A study on Groupon.com. Collective buying & social marketing

1. Groupon | Collective Buying
& Social Marketing

2. content
I. Groupon Profile
• Background
• Business Model and Operation
• Additional Marketing Methods
Tuán Gòu 团购
• API
Collective buying
Store mobbing II. Study the business model of
Collective Buying
• A Six Forces Analysis

3. GROUPON
COMPANY PROFILE

4. Company Profile：
• Established：10/08
• Industry：Advertising and Marketing
• Employees：225 （from LinkedIn）
• Operation：
– Subscribers 4,400,000+
– Total Groupons bought 4,600,000+
• Media exposure：
• Funding： Total $173M
Angel, 1/07 Eric Lefkofsky Brad Keywell $1M
Series A, 1/08 New Enterprise Associates $6.8M
Series B, 12/09 Accel Partners New Enterprise Associates $30M
Series C, 4/10 Digital Sky Technologies Battery Ventures Accel $135M
Partners New Enterprise Associates

5. Business and Operation

6. Business Model：a form of Re-intermediation
③ gain stable sales,
① looking for good deals,
increase awareness
find/ share shopping experience
Consumers suppliers/ retailers
② Sell groupons,
charge commission
• Groupon negotiate with suppliers/ retailers to offer deals；
• Groupon promote deals and gather customers via its marketing channels；
• Groupon sells coupons to customers and charge commission from suppliers.

7. A brief review
Features：
• Consumer pays before purchasing: ensure the deals get
done；accelerate the cash flow
• Large discount for collective buying in limited time and
items：create a phenomenon of Bargaining& Panic
Buying，encourage customer wowing the deals by word
of mouth (via Social Web)；
• One deal per day, consumer don’t need to make the
choose；
• Achieve a Three-Win

8. Product line（from official web site）
~ Consumer Packaged Goods ~ Electronics
~ Accessories ~ Entertainment
~ Automotive ~ Fashion
~ Beauty ~ Health & Pharmaceutical
~ Beer, Wine, and Spirits ~ Financial
~ Diet and Fitness ~ Travel
The place of AD banner

9. Current sales：an analysis of 108 featured deals
Sold Items Bought Groupons sold cost
Categories
Count % Mean Minimum Maximum Mean Minimum Maximum
Restaurant & Cafe 39 36% 3609 1995 7207 16 4 35
Food 14 13% 4091 2078 9746 9 3 20
Salon , Makeup & SPA 13 12% 3350 2028 4724 44 22 99
Ticket 12 11% 3669 1962 14670 10 4 25
Fitness 8 7% 2982 2050 3995 36 5 55
Tour 7 6% 6686 2487 19872 18 10 30
Grocery 6 6% 5114 2679 9995 17 15 20
Lesson 5 5% 2409 1998 2600 34 20 69
Membership 3 3% 3814 2355 4913 37 30 40
Car Wash 1 1% 2358 2358 2358 5 5 5
Total 108 100% average sales= 3822 average cost= 21.76
Value Discount
Mean Minimum Maximum Mean Minimum Maximum
33 10 75 53% 47% 60%
21 8 40 54% 50% 67%
220 45 805 61% 50% 88%
21 8 50 50% 45% 53%
136 15 480 62% 50% 95%
40 20 80 52% 42% 63%
37 30 40 55% 50% 63%
135 40 290 66% 50% 91%
93 75 110 61% 58% 64%
12 12 12 58% 58% 58%
average value= 67.84 average discount= 56%
• Main deals are services, such as restaurant & café, hair salon/ SPA, training.
• Unit prices are low averaged $68，Groupon cost $22；discounts are high
averaged 56%
• Need no logistic distribution center

10. Business Model
One deal per
day
High discount
Time limit
Buyers must
exceed the floor
level to get the
deal open

11. Business Model
Encourage virus-
spreading via social
application
Facebook | Twitter
Additional deals

12. A virus marketing– Leverage the influence with the
social applications
• Integrated with Facebook Connect; no bother to register
• Location-based operation, every city has an independent twitter/ face
book account, which is aimed to talk and communicate with
customers
• A $10 bonus for friend recommendation
• Email subscription/ share of deals
• RSS subscription of deals
• API, open the deals information

13. Leverage the influence with the social applications
• A two-degree networking relationship analysis of 100
randomly-chosen Twitter followers of Groupon L.A
– 100 users generated 4000+relationship（including Follow、Mention &
Reply）
• Feature：
– Leverage the marketing info/ influence
– Do not to CONTORL but to INFLUENCE

14. Additional marketing methods
• Company blog，to talk with customer
/ suppliers
• Live Off/ Groupon Says，make the
topics and earn eyeballs, encourage
wowing
• Make the service personal, let
customer know the people behind the
screen to increase the trust and
intimacy（decrease the emotional
distance & barrier）

15. Business Suggestion: let customer vote from whom
want buy

16. Launch a rewards program
• The currency, G’s, are awarded for viewing deals and buying deals.
And if you buy a deal early (a minimum number of buyers have to
go for a deal or else no one gets it), you get even more G’s.

17. Why Social Marketing?
Those behaviors
Key conversion happening on
point Social web
The main focus of
traditional marketing
The differences of traditional/ social marketing：
• Traditional：focus on customer awareness, educating customer（product
function, feature or brand image etc）
• Social：focus on equal, transparent communication，let customer know
the benefit of buying a specific product to make a smart purchase

18. Groupon recruitment
• Expand its business development team in US market；
• Web/ Internet product development, User experience

19. Operation Area
 Cover 60+ cities in US
 Subscribers 4,500,000+
 Sales：
 Groupon sold 4,500,000+

20. Web Traffic：Unique Visitors (compared with Newgg.com)
Data source：

21. Demographics of web visitors
Data source：

22. API

23. Open its deals（not function as a platform instead）
http://www.groupon.com/pages/api
API case – Android APP
Widget
Groupon makes its deals as a news media

24. Future Operation & Direction

25. Luxury product aimed at high-class consumers
Put strict requirement for membership
• The tax-income document needed

26. M&A: Mob.ly
• Going mobile!!!
• Mob.ly is a mobile application
service The company, which
works with clients to create
mobile applications from top
to bottom (from conception to
design and testing), has built
apps for clients like Comedy
Central, NBC, Digg and Yahoo!
• Mob.ly is led by former Yahoo!
Senior Director of Product
Management Mihir Shah and
Yishai Lerner, former Director
of Engineering at Carrier IQ.

27. A Review
• Simple and clean profit model
• Simple and satisfying shopping experience
• Lower entry barrier
• Not too many products
• Consumers don’t have many options
• Issues of after-sales and warranty

28. AN ANALYSIS OF
COLLECTIVE-BUYING MODEL

29. A Five-force industry analysis
The sixth force：manipulating the development and open of
social web, leveraging the marketing efforts
For New Entrants：
• pioneer advantage （Brand
awareness/scale economics）
For Supplier： • Funding advantage
• Large customer base, ability • Business developing ability
to increase awareness
• Supplier lack ability of For Customers：
backward integration（do it • Lots of supplier
themselves） resources
• Get enough discount
for appealing
• Wide business
operation
For Competitors： For Substitutes：
• Lower entry barrier（technology and capital) • How to compete by
• The size and growth of industry differentiation

30. Groupon’s european competitor ：Groupola — a complete clone

31. Global collective buying websites: a phenomenon

32. Many Chinese copycats The 1st Goupon clone in China mainlad
more than 50s
The No.1 C2C in China

33. Deals Statistics: the latest 102 deals from Chinese
Groupon-alike websites
Category Items Orginal price Discount % Cost Saved
Count % Mean Minimum Maximum Mean Minimum Maximum Mean Minimum Maximum Mean Minimum Maximum
Restaurant, Pub & Cafe 26 25% 187 10 466 29.69 10.00 50.37 64 4 198 123 6 292
Hair salon/ Makeup/ 18 559 128 1876 20.87 4.69 45.38 96 10 188 463 100 1788
Massage 18%
Cosmetics 17 17% 203 50 650 43.40 9.09 64.32 69 18 138 134 21 585
Membership/ Ticket 15 15% 592 25 5218 28.12 4.22 60.00 91 5 348 501 20 4998
Training/ Class 6 6% 368 50 600 18.25 10.82 30.00 66 15 120 302 35 480
Photography 5 5% 1048 108 3000 18.78 6.98 30.15 260 9 880 788 98 2120
Coupon 4 4% 94 20 300 29.54 3.33 54.81 9 3 15 85 10 290
Medical / Dental 4 576 426 879 35.84 15.70 49.60 186 138 248 391 228 741
examination 4%
Flower/ Gift 3 3% 195 128 258 35.26 26.31 53.13 63 52 68 132 60 190
Appliances 1 1% 139 139 139 41.73 41.73 41.73 58 58 58 81 81 81
Designed Tee shirt 1 1% 178 178 178 16.29 16.29 16.29 29 29 29 149 149 149
Karaoke 1 1% 28 28 28 3.57 3.57 3.57 1 1 1 27 27 27
Wine 1 1% 398 398 398 34.92 34.92 34.92 139 139 139 259 259 259
Source: http://tuan123.net/pastTuan.php
04/28/2010 – 05/11/2010
• Main deals are Restaurant/ Pub & Café, Hair Salon/ Spa; Cosmetics; Tickets,
accounting for 75% in total.
• Cosmetics deals have highest average dicount.

34. The chart of Chinese Groupon-alike websites
Lunched Existing Daily average Daily cost
Website Groupon Sold Cost Saved
Date Days Coupon Sold saved
美团 2010-3-4 69 29,962 434 69501.97 4,795,636
F团 2010-3-15 58 29,794 514 41533.53 2,408,945
满座 2010-1-6 126 29,421 234 15941.60 2,008,642
拉手 2010-3-18 55 19,207 349 31956.35 1,757,599
优享团 2010-1-23 109 18,553 170 7471.72 814,417
团宝 2010-3-26 47 15,297 325 74599.64 3,506,183
团美网 2010-3-23 50 12,436 249 18509.96 925,498
窝窝团 2010-3-14 59 10,850 184 60040.78 3,542,406
24券 2010-4-6 36 6,813 189 11790.00 424,440
爱帮团 2010-4-22 20 3,091 155 12013.90 240,278
来客团 2010-3-26 47 1,566 33 3529.94 165,907
爱爱团 2010-4-5 37 1,549 42 1346.81 49,832
赶团网 2010-4-14 28 1,024 37 1652.46 46,269
酷团网 2010-3-28 45 821 18 6041.87 271,884
17团团 2010-4-26 16 623 39 4011.56 64,185
千折百扣 2010-3-2 71 458 6 1465303.96 104,036,581
丁狗 2010-3-15 58 435 8 718.59 41,678
火团网 2010-4-10 32 284 9 465.81 14,906
粉皮儿团 2010-4-20 22 79 4 362.68 7,979
団客 2010-3-23 50 38 1 48.84 2,442
阿拉团购 2010-4-10 32 26 1 64.34 2,059
团拍 2010-3-4 69 0 0 0.00 0
围团 2010-4-16 26 0 0 0.00 0
Masa
2010-3-17 56 0 0 0.00 0
Maso
Source: http://tuan123.net/history.php
• Most website are new startup and have been operating less than 3 months;
04/12/2010 – 05/11/2010
• Daily sales are relatively small, general less than 500 coupon per day.
• The operating areas are limited: Meituan.com 美团 only covers 3 cities so far: 北京、上海和武汉

35. Taiwan
• Launched since 04/12/2010
• Operating in 台北，桃園 ，新竹，台中，台南和高雄
• Saved： NT$1,970,669 ， daily average NT$65,689
• 17P customers who purchased：4，802 daily average 160 persons
To date 12/05/2010

36. Collectively Buying E-commerce platform
Open source & commercial

37. A substitute —— Adidas www.freestripes.com

38. A substitute—— DELL Swarm

39. THANKS