Groupon was launched in 2008 and quickly grew to 35 million users earning $1 billion annually by 2010. It offered daily local deals where consumers could purchase coupons for 50-90% off local businesses' services. If a minimum number of coupons for a deal were purchased, the deal would be valid. Groupon took 50% of revenue and passed the rest to businesses. It targeted young, educated, urban women and helped small local businesses attract new customers. While very successful initially, competition grew and some businesses lost money on Groupon deals.

1. GROUPON Case
Written by:
Sayan Chatterjee, Sarah O’Keeffe and
Alison Steriff
Version: 2012-02-14
Presented by:
Ankit Aggarwal, Ashish Verma, Diksha Jaiswal, Shrutkirti Sood, Ushma Khattar

2. Introduction to Groupon
● Groupon was launched in November 2008.
● December 2010, Groupon’s CEO, Andrew Mason and his company
leaders met with Google representatives to talk about the future of
Groupon.
● In just two years time, Groupon reached 35 million users and was
earning annual revenues of $1 billion.
● Google offered to to buy out Mason and his partners.
● Groupon had hit upon a desirable business model. Mason had two
options, either let Groupon to continue on its own, trying to
maintain the edge it had created- possible even going public or to
quit while he was ahead and sell it to Google?

3. What is Groupon?
● Online coupon that allows the consumer, upon subscribing to Groupon.com,
to purchase a specific service from a local business at a discount rate of 50
to 90 % of the regular price.
● A new groupon was sent to subscribers each day; it had to be bought within
the time limit specified and it had to have minimum number of purchasers
before “the deal was on” and the purchase of the Groupon was truly
completed.
● Subscribers sign up for their city of choice, and in turn, they receive an email
with the “Featured Deal” of the day plus a few “side deals” for that city.

5. The Beginning of Groupon
● In 2003, Andrew Mason started working with Eric Lefkofsky at
Innerworkings as a self styled web designer.
● In 2006, Mason left web designing to attend Chicago University’s Harris
school of Public Policy studies.
● A frustrating experience with the cell phone contract, inspired Mason to
experiment with a web based platform for organising collective action.
● Erik offered to bankroll the project, which by november 2007, became
known as “The Point”.
● Through The Point, anyone could start a campaign and anyone could
pledge support to the campaign.
● Individuals only tentatively joined a cause, and monetary pledges were
not collected until the campaign’s predetermined tipping point- the
amount of people needed to make it successful- was reached.
● The platform had early success but did not generate income.

6. ● Erik pushed Mason to think how to make money out of this concept.
● Groupon was started as a side project in November 2008, in which they
took one application of the point i.e group buying and focused on that.
● Next they needed to identify a market in which getting a number of
people to act would result in income dollars for Groupon.

7. Early Days : What worked
• With focus on one application - Groupon was launched in other
cities
• Key success - Deals that were popular and what interested the
buyers
• Figuring out what worked and what did not - being first -trials
• offered deals from different business sectors
• Judged the subscribers reaction
• Learnings - to offer interesting and experiential deals
• They vet business in each market that offered the above deals
• Tipping point software helped in measuring the popular deals
• a veritable city guide for its users- a way to discover hidden gems
of their city

8. • Flood of business houses
• Typical deals from restaurant and entertainment industry
• Initial workforce on subscribers and businesses - hit pavement -
friends family - emails
• More skilled sales people were hired

9. Expansion Journey
• Social Media Infrastructure
• more cities , more skilled salesforce
• Sale skills were compared to investors skills
• Generous sales commission
• Opened in New York - 3rd city
• In one year it expanded to 70 American cities and 80 European
cities
• model preference - collective buying industry
• More competitors emerged

10. Setting Up The Deal
● Discount amounts as well as the minimum and maximum number
of deals available were contracted between Groupon and the
business before the deal was published.
● Once a deal had been posted, subscribers had a time period during
which they could purchase it.
● If the pre-set minimum number of subscribers purchased the deal,
then the deal became valid, purchaser’s credit cards were charged
and they received their Groupon discount by e-mail or mobile
phone applications.
● Alternatively, for subscribers who purchased a deal that failed to
reach a minimum, their credit cards were not charged, and deal was
off the table.
● Groupon made money by taking a 50 per cent cut of all revenues
generated from the daily deal.
● The day after a deal,Groupon sent a cheque to each participating
business for the cut they made on the daily deal.

11. Local
Business
Customers
Groupon
Create “Deal”
and Tipping
Point
“Deal of Day” sent via e-mail; differs
based on city
Subscribers click on e-mail, see Deal of the Day and are taken to Groupon
site for their city.
Want deal=
enter CC info
IF
Deal is
on
Deal has not
yet tipped
Tipping Point is
reached
Tipping Point
not reached
CC is charged
Don’t want the Deal
End

12. Marketing
● Groupon had a unique style to its brand that helped sell its services
to both subscribers and businesses.
● It marketed itself mainly through its subscribers by encouraging
them to share deals through social media, including e-mail,
Facebook and Twitter.
● Subscribers were rewarded Groupon dollars if they referred to a
non-subscriber friend to Groupon that purchased a deal.
● Creative writers and copy editors were also hired to deliver the
message of product uniqueness on the site as well as in daily e-
mails and advertisements.
● In 2010, Groupon opened an office in Silicon Valley and hired Mark
Johnson, former ad executive at Netflix and the company aired its
very first television advertisement in January 2011.

13. Customers: Individual Subscriber
Demographics
● Estimated Subscribers: 40 million in over 170 cities in
North America
● Core Demographics reflect an extremely desirable market
● Typical Groupon Customer: young, single, educated, urban
woman employed and with a significant earning power.
Key Customers:
● Women accounted for 77% of Groupon subscribers in
2011 and more than two thirds of this customer segment
fell between ages of 18-34.
● Groupon subscribers tended to be well educated and half
of them held a bachelor’s degree.
● Vast majority of Groupon subscribers were employed- 75
% held full time jobs .
● 29 % of Groupon subscribers had an annual income of
more than $100,000.
“What makes
Groupon fun for its
consumers is its
element of
discovery, finding
new things and
being surprised
every morning
about what the
deal is”- Andrew
Mason- Founder

15. Customers: Businesses
•Typical profile : local, small to mid-sized, retail,
services, restaurants, health and beauty.
• Modus operandi of Groupon- wipe out perishability
for small businesses.
•Local businesses would get performance based
marketing.
•Groupon helped small businesses acquire new
customers by helping them to gain exposure through
daily emailed deals- “delivering Groupon customers
literally to the doors of participating businesses”.
•If a Groupon deal was popular, it would drive a
large number of consumers to a store location with a
single event.
“While this model
worked for many
businesses, studies
showed that up to
32% of the companies
lost money on
Groupon deals.
Many blog sites are
dedicated towards
guiding the customers
on how to use
Groupons effectively
(or not at all).

16. Collective Buying Industry
● Earlier buying sites like Mercata and Mobshop could not compete with
Amazon in driving down prices; their goods could be bought at other
places quicky.
● Groupon’s core concepts thus defined the collective buying industry for
that time.
● Elements involved: A local business offering its goods and services for a
discounted rate in an attempt to attract new clients.
● Collective buying resonates with people and gets them to make a
purchase quickly.
● It is also a great way for businesses to drive new customer acquisition.
● Groupon’s collective buying model resembles a Dutch Model- except
instead of items in the collection staying constant, the price stayed
constant as it was predetermined by the vendor.
● Coupons are given to all bidders until either all the coupons have been
distributed or the deal’s time frame has expired, whichever occures
first.

17. Competition
• Many new companies entered the competitive landscape.
• Many competitors catered to only niche buying pockets, such as
cosmetics and travel.
• It was evident that many competitors deals were comparable to
Groupon with regards to offer timing, local business promotion and
the means through which that local business would reach out to
company
• Firms in the similar marketplace are Living Social, DealOn,
HomeRun, BuyWithMe, Tippr, Twangoo, Google offers.

18. Competition
Living Social –
• It operates in USA, Canada, UK, Ireland, Australia.
• Majorly it deals in coupons of restaurants, spas, theaters and bars
within a city region.
• They list 1 coupon per day with the discount of upto 90% in come
cases
• User purchases the deal and if the user forward the link to 3 or
more others user and they buy it then the deal becomes free for
the originating user.

19. Competition
KGB Deals –
• It operates in UK, Italy, France, USA.
• It deals in coupons of Eateries, retail and entertainment
venues/activities within a city region.
• Depending on availability a user simply has one or more days to
purchase a coupon.
• Users can use the coupon immediately regardless of how many
others are interested in the deal.

20. Growth
• Groupon acquired several clone sites like Citydeal in Europe, adding
16 counties to its roster.
• They acquired Qpod(Japan), Darberry (Russia), Sosasta (India),
Grouper (Israel) and Twangoo (SA).
• They started operations in Hongkong, Taiwan, Philippines and
singapore in December 2014.
• For expansion in china they considered a joint venture (Jack Ma was
among investors).
• They had plans to have a workforce of 1000 employees in china by
summer 2011.

21. Conclusion
• Groupon had found a revolutionary niche in the coupon market.
• Using connections in social media and the internet they had gone
from a concept of collective action to one of the fastest growing
companies in America.
• They succeeded by partnering with local small business as well as
offering deals that were convenient, consistent and valuable.
• Regardless of intense competition they managed to capture and
engage an important customer demographic that was sought after
by many business.