of coupon redemptions. A local business reported an $8,000 loss due to excessive redemptions from a Groupon promotion. Further insight from a survey of 150 retailers indicated that only about 66% found Groupon promotions profitable. In conclusion
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