So who wins? In our hypothetical situation, the Groupon nets the restaurant $4,630 over the year while the traditional ad gets us just $3,752 — and there were probably some upfront costs that still need to be deducted. So Groupon is the clear winner, right? It’s actually trickier than that. According to the Rice study, just 35.9% of daily deal customers spend beyond the face value of the deal. Or, in other words, a large chunk of those initial Groupon users might get to the $100 average bill, so the profits from the Groupon might be much lower. (In our example, Groupon customers would be worth negative $7.30 if they only spend the Groupon price.
That means they’re worth about $235 the first time through, assuming 64 of them only spent the coupon amount and the rest spend the full $100 average, and about $2,915 over the year.)
Of course, I can make the numbers say whatever I want — it’s all hypothetical (changing the numbers this way can make Groupon look great or look terrible) and I’ve made plenty of assumptions about customer value. The point is this: Other forms of advertising don’t have to be that much more effective (and can still be less effective from a pure purchaser standpoint) to create similar revenue and offer similar customer acquisition costs.
もちろん、数についてはどうとでも言え、すべて仮定(こんなふうに数字をいじれば、Grouponを良くも悪くも見せられる)の話であり、顧客の価値についてたくさんの仮定を置いている。要は、他の形の広告が、同程度の収益確保や顧客獲得の経費面で、上で述べたよりはるかに効果的(純粋な買い手の立場からは効果がもっと少ないとしても)である必要はない。
When consumer spending is low, it makes sense that fewer people are spending on things like expensive dinners out. A discount Groupon is an attractive incentive to get them out to the restaurant, and it is more effective at driving new business, even for successful restaurants like Seviche. But that likely won’t always be the case. If and when the economy rebounds, businesses might have an easier time getting customers in the door to spend at full price. They may no longer require the high-cost marketing that Groupon offers.
Can Groupon Keep Growing?
それでもグルーポンは成長し続けることが出来るだろうか。
Grouponは成長を続けられるか？
Groupon’s growth relies heavily on marketing. When the company cuts its marketing expenditures, revenue growth slows dramatically. That’s in a poor economy that is friendly to Groupon. What happens to that growth when businesses with desirable products and services can afford to refuse offering such attractive discounts? What if merchants refuse to play at all? Just 29.5 million of its nearly 143 million subscribers have ever purchased a Groupon (again, according to the company’s IPO prospectus). What will that conversion ratio look like if deals cease being as attractive to buyers as they are now?
As the company nears its IPO, investor confidence appears to be waning. In a piece in VentureBeat Monday, analyst Rocky Agrawal, who thinks Groupon is bound to fail unless it significantly reinvents itself, painted a bleak picture of who loses if the company goes under. Spoiler alert: it’s not just Groupon’s executive team and investors who would feel the pain.
Customer Retention Over Acquisition
So is Groupon destined for collapse? I’m not ready to say that just yet. Any economic turnaround in the U.S. won’t happen overnight — and could take years — and Groupon has aggressively expanded into international markets over the past year, whose economic climates I can’t and won’t comment on. They’ve also launched some new programs in an attempt to diversify their offerings, such as Groupon Now, which allows businesses to target deals to specific times and sell excess inventory during slow periods (though some reports indicate that Now is not gaining Groupon-like traction), as well as a travel deals service.
However, I do believe that Groupon will be forced to significantly alter its existing business model to survive long-term.
More than decreasing customer acquisition costs, Groupon needs to find new ways to add value for merchants to keep them offering deals. I predict that once the economy rebounds, small businesses will need to risk less to get potential buyers in the door and will be more interested in ways to retain and reward customers. This is something that Groupon only just recently began to address with Groupon Rewards, a clever program that allows merchants to reward customers for repeat business with exclusive deals.
集客のためのコストの著しい低下で、Grouponはマーチャントに取引を提供させ続けられる広告の価値への新しい方法を見つける必要がある。私は、経済が立ち直れば、小さなビジネスは潜在的なバイヤーを得るためのリスクが低くなり、客を保持し、報奨する為の方法に興味を持つ事になるであろうと予測する。これは、マーチャントが顧客に高額な取引を再契約することを報奨することができる才気のあるプログラム、Groupon RewardとしてGrouponが取りかかり始めたような類ものである。
Groupon isn’t alone in this space — they’ll face stiff competition from companies like Swipely and Google’s yet-to-launch Punchd, which incentivize full-price purchasing through discount rewards, and Foursquare, which drives repeat foot traffic at a low cost.
This is the future. Customers will always buy deep discount deals, but fewer merchants will need them. What they’ll need are ways to turn existing business into repeat business.
