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  • Went into the 10k instead that had this list insetad of tylers list w POS and the breadcumbs…thought breadcrumbs was just an example

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  • 1. Groupon Zainab Raji, Tyler Olson, Mar’yana Vartsaba, Nicole Vournazos, Swetha Mohan, Prajoth Pattamatta, Nick Klempf Final Project December 5, 2013
  • 2. Executive Summary • Launched in November 2008, Groupon was founded by Brad Keywell, Andrew Mason, Eric Lefkofsky (CEO) headquartered in Chicago, Illinois. The company has over 80 million subscribers. • Groupon outgrew it’s original website ThePoint.com and had it’s IPO (initial public offering) on November 4th 2011at $20/share • At the year end of 2013, the U.S. daily deal (“DD”) industry is expected to have $3.3B in revenue. While this is an increase of 3.5% from last year, the U.S. DD market is estimated to finish with a 596 million dollar loss • There are 623 daily deal businesses in the United States; Groupon makes up 59.1%, LivingSocial 16.6% and 24.3% of other; Groupon has deals in 48 different countries. • We recommend two strategies for Groupon to help differentiate itself: – Groupon should actively pursue deals that are spread i.e. 10$ off 3 visits instead of $30 off 1 visit in order decrease the rate of one-time customers – Build out data analytics platform leveraging current data acquisitions so Groupon so they could help merchants with customer data such as offering merchants suggestion to structure the deals • While product differentiation will help client regain access to consumers, it is imperative that client scale the initiative conservatively 1
  • 3. Industry Digital Coupon Landscape MOBILE+SOC IAL+LOCATIO N LOCATION COUPON DISTRIBUTORS Coupons.com, Smart Source, Red Plum, Shortcuts, Cellfire, Catalina.com MOBILE SOCIAL Industry Description: Companies in the daily deals industry offer discounts to consumers on behalf of merchants. Source: http://blog.360i.com/reports/digital-coupons-playbook DISTRIBUTION AND DISCOVERY Fouresquare Gowalla Loopt+More Geo-targeted ads Augemented Reality Points Programs Localized Deal Apps Mobile Ads Coupon Serving Apps Mobile Loyalty Cards SMS Delivered Scanning Media 1D/2D/QR Codes Facebook Groupon CrowdSourced Gamification “Tell a friend” Progressive Digital FSIs Banners Email Loyalty Cards Retailer Merchant Entry Aggregators and Blogs 2
  • 4. Daily Deals Industry Daily Deals is a misnomer; not always a 24 hour time distribution *Circles represent relative values based on Forrester estimates Deals are often executed in two ways: -Flash Sales: “Limited time offers of physical merchandise that is mailed to an address and offered in limited supply or for a short period of time” (2). Flash sale offers are typically not visible through search engines such as Google, and oftentimes, only registered members enjoy the offers. Some flash sales companies hold the inventory for their sales offers, while other flash sales companies operate with a consignment model i.e. they take orders from consumers and purchase the inventory from suppliers only after the “sale” is completed. -Prepaid Vouchers: “Prepurchased merchandise or services, also often offered in limited supply for a deep discount and available for a short period of time, which are redeemed or retrieved at some physical location by the buyer” (2). Voucher companies request that merchants offer about a 50% discount on items or services and share the remaining proceeds of the deal in a predetermined split (usually in a 50-50 split). Hence, merchants often provide discounts of about 75% on their products. Source: http://spartandaily.com/wp-content/uploads/2011/12/myths_and_truths_about_daily_deals.pdf
  • 5. Client Groupon Business Model Shifts OLD BUSINESS MODEL Demand-Push Strategy Distribution Description CURRENT BUSINESS MODEL Cost-Pull Strategy Email Groupon Website • Groupon sends sales people to local businesses • Now, the business model has two main • • • Benefits • Sold a product that would not have otherwise • • Challenges to get deep discounts Groupon and small business owners split the profit on the product 50/50 i.e. if a product cost $10, the business would sell the product for $30, for $20 profit Using Groupnow the product will sell for $20 giving Groupon $10 and the consumer $10 Groupon uses email blasts to reach merchants sold Drives more traffic to the store Cross-sell items for additional profit or to make up for lost profit • Low barriers to entry • Multiple competitors • • core competencies: (1) price cutting and (2) e-commerce Groupon launched a price cutting strategy on U.S. market with take rates of 43%and 44% for local and travel deals; revenue dropped 38% in the first quarter, 32% in the second quarter E-commerce hub with products like Goods and Groupon Now! • Wider product selection • Takes advantage of on demand local • Low margins; confusing profit-sharing • Large amount of capital needed for • warehouse Cumbersome user interface
  • 6. EXHIBIT TITLE Industry Product and Brand Discovery is an Opportunity in Daily Deals VOUCHER SUBSCRIBERS: “Coupon/gift-card-based flash sale sites help me discover and try new retailers, products, or services I may not have experienced otherwise” 95 86 84 82 80 78 76 74 72 70 68 66 discover and try new retailers, products, or services 90 I may not have experienced otherwise. 85 80 75 70 65 Gen Y Gen X FLASH SALE: “Flash sale retailers help me discover and try new retailers, products, or services I may not have experienced otherwise” Boomers Gen Y Seniors Gen X Boomers Seniors Purchasing on Daily Deal Sites Voucher Subscribers: How many purchases have you made from those sites in the last year? 50 45 40 35 30 25 20 15 10 5 0 Flash Sale Subscribers: How many purchases have you made from those sites in the last year? 40 35 30 25 20 15 10 5 0 1 2 3 4 5 1 2 3 4 5 Industry Challenges: Daily deals do not always increase revenue for merchants: Consumers who subscribe to receive daily deal offers do not always purchase products from merchants. In 2011, about 51% of prepaid voucher buyers and 25% of flash sales buyers were willing to purchase daily deal offers at full price. 5 Source: Cannibalization of full-price sales can drive down revenue. Forrester eBusiness Online Daily Deal Survey, Q2 2011
  • 7. Current Groupon Product Offerings Overview Client Product Description • Distribute deals via email to subscribers and on the Daily Deals website; algorithmic approach to deal targeting specific customer segments; • Goods represents 38% of Groupon’s sales; consumer Goods electronics, jewelry, clothing, etc.; low margins, expensive incentives i.e. free shipping; competes with Amazon and now needs warehouse infrastructure • Groupon Now! deals are offered instantly on a mobile Groupon Now! Groupon Getaways device based on the location of the user. Offers typically expire within a few hours and are best for merchants to eradicate excess capacity • Getaways features offers personalized to customers for Groupon has expansive product offerings that target multiple one-time deal segments packaged deals including hotels and airfare. These cover both international and domestic travel; deals are emailed weekly to subscribers and can be accessed from the site • Joint venture between Groupon and Live Nation that is a GrouponLive local resource for events; visitors can access one-time deals on events Source: http://www.groupon.com/live http://techcrunch.com/2011/05/09/grouponlive-an-online-ticketing-deals-marketplacefrom-groupon-live-nation/ http://investor.groupon.com/secfiling.cfm?filingID=1445305-12-922 6
  • 8. Client Groupon Geographic Reach via Strategic Acquisitions Groupon’s Acquisition Timeline Groupon’s Presence in 2013 120 100 60 23 23 23 22 22 36 35 34 32 31 41 42 44 45 46 3Q12 80 4Q12 1Q13 2Q13 3Q13 40 20 0 North America Groupon Yearly Expansion by Number of Countries EMEA Rest of World Groupon Stock Price by Year to Date 50 40 30 20 10 0 2008 2009 2010 2011 2012 2013 Groupon is present in 408 countries, 500 markets, and 4 continents Source: http://www.groupon.com/live http://techcrunch.com/2011/05/09/grouponlive-an-online-ticketing-deals-marketplacefrom-groupon-live-nation/ http://investor.groupon.com/secfiling.cfm?filingID=1445305-12-922
  • 9. Industry Daily Deal Industry Categories and Ad Spending Advertising Spending Deal Categories Other online… Restaurant/Bar Online search Salon & Spa Email promotions Retail Store Print Adveritisng Auto Services TV Advertising Cleaning Services Radio Advertising Medical Servcies Daily Deals Direct Mail Health and Fitness Services Education Services Tourism related Services Yellow Pages Special Events Twitter Val-pak coupons 0 5 10 15 20 25 Percentage spend 0 50 100 Industry Daily Deal Categories % making money on the daily deal Industry Daily Deal Categories % intending to run another daily deal in the future Daily Deals are still a low spending budget as considered advertising; health and fitness make the up the highest number of daily deals offered that are making money on deals Source: http://news.rice.edu/wp-content/uploads/2012/07/2012-07-05-DailyDeals.pdf 8
  • 10. Competitors Social Media Sites by Small Business Social Network Sites Used by US Small Businesses 40% 35% Social Media Sites Used by Restaurants Worldwide 100% 2012 90% 2013 80% 30% 70% 25% 60% 20% 50% 40% 15% 30% 10% 20% 5% 10% Poynt AroundMe Tumblr FlickR Living Social Groupon Google+ Pinterest TripAdvisor Blogs LinkedIn Google Places Urban Spoon foursquare YouTube Yelp Twitter 0% Facebook 0% Groupon has low share of mind as a social media network site compared to competitors and remains in the mid-low end among industry specific sites such as restaurants Source: Emarketer: American Express, "OPEN Small Business Monitor," Oct 17, 2013 9
  • 11. Competitors Consumers Often Subscribe to Multiple Daily Deal Sites Voucher Subscribers percentage: “Please select the sites you receive emails from and/or visit.” Flash sale subscribers percentage: “Please select the sites you receive emails from and/or visit.” One Kings Lane BuyWithM e ideeli Eversave HauteLook Woot LivingSoci al Rue La La Gilt Groupe Groupon 0 0 20 40 60 80 10 20 30 40 50 100 Base: 2,193 US voucher customers Base: 1,433 US Flash Sale Customers **Excludes Loyal Voucher Buyers Groupon has low share of mind as a social media network site by total U.S. business and remains in the mid-low end among industry specific sites such as restaurants Source: Forrester eBusiness Online Daily Deal Survey, Q2 2011 http://spartandaily.com/wp-content/uploads/2011/12/myths_and_truths_about_daily_deals.pdf 10
  • 12. Client Groupon Timeline March 2013 Nov 2012 Dec. 2010 Company • Andrew Mason May 2010 • Stock down to Nov. 2008 • Groupon turns • Samwer brothers down Google $6B $2.76/share from $20 IPO price 2013-2014 2013 • Groupon Launches scale internationally 2012 Group Acquisitions 2011 2010 European MyCityDeal, South American ClanDescuento, Japanese Qpod.jp, Russian Darberry.ru, Singaporean Beeconomic.com quits as CEO Indian SoSasta.com, rebranded it as "Crazeal by Indian SoSasta.com, reGroupon Inc”, Hong Kong’s branded it as "Crazeal by uBuyiBuy, Malasian Groupon Inc”, Hong Kong’s GroupsMore.com uBuyiBuy, Malasian GroupsMore.com Korean TicketMonster Restaurant reservation and discount site Savored, SideTour, In novate Mobile Apps Europe SL, Plumfare Inc, MashLogic Inc, Glassmap, Blink, CommerceInterface Inc Time Groupon has had an intensive series of acquisitions that have helped the company expand globally. The Samwer brothers were responsible for scaling globally. Eric Lefkofksy replaced Andrew Mason as CEO in 2013. Source: http://www.theverge.com/2013/3/13/4079280/greed-is-groupon-can-anyone-save-the-company-from-itself 11
  • 13. Groupon Value Chain: Daily Deals Source Deals Acquire Customers Procure Orders Fulfill Deals After Sale Service Choose merchants Determine target segment Build and manage the technological architecture Build an order management system Provide customer with similar deals Perform quality checks Plan and execute marketing strategy Manager orders Track and manage consumer purchases Customer support Negotiate Pricing Design promotions Determine Merchandising For merchandise: Pack and deliver the good For merchandise: handle returns For merchandise deals: accept delivery/handle returns Implement customer loyalty Collect online payments Manage ordering volumes Perform user analytics 12
  • 14. Client Groupon User Demographic (percentage) Age Age Range (years) Gender 80 28 70 27 60 26 50 25 40 30 24 20 23 10 22 0 18-34 35-44 45-54 55+ 21 Women Men Age Employment Marital Status 80 70 60 50 40 30 20 10 0 60 50 40 30 20 10 Employed Full-Time Student Retired or Unemployed Homemaker 0 Single Married Partner Separated Groupon’s consumers are 18-34 years old, wealthy, educated and single Source: www.groupon.com 13
  • 15. Client Client Analysis Competitive Advantage • Large scale; international market share • First mover in the space leads to trust in the market share • People go to Groupon over competitors because they signed up for it first • Strong network effect, businesses can reach clients quickly • The large customer has built trust and attracts merchants Source: http://blogs.hbr.org/2011/07/the-problem-with-groupons-busi/ Competitive Disadvantage • Merchants have lack of repeat buyers • Merchants need to structure the deals better • Need additional data on consumers to match consumer needs • No customer loyalty or other ant switching incentives • Users do not subscribe to Groupon • The interface does not offer an any advantages • Don’t use Groupon for essential goods and services, solely discretionary spending • The model does not form a relationship with a customer • Little impact in customer experience • The model is stand a lone • It does not work with any other platforms, 14
  • 16. Rec. 1 Recommendation 1 Data Overview Data Overview • Data suggests that Groupon buyers are low repeat buyers; buyers need to be repeat buyers in order • The majority of consumers would not have bought the deal at all without the coupon • There is a low switching costs from buyer to buyer • Most consumer do not redeem cooupons at; redemption failure can mitigate customers from becoming repeat customers in the first place (43% of consumers failed to Recommendation • We encourage Groupon to stagger its deals over a period of time • Instead of focusing on deals for $30 one time, we propose Groupon has deals over multiple times such as $10 over during three visits • Multiple touch points in a relationship give merchants a better opportunity to create customer relationships • Customers become repeat buyers as a result of the deal redeem their vouchers at least once in 2011) Source: Forrester eBusiness Online Daily Deal Survey, Q2 2011 http://spartandaily.com/wp-content/uploads/2011/12/myths_and_truths_about_daily_deals.pdf 15
  • 17. Rec. 1 Vouchers Drive Limited Incrementality Last Daly Deal was Bought from the following store: Restaurant Food Service (e.g. spa) Activities Clothing, Jewelry, Shoes Health/Beauty Products Home and Garden Sample Size 494 143 91 143 114 53 Buyer spent “a lot more” than the voucher amount 28% 13% 9% 30% 24% 27% Agree with the statement, “I have previously bought directly from the retailer or service provider featured…” 63% 40% 43% 80% 63% 67% Agree with the statement, “I would have bought…even without the coupon or gift card 52% 33% 40% 60% 55% 49% Last Daly Deal was Bought from the following store: Gilt Groupe Rue La La Woot HauteLook Sample Size 141 81 154 67 I have previously bought an item, brand, or service from a traditional retailer at full price 44% 46% 34% 39% I have previously bought that item, brand, or service from a traditional retailer on sale 56% 65% 46% 52% IUltimately, we believe that the at full price evendaily deal sites, would have bought that item or service problem for if it 26% wasn’t on sale profitability because it lacks repeat buyers. 27% 25% particularly Groupon, lies within the fact Groupon24% loses I will probably buy that item or service again even at full price 25% 30% 24% 26% I spend less at traditional retailers since I started buy from flash sale retailers 61% 53% 58% 71% I am likely to purchase from this flash sale retailer again 92% 87% 90% 93% Buyers are generally not new to a store, many customers would have reduced their spending without the offer; only 51 percent of voucher buyers and ~25% of flash sales would have purchased regardless of the offer Source: Forrester eBusiness Online Daily Deal Survey, Q2 2011 16
  • 18. Rec 1. Attaining Repeat Buyers Leads to Profitability Key Insights Regression of daily deal profitability on consumer behavior metrics Standard Regression Coefficient P-Value T-Value and the percentage of deal users that became repeat buyers are positive revenue predictors • Merchants need a “game plan” to attract users for a second visit and a way to engage inactive users • The proportion of new and repeat buyers are more important than how much each customer spends on an average daily deal • Neither the average amount a consumer spends nor those who spend beyond the deal’s value affect profitability of the deal % of new customers 0.25 2.6 0.01 New customer average spend -0.08 -0.66 0.51 % of deal users who spent beyond deal value 0.07 0.8 0.43 Average amount spent beyond deal value 0.18 1.62 0.11 % of deal users that became repeat buyers 0.18 2.12 0.04 Average amount spent by repeat customers on next visit -0.08 -0.89 0.38 % of unredeemed deals when promotion ended LivingSocial OpenTable Travelzoo BuyWithMe Age of Business 0.2 -0.01 0.1 -0.08 0.01 0.17 2.47 -0.12 1.19 -0.9 0.07 1.97 0.02 0.91 0.24 0.37 0.94 0.05 Annual revenue of business • Both the volume of new deal users 0.01 0.12 0.91 Ultimately, we believe that the problem for daily deal sites, particularly Groupon, lies within the fact Groupon loses profitability because it lacks repeat buyers Source: http://news.rice.edu/wp-content/uploads/2012/07/2012-07-05-DailyDeals.pdf 17
  • 19. Rec 1 Attaining Repeat Buyers Leads to Profitability Customer Behavior Metrics Full Sample Groupon LivingSocial OpenTable TravelZoo BuyWithMe 79.20% 77.60% 83.00% 51.40% 85.30% 81.10% % of customers that were new Average amount spent by new customers $64.30 $46.00 $84.50 $127.30 $62.80 $50.90 % of deal users who spent beyond deal value 35.90% 36.70% 34.30% 67.20% 21.30% 40.70% Average amount spent beyond deal value $60.20 $47.00 $93.50 $37.30 $24.20 $29.80 % of deal users that became repeate buyers 19.90% 20.40% 18.70% 30.00% 18.00% 22.90% Average amount spent by repeat customers on next visit $70.80 $69.60 $73.00 $103.30 $61.30 $66.50 % of unredeemed deals when promotion ended 21.70% 23.40% 20.90% 13.40% 18.10% 18.50% From the Consumer • “It’s not bad for exposure, but as a dental practice, most were looking for one and done. Title From the Consumerhundreds of dental Some people travelled past offices to come see me. The reality is they won’t come back.” –Groupon, Medical Services • “The downside…is the customers we get in some cases are SUPER cheap, and look to nitpick even beyond the deal” –Buywithme, Online Retail • “People also don’t tip on the vouchers so its bad for morale” –Travelzoo • “Guests take advantage of the deal buy buying low cost ticket items and stop buying once they meet the dollar value” –OpenTable, Restaurant/Bar. • About 80% of deal users were new customers; new customers had an average spend of $64.3 when they used the deal • Groupon had the lowest average spend per customer $46.0 compared to Living Social, $84.5, and OpenTable, $127.3 . Source: http://news.rice.edu/wp-content/uploads/2012/07/2012-07-05-DailyDeals.pdf • About 1/3 of customers spent over the daily deal amount; on average they spent $60.2 more than the deal, while Living Social users spent $93.5 •21.7% of deal buyers never redeemed their rates; OpenTable had the lowest rate of 13.7% 18
  • 20. Rec. 2 Recommendation 2 Data Overview Data Overview • Merchants need to structure their deals better in order to meet customer demand Recommendation • Build out existing software Source: Forrester eBusiness Online Daily Deal Survey, Q2 2011 http://spartandaily.com/wp-content/uploads/2011/12/myths_and_truths_about_daily_deals.pdf 19
  • 21. Rec. 2 Successful Deals Key Insights • Both the volume of new deal users Regression of daily deal profitability on deal characteristics Standard Regression Coefficient P-Value T-Value Daily Deal Face Value 0.16 1.97 0.05 % Discount off Regular Price 0.01 0.014 0.89 -0.17 -2.05 0.04 Whether upper limit placed on number of daily deals sold 0.18 2.24 0.02 Age of business 0.08 1 0.31 Annual Revenue of Business -0.08 -0.91 0.36 Time since the daily deal appeared in days and the percentage of deal users that became repeat buyers are positive revenue predictors -0.04 -0.42 0.68 • Merchants need a “game plan” to attract users for a second visit and a way to engage inactive users • The proportion of new and repeat buyers are more important than how much each customer spends on an average daily deal Redemption duration • Neither the average amount a consumer spends nor those who spend beyond the deal’s value affect profitability of the deal The chart above indicates the most profitable ways for SMB (small-medium sized businesses) to run daily deals. The daily deal should offer a high face value ($50 or more), discount (at most 25% off face value), a short redemption period (three months or less), and limit of 1,000 on the number of deals a consumer can buy Source: http://news.rice.edu/wp-content/uploads/2012/07/2012-07-05-DailyDeals.pdf
  • 22. Groupon Low Long-Term Use for Merchants Incidence of profitable and unprofitable promotions by daily deal 70.00% Rec 2. Other businesses considering other daily deal sites for next promotion (percentage) 80 78 76 74 72 70 68 66 64 62 60 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Made Money Broke Even Lost Money Intentions to run another daily deal (percentage by site) 70 60 50 40 30 20 10 0 Yes No Unsure Groupon merchant’s experience low profitability 50/50 split; there are low switching costs from deal site to another based on perceived benefits; 50/50 split between intentions to run another deal; this data suggests deals need to be structured in a way that better targets consumers in order to reduce switching costs through improved personalization or structure Source: http://news.rice.edu/wp-content/uploads/2012/07/2012-07-05-DailyDeals.pdf
  • 23. Rec. 2 Intentions to Run another Daily Deal Will Run Another Deal Promotion Made Money Broke Even Will Not Run Another Deal Promotion Lost Money Made Money 13% Broke Even Lost Money 3% 34% 33% 54% 63% Item Daily Deal Dollar Daily Deal % Making Money on a Daily Deal % Making Money on a Daily Deal % Intending to Run Another Daily Deal in the Future % Intending to Run Another Daily Deal in the Future 45% 43% 57% 55% Businesses tend to be risk averse, particularly after they lose money on a deal; the structure of the deal is important, 47% of dollar promotions were profitable and 59% of item promotions; 79% of businesses were interested in running another item promotion; this finds suggest that construction of the deal offer i.e product choice, service/bundle influences the profitability of the deal Source: http://news.rice.edu/wp-content/uploads/2012/07/2012-07-05-DailyDeals.pdf 22
  • 24. Questions? Zainab Raji, Tyler Olson, Mar’yana Vartsaba, Nicole Vournazos, Swetha Mohan, Prajoth Pattamatta, Nick Klempf Final Project December 5, 2013 23
  • 25. Appendix 24
  • 26. Alternative Strategy: Grow Market Segments In the demographic space it is clear that there are several oppurtunities for expansion in different areas. These areas would be the most likely to facilitate growth for Groupon and continue a sustainable strategy for the long-term. • Though 68% of Groupon users are between the ages of 18-34 College Students 18-25 it is clear that many of them are on the older side of 26-34. • To increase this demographic Groupon should increase the number of deals that appeal to this demographic. • Example: Partner with Chegg or Barnes and Noble, open a Groupon College segment, use restaurant deals in college towns • This can increase the loyalty of the new customers as they will be using Groupon to find good deals from when tey first begin making financial decisions. • Another segment that has great market potential is men. Currently only 23% of Groupon users are men. Men • Many of the deals and coupons on the website are geared towards women. • To combat this Groupon can increase the number of deals that men, especially in the 18-25 segment will like. • Examples: Store credit at Gamestop, deep discounts on gaming consoles and accessories. Source: http://www.groupon.com/pages/9 25