Groupon's Business Model: Sosial and Local

1. Groupon's Business Model: Social and Local CASE 4.3
1 MBA_Batch2_UMK_Kch/M7/GST5803/Information Systemand E-Commerce/P14D398P
CASE STUDY 4.3
GROUPON'S BUSINESS MODEL: SOCIAL AND
LOCAL
QUESTION 1: How does Groupon take
advantage of social networking and location
technology?
Since its launch in 2008, the daily deal Web
site Groupon has become so popular and so
profitable that it passed on a $6 billion buyout
offer from Google in December 2010.
Groupon has achieved fame and fortune by
putting a Web-savvy spin on the boring old
coupon but to understand how Groupon works,
let's start with how coupons work.
A coupon is what is called a loss leader. A loss leader is any kind of sale, promotion,
discount or special offer that entices customers to walk in the door. The business will almost
certainly lose money on the discounted items, but the hope is that the customer will also
spend money on other items, or even better, become a regular customer. Coupons typically
have an expiration date and offer modest discounts; perhaps a dollar off specific grocery store
items or a 15 percent discount at a major retailer.
Groupons are like coupons on steroids. The deals offered daily through Groupon start at 50
percent off and can go as high as 90 percent cheaper than the normal price. Groupon can
offer such steep discounts because it guarantees business owners a minimum return on their
investment and the possibility of becoming an overnight sensation. Groupon claims that its
service is a win-win for both businesses and consumers, but there are some disadvantages.
Groupons was using their strategies to take advantage of some culture that interested with
discount.
Nowadays, social, local, mobile are three words marketers are hearing more and more these
days. Sometimes we may even hear them uttered together in one breath as SoLoMo. With

2. Groupon's Business Model: Social and Local CASE 4.3
2 MBA_Batch2_UMK_Kch/M7/GST5803/Information Systemand E-Commerce/P14D398P
an increase of users relying on mobile phones, tablets and their accompanying geo-location
technology, businesses today are increasingly finding the need to think locally.
QUESTION 2: Do you think
this business model is viable?
Why or why not?
In our opinion, this business
model is still viable because the
increasing the numbers of social
networking user that will increase
the numbers of Groupon's
customers. Other than that, increasing the online business will helps this kind of business
model to growth healthy.
Besides that, these are the other reasons why this business model is still viable.
 Ability to get more profit
 Currently social connectivity is proven as a platform to selling goods and services on
the internet
 Inexpensive deal
 Groupon serves 500 markets in 44 countries
 Groupon also need to strategize the marketing and business in order to maintain their
profits
 Groupon also need to maintain and increase competitive advantage for their products
and services