How Groupon Inc Affects Consumer Behaviour - Case Study Example

E-commerce Table of Contents Introduction 3 Groupon’s effect on behaviour 4 Conclusion 11 Introduction The aim of this study is to analyse how Groupon Inc. affects consumer behaviour and understand the operations of the company from customers and business perspectives. Groupon Inc. operates in the service industry and focuses on a new O2O (online to offline) E-commerce. The study focuses on circular or closed loop marketing and how Groupon implements it in its business operations (Yao, 2005). Therefore, to understand how the study of the behaviour of consumers helped Groupon to expand its operations in the field of e-commerce, there is a need to study the O2O loop theory. There are also other factors that affect consumer behaviour and they are equally important and needs to be analysed (Ahn, Ryu and Han, 2005). The company profile of Groupon suggests that, it mainly caters to customer needs by providing real time offers and deals on daily basis via emails or any other online methods. Consumers are given offers and discounts on the basis of targeted personal preferences and locations. Thus, a simplified search process is provided to customers that help them to gather product related information. Customers prefer to purchase goods and services via the online mode as this requires low investment. Huge discounts are available online which lowers the cost of the product. Consumers also save travelling time and cost. Thus, the consumers apply less time and effort in researching about the desired product that needs to be purchased. Therefore, it has been seen that customers prefer the online mode of shopping. In the online to offline service, consumers generally place the order over the internet and their products are delivered through the offline sources. The entire process of e-commerce is vital from the perspective of the company as the customers satisfaction is essential to be maintained in this form of business operations. The entire process of e-commerce is vital from the perspective of the company, as the customers satisfaction is essential to be maintained in this form of business operations (Cheng and Huang, 2013). Groupon’s effect on customer behaviour Gropuon has always taken initiative to help consumers with decisions related to purchasing. Consumers are generally attracted by schemes which involve discounts in price of products. Groupon tries to capture this price discount by offering group coupons. These group coupons are offered through various promotional schemes in the form of deal of the day (Krasnova, et al, 2013). The offerings involve both national and local businesses. Consumers prefer such concepts as they can avail different types of products at attractive prices by using Groupon coupons. Internet forms an integral part for the growth of such businesses. There is a revolutionary change in the mindset of people. They are more open to transactions that involve local business. Groupon tried to cater to such customer needs by integrating business operations. It helped in bringing people together and finding solutions to problems by working in a team. The primary objective of this Entrepreneur who operated on the internet was to identify consumers who loved purchasing goods and services at a discounted price (Curty and Zhang, 2011). Groupon soon started gaining popularity all over the world. It expanded its operation to many countries. The growing popularity of Groupon was due to the fact that, it offered customers with an easy and feasible way to avail huge discounts. These discounts were accompanied by fun activities within the city that were earlier not discovered by the customers. The customers taste and preferences changed with time and it was essential for Groupon to focus on this criteria. In order to keep updated with customers’ needs, the company features innovative schemes every day that offers goods and services to consumers at attractive prices. The company collaborated with the best businesses that operated locally to offer goods to consumers at an exceptionally low price. The local businesses comprises of theatres, stores, restaurants, spas and other special events (Grewal, et al, 2011). However, the company should also keep in mind the restrictions that are associated with the various deals. There are various consumers who are very particular about the product quality. Consumers do not like compromising on the quality of the goods and services even though they are purchasing them at a lower price. Some coupons had restrictions in form of time specifications (Zhang, et al, 2013). They could be used only during off-peak seasons, sometimes appointments had to be done in advance to avail a coupon or a coupon could be used only during specific business hours. This affected consumer behaviour in the sense that, most consumers who were engaged in their own office works could not utilize the coupons (Edelman, Jaffe and Kominers, 2011). They were also sceptical about using some products which may harm their health, in case quality is compromised on in order to provide the same service at a lower price. For instance, many spas provided huge discount in order to attract customers to avail their services, but consumers are apprehensive to use such products as the products might be of low quality in order to justify the low cost and this may harm consumers’ interest (Lvovskaya, Tan and Zhong, 2012). In such cases, consumers would not prefer such discounts and rather avail services at the higher price and avail outstanding service. Companies would lose their consumer base if quality is compromised on as consumers are highly influenced by quality of products. Thus, discounts should be planned in a way which does not lower the cost of the product to such an extent that requires compromise on quality. It becomes imperative for the local companies to identify avenues through which the discounts would be channelled without harming the product quality (Edelman, Jaffe and Kominers, 2010). Groupon helps local businesses to identify ways of cutting cost so that, providing discounts would not harm their profitability position. Measures are developed so that advertising cost is lowered for the local businesses. Groupon finds ways to attract consumers even in off seasons. It adapts various strategies which influences customer behaviour. It ensures that the whole process is made customer friendly so that the customers can easily operate the services of Gropon. Thus, it is very easy for the consumers to access Groupon. The consumers can look for new deals every day. They can do so by subscribing to the daily alerts which would help them to get registered emails about the deals that they can avail on the specific day. Some deals also involve terms and conditions like activation of coupons or deals can only be done if a specified number of people register for the services (Draper, 2012). In such cases, minimum numbers of consumers are needed to avail such discounts. Consumers can register and select the desired product, but payment would be charged only if required number of people joins to activate the deal (Draper, 2011). This ensures that, mass buyers are involved in the business operations. This is how; marketing cost is minimized by local businesses through the help of Groupon. Advertising cost is cut by a huge amount due to the use of internet and social media which helps in attracting the mass through a shared platform (Erdoğmus and Çiçek, 2011). Consumers’ reviews also affect the behaviour of those consumers who were previously unaware of the discount facilities. This is how, many local businesses cope up with the discounted price without harming its profitability. Product quality is also maintained as per the standards. In this way, local business finds a breakeven point for huge discount they made for customers (Divol, Edelman and Sarrazin, 2012). Management of customer relationship is essential for any business operation. It becomes even more important for an O2O e-commerce business. Such business operations require maintenance of strong and long term customer relationship. The process of maintaining customer relationship is done directly or indirectly and by using various techniques. Whenever a consumer makes a decision about purchasing goods online, he indirectly shares vital information with a particular company whose product would be bought (Wei, Straub and Poddar, 2011). This sharing of information takes place even if the consumer eventually does not buy the good. While buying a product, the consumer has to register himself through some ID that makes him a registered user. He can then get access to the cloud storage space which enables him to carry various activities like downloading of applications, purchasing goods and looking for best deals. Later on during the transaction, credit card details are also required (Byers, Mitzenmacher and Zervas, 2012). This procedure is valid even if the sales channel is offline in nature. So, during the entire process, the company can actually make use of real information. This information gets updated with the increase in users. Enterprises are generally concerned with O2O due to its importance in establishing Customer Relationship Management (CRM) techniques. The start of such techniques was associated with a term called closed loop and its applications thus, became imperative to study (Yao, 2005). Reliability and authenticity of information by the users is a real concern for most companies. There are various enterprises that have developed mechanisms to track and verify information by the users. Extensive management is required to carry such operations which enhance relationship with customers. Many traditional retail firms fail to cope up with the daily traffic and thus verification of information becomes a difficult task (Conitzer, Taylor and Wagman, 2012). It is essential to analyze the gathered information of users to understand their taste and preferences and design promotional methods accordingly to suit their needs. Groupon as an entity of e-commerce has followed various techniques to improve customer relationship. It has tried to adopt full-channel marketing. This is a more mature way of marketing and promoting products and services. This process of marketing requires various steps. The first step comprises of the operations that are done over the internet. Consumers are attracted by various schemes and then the transactions are done over the net through the online mode. The second stage focuses on, customers’ feedback and experiences with the product. Local businesses need to concentrate on these feedbacks to develop products in such a way so that consumers are satisfied. In the closed loop theory of marketing, excessive focus is given to consumers’ reviews and based on that, further business operations are strategized (Zhao, Chen and Ye, 2012). Finally, the entire process of marketing is fully consumer-centric. Continuous efforts are made to encourage interaction with the customers to understand their needs and requirements. Thus, it can be seen that consumers operate differently in O2O e-commerce. The consumers make transactions through the online mode and they avail the services through offline mode. When consumers are satisfied with the service, they again avail such offers. As a result, a consumption circle is created. This is a way to attract a large number of consumers by focusing on the individual needs of the consumers (Kauffman, Lai and Lin, 2010). In many cases, it can be seen that fraudulence exists in online transactions. Consumers are sceptical about these issues. Their buying decisions are negatively affected due to these problems. Apart from the low quality of the products, safety issues concerning online shopping is also a factor that affects consumer behaviour. Groupon tries to overcome such issues by developing innovative solutions. It focuses on the experience it provides to its consumers and ensures that consumers are benefitted from the whole transaction (Liu, Li and Hu, 2013). Only the best companies are selected by Groupon so that quality issues do not arise. Consumers are also provided with special service in case if consumers are not satisfied with a particular product or service provided by them or a merchant. There are options through which consumers can get back their money. This ensures that consumers’ faith is gained and a customer base is created in the long term. This indirectly acts as an unparalleled promotional method that creates opportunities in the future. Consumers are attracted to avail services from these merchants even if they are not satisfied with the products, as they are assured that they would be able to return the product or get back their money in case their demands are not met properly. This is how, Groupon increases consumer satisfaction and ensures sustaining business operations (Moe and Fader, 2004). The popularity of Groupon among consumers has helped it to expand in markets all over the world. However, in certain markets like China, Groupon could not generate the same customer satisfaction and as a result profitability of the company was also harmed. Groupon spent an inappropriate and unsuitable amount towards marketing their business operations which eventually affected the valuation of the company (Luo, et al, 2014). The main reason for Groupon’s failure in the Chinese market was due to their increased arrogance that was a result of their increased profitability in the other markets. Groupon’s business operations flourished in parts of Europe and they applied same techniques of business operations in China. In Europe, they tried to hire employees of its rivals by paying them attractive salaries. But these strategies did not work in China (Grewal, et al, 2012). Groupon also did not have proper understanding of the local market. They thought that, all the markets over the world were alike in characteristics. They designed a single strategy to operate in all the markets. The strategies and aggressive marketing and sales of Groupon affected the interests of the local vendors. Groupon’s main marketing techniques included sending emails to the customers to alert them about their offers. However, Groupon failed to recognize that, in China people do not prefer gathering information through emails (Wellman, Boase and Chen, 2002). The management structure of Groupon was also not aligned properly in China. This was due to its inability to recruit local talents in its workforce. The employees those were recruited to handle operations in China were mainly from other countries and they had limited or no understanding of the local Chinese market. This resulted in ineffective business operations. Consumers’ needs were also not getting fulfilled as a result. Groupon also could not strategically collaborate with local businesses. Their selection of local businesses proved to be wrong for their operations as they could not capitalize on the opportunities presented by the local partners. Their decision of collaborating with Tencent was wise. However, they could not reap the advantages that Tencent had to offer. Groupon could not use the market expertise of Tencent and instead relied more on its employees who had little local market knowledge. So, it can be seen that Groupon failed to understand the business requirements in the Chinese market which led to their failure. They could not cater to customer needs and thus, could not affect customer behavior in the Chinese market (Li and Shi, 2012). In other markets, Groupon established a sound base. This profitable position was due to the various strategies it adopted to satisfy the customers. These strategies also included activities to improve business experiences of the local partners. Groupon also provided services to merchants that helped them to connect and interact easily with their consumers by using Groupon Now (Sharma and Khattri, 2013). Groupon Now also helped in alerting customers about various deals and offers just by launching the applications. Like Apple and its various applications, Groupon also developed applications for the android users. Their mobile application aims to ensure outstanding shopping experiences for its customers. Applications of Groupon were also available for Ios (Parsons, Ballantine, Ali and Grey, 2014). The applications on the android mobiles would allow consumers to check numerous deals and offers easily without much of a hassle. The consumers can also use such applications to purchase their desired products. They can also redeem their purchase without showing any print out of their transaction. They can just show their voucher on the mobile device and collect the product from the third party vendor or outlet (Kim, Suh and Lee, 2013). Shopping experiences of the customers are enhanced through such sales techniques. These techniques broaden the customer base of the company as large number of customers can be reached at a time. It becomes convenient for the customers to use and access the deals. Consumers can also share their shopping experiences on various social networks which act as a tool of buzz marketing (Park and Chung, 2012). Consumers lay importance on word of mouth to a great extent and the mobile applications can positively affect it. Groupon has continuously capitalized on the available growth opportunities and tried to develop their business operations innovatively. This has helped them to enjoy a comparative advantage over its rivals (Grewal, et al, 2012). Conclusion The findings from the study confirm that the business operations of Groupon have an effect on the consumer behaviour in many ways. The company has partnered with the local businesses to cater to consumer needs. Internet has been the main driving force that governed the business activities of the company (Lee and Whang, 2001). Groupon used various promotional tools to attract consumers. Consumers’ reviews about a product were valuable from the point of view of the company. This is because, in case of O2O e-commerce business, closed loop marketing becomes imperative (Yao, 2005). The company has focused on such tools and techniques of marketing and expanded in various markets all over the world. Groupon has successfully identified the various factors that affect the behaviour of the consumers. Price is one of the important factors that have ensured customers’ reliance on the company. Quality of the product is also equally important for the consumers. It can be seen that, consumers also prefer the shopping experiences provided by Groupon because, it engages them into an activity which comes with a fun quotient. The business operations and the profitability position of the company have made it one of the fastest growing enterprises dealing with e-commerce. This is because of Groupon’s continuous efforts for identifying innovative solutions to problems. 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