An Analysis of the Current and Future Use of Internet Technologies of Groupon - Case Study Example

AN ANALYSIS OF THE CURRENT AND FUTURE USE OF INTERNET TECHNOLOGIES OF GROUPON Executive Summary Groupon is one of the fastest rising online businesses in the last decade that uses unique e-business model to offers its customers’ group coupons and daily deals. The business model of the company works such that if the minimum number of people does not sign up for the day then the deal is cancelled and no one gets to avail the deal for that particular day. By using this kind of business model the company reduces retailer risks. The company’s marketing and promotion strategy enables subscribers to share their experience on social media. This helps the company to spread the daily deals reach out to as many customers as possible. The company leverages existing customers’ referrals a tool for e-marketing strategy through online social media networks like Facebook or Twitter. The Business-to-Business model of Groupon focuses on commission based model. A recent study on Groupon’s 2012 mobile web +app audience inferred that Groupon subscribers are favouring mobile application compared traditional desktop web. The objective of this study is to analyse the current and future use of internet technologies in Groupon Inc. Table of Contents Executive Summary 2 E-Business Background 4 E-Marketing Analysis 5 Web design Analysis 6 Business-to-Business Analysis 7 Mobile Commerce 8 Conclusion 9 Recommendation 9 References 11 Bibliography 13 Appendices 14 E-Business Background Groupon is one of the fastest rising online businesses in the last decade with over 35 million subscribers as of October 2010. The company serves more than 150 markets worldwide reported an annual turnover of $1.6 billion for the year ending 2012. The company has unique e-business model through which it offers its customers group coupons. It uses The Point’s platform which allows deals available to all only if certain minimum number of people sign up for offer. If the minimum number of people does not sign up for the day then the deal is cancelled and no one gets to avail the deal for that particular day. By adapting such a business model the company is able to reduce the retailer risks that often treat these coupons as discounts when sold in bulk quantity. This e-business model also helps the company to use group coupons as a sales promotion tool. The company makes profit by retaining utmost half the money paid by customers for subscribing to coupons. For instance, a $50 message can be bought by an individual for only $25, if purchased through Groupon. Then the $25 would be split between the retailer and Groupon as per their initial terms of contract. Each day, the subscribers of Groupon receive daily deals from a variety of local businesses including spa, home paints, restaurant, and so on. From the above discussion it can be said that if the minimum number of subscribers does not sign up for daily offers, the subscribers are not given discounts. E-Marketing Analysis The e-marketing strategy of the company helped to grow its revenue in one year and become one of the fastest growing companies. According to the business model of the company, the users get to avail discounts only when certain number of subscribers signs up for a deal. Such a strategy adopted by the company helps the existing subscribers to spread the message to their family, friends, followers, and hence encourage others to follow the suit. This e-marketing strategy helps the company to introduce themselves to new potential customers (Chaffey, 2008, pp.336). The company’s marketing and promotion strategy enables subscribers to share their experience on social media. This helps the company to spread the daily deals reach out to as many customers as possible. The company also offers group deals which add value to daily deals package because a customer who has never used the products of Groupon gets to avail attractive discounts. The process spreads through referrals helping the company to spread products to larger segment. In addition, the company sends daily emails to their subscribers regarding latest offers and deals for the day. The frequent emails motivate the subscriber to revisit the company’s website on an average at least once or twice per week (Flaherty, 2005, pp.84-139). Sometimes the company encourages its customers to market Groupon deals by referring to their family and friends. This helps the customers to earn money when their friends or any one the customer has referred actually signs up for the deal (Gay, Charlesworth, and Esen, 2007, pp.37-64). By only mere subscribing with the company does not earn the customer any money. From the above discussion it can be said that the company leverages existing customers’ referrals a tool for e-marketing strategy through online social media networks like Facebook or Twitter. Such strategy helps the company to reduce the cost of advertising and add value to business by encouraging potential customers turn into repeat customers (Ryan, 2011, pp.17-23). Web design Analysis The company believes in delivering interesting products to people which will add value to the company as well as the customers. It uses localisation of products as a strategic model to achieve its objective in geographically dispersed markets. The company also believes that if the customers are offered best of quality products at best discount offers, customers will not be able to walk away from their deals. Then the social media comes to play through which the subscribers get to spread and convince the deals to as many people as possible. In order to make the process interesting, the company web designer team has added a timer and points in the portal which allows customers to feel the process like an online game (Wolny, 2012, pp.24-55). The company’s Web portal is in-line with its strategy that uses the power of online and offline social networking to motivate customers to make business deals. Everyday Groupon features a single deal per city or town. The web design allows the company to use collective bargaining skill to sell its products to customers. The web site is designed in such a manner that unless a minimum numbers of deals are sold through the company’s website no one would be allowed to buy the products at offered discounts. The company then uses this strategy to motivate existing subscribers to attract potential subscribers. The web portal design of the company allows the customers to refer the deals to their friends or family members through social networking sites (Schlie, Rheinboldt, and Waesche, 2011, pp.33-34). The Groupon deals’ web page has a timer that countdowns the number of deals bought and the time remaining to avail the discounts. These two components are the key drivers that push the customers to spread the deals. The number of deals shown alongside helps the customers to constantly monitor the success of the deal. As the number of deals slowdown, the timer motivates the customers to influence others to make the deal successful. The inclusion of social networking feature in the web design acts as second motivator that helps the customers to share deals with their family members or friends. The concept of visual direction in the company’s website attempts to get user’s attention to the key deals. The brightest and the biggest elements on the company’s webpage are the ‘Buy’ button and the ‘title page’. This helps the customers to keep focus on their objective when they are spreading the deals through social networks. Business-to-Business Analysis The Business-to-Business model of Groupon focuses on commission based model. Groupon often offers up to 50% discounts to subscribers which puts question about the viability of the business. The customers of B2B model of Groupon are mainly the small and medium (SME) enterprises. Hence, in order to make profits the company focuses on increasing volumes as much as possible. This is apparent from the daily deals target in which there has to be a minimum number of subscribers per deal in order to avail the discounts. In case the number of subscribers is less than minimum requirement, the deal is off. In such case the retailers are ensured safety from the risk of sales uncertainty (Laudon, 2011, p.87). Generally the B2B trading cycle is longer than B2C. For instance, a typical B2C deal in Groupon lasts 24 hour where as a B2B deal might last for 7 to 14 days depending on the decision making process. Again, the B2B model of Groupon is based on needs and not wants. This model does not have the features of B2C model like countdown timers or game like atmosphere. But the similarity with B2C model is that the SMEs get to avail the discounts if the make bulk purchases (Morley and Parker, 2009, p.471). Mobile Commerce A recent study on Groupon’s 2012 mobile web +app audience inferred that Groupon subscribers are favouring mobile application compared traditional desktop web. The results of the test showed Groupon’s mobile application visitors were over 17 million compared to 12.4 million desktop viewers. If the existing E-Commerce model of Groupon is integrated with m-commerce, then the customers will feel more attached with the company. Not the mention how the cell phones are becoming popular among the younger generations, perhaps it is one of the best way to reach the young bloods. The customers will be regularly updated about the delivery in progress and also they will get to know about new offers on their handsets without having to visit the stores. Thus, it provides the customer the convenience to check the availability of product, price, and location of store without a desktop computer (Mennecke and Strader, 2003, p.15). The m-commerce model is expected to change the concept of retailing as well as e-tailing. It is easy to use, secure, and cost effective. It will help the company to implement social commerce. When m-commerce is integrated with e-commerce model, customers will be able to make payments from their cell phones. A customer can first check about the current offers and then visit the stores directly or otherwise he/she can directly order from cell phone. It also overcomes the limitations of desktop computer as in traditional e-commerce model the customer must have a computer and access to internet (Sadeh, 2003, pp.99-177). Conclusion From the above analysis and discussion it can be said that the company Groupon Inc. is one of the fastest rising online businesses. The company’s e-business model uses feedbacks in the form of referrals to get new customers by leveraging existing subscribers. The company also motivates its customers through social networking. The web design of the company’s portal uses a countdown timer clock and a tracker of number of deals signed by customers. Such interface helps the customers to spread the deals online to their friends and family. The company’s e-Business strategy also helps to reduce the cost of advertising and add value to the business by encouraging potential customers turn into repeat customers. The company also sends frequent emails to subscribers for daily deals and best offers. The company’s marketing and promotion strategy enables subscribers to share their experience on social media. This in turn motivates the subscribers to spread the daily deals reach out to as many customers as possible. Recommendation The e-marketing strategy of the company helped to grow its revenue in one year and become one of the fastest growing companies. According to the business model of the company, the users get to avail discounts only when certain number of subscribers signs up for a deal. Such interface helps the customers to spread the deals online to their friends and family. Recent studies have also shown that Groupon subscribers are favouring Groupon mobile applications over traditional desktop internet. The company should invest more in mobile commerce technology. It will help the company to reach younger generations more easily and also increase revenue. References Chaffey, D., 2008. E-Business and E-Commerce Management. 3. New Delhi: Dorling Kindersley (India) Pvt. Ltd. Flaherty, T. B., 2005. Electronic Marketing. United States: Idea Group Inc. Gay, R., Charlesworth, A., and Esen, R., 2007. Online Marketing: A Customer Led Approach. United States: Oxford University Press. Laudon, K. C., 2011. E-Commerce: Business, Technology, Society. 4. New Delhi: Pearson Education India. Mennecke, B. E. and Strader, T. J., 2003. Mobile Commerce: Technology, Theory, and Application. United States: Idea Group Inc. Morley, D. and Parker, C. S., 2009. Understanding Computers 2009: Today and Tomorrow. United States: Cengage Learning. Ryan, P. K., 2011. Social Networking. New York: Rosen Publishing Group, Inc. Sadeh, N., 2003. M-Commerce: Technologies, Services, and Business Models. United States: John Wiley & Sons, Inc. Schlie, E., Rheinboldt, J., and Waesche, N., 2011. Simply Seven: Seven Ways to Create a Sustainable Internet Business. New York: Palgrave Macmillan. Wolny, P., 2012. Andrew Mason and Groupon. New York: The Rosen Publishing Group. Bibliography Belew, S. and Elad, J., 2011. Starting an Online Business All-in-One for Dummies. New Jersey: John Wiley & Sons, Inc. Haegele, K., 2001. E-advertising and E-marketing: Online Opportunities. New York: The Rosen Publishing Group. May, P., 2001. Mobile Commerce: Opportunities, Applications, and technologies of Wireless Business. United Kingdom: Cambridge University Press. Rich, J., 2008. Design and Launch an Ecommerce Business in a Week. United States: Entrepreneur Press. Satterlee, B. C., 2001. E-Commerce: A Knowledge Base. United States: iUniverse. Schneider, G., 2011. Electronic Commerce. United States: Cengage Learning. Shi, N., 2004. Mobile Commerce Applications. United States: Idea Group Inc. Appendices Figure 1 – Sample daily deal given in Groupon (Source: Groupon, 2012, http://jamiedunham.wordpress.com/2011/06/19/marketing-to-women-only-1-in-5-groupon-users-return/) Figure 2 – Groupon deal progress tracker (Source: Word Press, 2012, http://provenstratgz.wordpress.com/2012/06/29/the-7-growth-strategies-that-led-to-groupons-12-7-billion-ipo/) Figure 3 – Groupon daily deal offered to subscriber (Source: Word Press, 2012, http://provenstratgz.wordpress.com/2012/06/29/the-7-growth-strategies-that-led-to-groupons-12-7-billion-ipo/) Figure 4 – Groupon’s marketing strategy (Source: Word Press, 2012, http://provenstratgz.wordpress.com/2012/06/29/the-7-growth-strategies-that-led-to-groupons-12-7-billion-ipo/) Figure 5 – Groupon Web design (Source: Tutsplus, 2012, http://webdesign.tutsplus.com/articles/design-theory/analyzing-groupons-design-why-so-many-buy-in/) Figure 6 – Groupon Web Design Strategy (Source: Tutsplus, 2012, http://webdesign.tutsplus.com/articles/design-theory/analyzing-groupons-design-why-so-many-buy-in/) Figure 7 – Popularity of Groupon Mobile Application compared to its rival (Source: ComScore Media Metrix and Mobile Metrix, 2012, http://www.comscore.com/lat/Insights/Blog/node_16073) Read More