I’ve had a draft of a review of GroupOn in my folders for the past 9 months. Happy to say I agree with most of what I wrote then. Things were put in perspective also when helping a client with their online channels today and chatting with a few GroupOn representatives to examine if it was an option, don’t think so for that client I’m afraid. So, without further ado, a review of GroupOn. Please feel free to share your experiences if you have any of GroupOn in ze comments box!

About GroupOn

This start-up has grown incredibly rapidly since late 2008 and connects consumers to deep-discounted services from retailers and other suppliers in their vicinity.

Business concept

Bring consumers cheaper goods and services while allowing merchants to start to build a relationship with each individual consumer by enabling the sale of an initial product or service.

The service

The service consists of a subscription service where a user can sign up to receive special offers from their town and a website where the special offers can be browsed. The idea is that a certain size of group must sign up to a deal in order for it to be activated. I haven’t seen the merchant end of the service for reasons I discuss on the business end a little further down.

Business model

GroupOn takes a fee for each sale arranged through their platform, a fee-per-sale model which is always attractive at least initially for vendors. They also have a huge database of people signed up and local businesses.

What I would review or change

The initial impression from a design point of view is quite pleasant and clear with a deal of the day taking up most of the front page and other deals listed on the right hand bar.  Also, there a lot of action-inducing psychological ploys built in such as counters to the deal ending, nice juicy Buy! button and other info on the deal now being on adding to a feel of a one-time offer.

The rest of the technical and communicative aspects of the site are very well done, professional and clear. They actually manage to communicate quite a lot of information clearly in a small space, often a challenge when you’re communicating something new.

However, a problem is the targeting of offers where the mail shots, at least the ones I’ve seen and also received, have been offering breast implants and other services I don’t really think I’ll be needing anytime soon…, and the end result is a wave of communicative fatigue from the receiver point of view as you have to wade through the deals to find anything of any value.  This is again a relatively simple fix to do if you want to follow the rules of relevance in communicating with people. In general, you can partly fix this by asking people WHAT they want to hear about, and WHEN they should mail you that information but there’s no functionality to support this in the user area.

Also, if you bang in groupon.com, and you’re not in the US you still get a list of US cities! It’s not a hard thing to  find out where someone is surfing in from and tailor the content to their region, and should really be done by a company providing local deals.  Many people enter .com after a domain name still today, not the local variant, especially if it’s an American startup. So, there’s probably some traffic, or at least annoyance, left on the table there.

The deals offered are excellent in value though for the end user, likely pretty good for GroupOn but not good enough judging from the burn rate of cash. In this article I’ve linked to there are also some worrying stats about merchant loyalty at 42% not returning to do business, meaning that for these people it probably wasn’t good for them.

In summary

I like the design and communication of GroupOn and could imagine people engaging with it more if it was focused around what groups of needs people actually have, not what deals happen to be on. Then it would have a chance of becoming indispensable.

But if you deep discount a service by a huge amount then for the merchants, the only ones who can offer the products and services, the chance of making a good profit becomes low and they become dependent on repeat business from that same customer. Now the chance of repeat business is low because it’s probable a large part of the target group are price-chasers and so will go elsewhere, and the ones who do come back may feel they are paying an unreasonable surcharge every time they rebuy the service at the normal rate. The other problem is the risk of brand damage where any investments in being seen as quality may become eroded as more and more rock-bottom deals are offered in connection with a particular brand.

I believe the key to a good service is providing value, not just to one stakeholder (here the bargain-hunting consumers) but to all stakeholders. In my opinion it’s not clear that GroupOn will be able to deliver enough value to merchants without diluting the normal merchant offerings, and generate the repeat business which would allow merchants, GroupOn and the end consumer to benefit.  Unless it can solve this it may end up being a player solely for the frugal who hunt in flocks. This combined with the shaky economics of their business model leaves me wondering what they’ll do to start turning a profit yet keep their offering intact.

If you have an opinion, positive or negative, you know what to do below!

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