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The Amazing Rise (and Inevitable Fall?) of Groupon
By The idea that would eventually evolve into Groupon was born out of the frustration site founder Andrew Mason felt when trying to cancel a phone contract in 2006.
Source: Online MBA
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Don't forget, they will also provide 100% refunds to the Groupon buyer if the merchant goes out of business, so now they have to be in the business of financial risk management of their merchants. If you sell $30,000 in future value, make $300 in fees and then the merchant goes out of business, there are only so many iterations of that model (i.e., doling out $25,000+ in refunds) that can occur before you start hemorrhaging cash and it hits the P&L. There have been many predecessor companies that have adopted similar models and gone bankrupt.
Well, GroupOn is a loss-leader that drives incredible publicity.
It's a one-off promotion where you can lose alot of money, but gain alot of publicity for your brand. The problem is that people will come to expect a promotion associated with your brand if you keep on using GroupOn.
What if I told you there was a cheaper and more consumer long-term value solution that could be re-used as a constant promotional piece, utilizing various advertising methods at once? To create a 2-in-1, 3-in-1, 4-in-1, or 5-in-1 promotion?
What would that do to GroupOn? Would that just put GroupOn in the "one-off" promotion category for short-term buzz?
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