Online Discount Coupon: Negative or Positive Marketing?
An Applied Research Project Submitted in Partial Fulfillment
of the Requirements for the Degree of Masters of Business Administration
Masters of Business Administration Degree
by
Adarsh Kudesia
Applied Project Supervisor: Dr Dwight Thomas
September 2015
ii
Table of Contents
Abstract ..................................................................................................................................... iv
Introduction ................................................................................................................................ 1
Research Purpose and Research Questions ................................................................................ 2
Literature Review ....................................................................................................................... 3
Overview of Online Coupon Industry ................................................................................. 3
Negative of Online Coupons ............................................................................................... 6
Positive Impacts of Online Coupons ................................................................................... 9
Mixed Impact of Online Coupons ..................................................................................... 12
Out of Business Players .................................................................................................... 24
Summary of Literature Review ......................................................................................... 24
Research Design and Data Collection ...................................................................................... 25
Results ...................................................................................................................................... 27
Analysis .................................................................................................................................... 29
Framework of Analysis ..................................................................................................... 29
Limitations & Assumptions .............................................................................................. 29
Categorization of business impacts ................................................................................... 29
Identification of Patterns ................................................................................................... 32
Synthesis and Generalizations........................................................................................... 33
Recommendations .................................................................................................................... 35
Conclusion................................................................................................................................ 37
References ................................................................................................................................ 38
Appendix A – Infographic: The Coupon Industry ................................................................... 40
Appendix B – “Top 15 Most Popular Coupon Websites” ....................................................... 41
Appendix C – GroupOn’s Performance Charts ....................................................................... 44
Appendix D – List of active laser hair removal deals at GroupOn.com .................................. 52
iii
List of Figures
1. TEAL’s customer satisfaction standing by GroupOn.com .................................................. 20
2. GroupOn’s declining share price chart 2012 - September 2015 .......................................... 23
3. Local deal offerings in Ottawa (Canada) ............................................................................. 23
4. Research Design Process...................................................................................................... 25
5. TEAL’s Customer Satisfaction Chart .................................................................................. 32
List of Tables
1. Positive and negative impacts of online coupon industry ...................................................... 5
2. List of select GroupOn Deals offered by TEAL in past four years ..................................... 20
iv
Abstract
Traditional discount coupons have existed for centuries but their distribution has been limited,
time consuming and slow. Traditional coupon also provided very low return on investment. On
the other hand, the online coupon industry which was created in and escalated in late 2000,
provided a rapid marketing tool that could reach millions of customers in a very short period of
time. It provided huge savings for consumers and many marketing benefits to businesses,
including hefty profit margins for coupon companies. Initial momentum of online coupons
allowed the online coupon industry to grow significantly until 2011-2012, when the number of
online coupon companies increased significantly and as a result, many companies went out of
business in recent years; perhaps higher supply than market demand/access to the coupons that
were sold online!
Despite long term and short terms tangible and intangible benefits of online coupon based
marketing, several business owners incurred losses in offering online deals and realized that this
marketing tool is not for everyone or that it needed to be evaluated against their marketing needs.
Businesses also felt that the term and conditions, discount level and deal’s length was often
controlled by the coupon companies, which left the businesses stranded. Leading online coupon
companies such as GroupOn on the other hand, have been able to manage constant revenue and
subscriber’s growth yet at the same time GroupOn failed to register a positive net profit until
2014. The online coupon industry is still growing but many Canadian online coupon companies
have gone out of business in the past two years, for example dealfind.com and teamsave.com.
Today, online deals are generally listed for much longer periods compared to daily discount
deals that were noticed in the beginning of the online coupon era back in the late 2000s until
early 2010. Prolonged listing of a discount deal today appears to be setting a low price point for
many services and products e.g. massage therapies, esthetics services, laser hair removal,
food/restaurant, hotels etc. which puts businesses in very tough spot to sell regularly priced
services/products.
Although the online coupon industry provides many marketing benefits to businesses such as
bringing new clients to the door in a very short time and helping to build brand/reputation, it
does not help in establishing a significant number of loyal customers to businesses due to the
wide variety/number of coupons available today. As a result, clients’ retention from online deals
is averaging between 3% and 22% as experienced by some of the businesses in this research
paper.
The scenario above appears to be similar to the dot com growth in late 1990 and its downfall in
early 2000, whose impact is significant on businesses. It has therefore attracted my interest to
analyze the advantages and disadvantages of the online coupon industry, and provide
recommendations to businesses in order for them to re-assess their marketing needs, expenses
involved and benefits should they consider participating in the online discount industry.
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This study also analyzes the online coupon consumer’s common issues such as frustration grown
over the expired coupon resulting in erratic behaviour often expressed to the business owners
which appears to be due to lack of awareness and understanding about the features and
limitations of online deals. Growing frustration of consumers is often expressed in term of
negative reviews against a business, which becomes almost “written on stone” and ruins a
business’s reputation in the long run. On the other hand, businesses have also benefitted from the
customer satisfaction rating that is collected and maintained publicly by online coupon
companies helping potential customers choosing suitable businesses for their need.
This research finds that the online coupon industry is going through some corrections and will
take some time to create a balanced and stabilized online coupon based marketing platform,
which will provide equal benefits to all stakeholders (e.g. coupon companies, costumers and
businesses).
1
Introduction
I am an Information Technology project manager by profession and have been in the IT industry
for just about 30 years. I have been working with a variety of industries (steel, textile, polyester
yarn, steel pipes, pharmaceutical and petrochemical manufacturing; Canadian government, IT
consulting; application development, networking and infrastructure, Geomatics, ecommerce)
around the world (India, Saudi Arabia, Canada).
This Applied Research Project is part of eMBA program’s Applied Project course APRJ 699,
offered by Athabasca University (AB, Canada). The purpose of this research work is to identify
key issues and benefits of online coupon based marketing, conduct analysis of the impacts of
online coupon based marketing/sales on local businesses and consumers, and produce
recommendations based on publicly available information, data and facts in the area of
marketing management that may help businesses making an informed decision,. This research
papers looks at both Negative and positive sides of online coupon industry.
So, who does not like discounts and deals! According to www.savings.com (Infographic: The
Coupon Industry, 2013, Appendix A), the first ever discount coupon was introduced by CocaCola when it gave away free bottles of soft drinks in 1890. As commonly observed, most
businesses offer discounts, free but limited period trial of services, free products to try out and
various other seasonal discounts to promote sales and to increase their service/brand’s visibility
in the market. Discounts, in general, are cherished greatly by most of the consumers. Who can
argue that! Until the late 2000s, when online coupons became available, not all discounts were
accessible to mass consumers. Online discounts that are offered nowadays reach anyone who
wishes to receive them just by providing their email address at the discount company’s web site.
Hence, the volume of discount claimers has multiplied by many times over the past 3 years.
The activity and intensity of the coupon industry and its impact on modern businesses intrigued
me, and hence I chose the online coupon industry as the topic of my research.
2
Research Purpose and Research Questions
This research is intended to identify and analyze issues related to the use of online digital coupon
based marketing, and to analyze the negative and positive impacts on businesses and consumers
with the presence and by the role of online digital coupon distribution service providers, such as
GroupOn.com. This research is focused on the marketing management aspect of the business
administration program. As outlined by many other authors and bloggers online, discount
coupons are often considered a part of the marketing strategy (Phibbs, 2010) or a means of
boosting sales, as interpreted by others. Either way, businesses today seek different types of
advantages from this online discount coupon when comparing with traditional marketing and
sales techniques.
Businesses in North America and around the world appear to have taken advantage of online
discount coupons (as discussed in details in the subsequent sections) in anticipation of boosting
revenues rapidly but their experiences differ greatly from each other. Some businesses have
leveraged the online discount coupons to the fullest, whereas others have lost financially and
significantly; as observed in the literature review section of this research paper. This research
will attempt to identify the impacts of online coupon industry, analyse those impacts and produce
recommendations to mitigate some of the side effects of those impacts.
The literature review and the analysis sections of this research will look at existing wellestablished online discount coupon companies, their offerings, available data and experiences of
other businesses within the context of the business model of online coupon companies.
Finally, the recommendations that could potentially help in mitigating any observed issues of the
online discount coupon industry will be provided. The recommendations of this research paper
also intend to help businesses make an informed decision how they may develop new marketing
strategies or review their existing marketing strategy. Recommendations may additionally
suggest changes that may be implemented or adopted by coupon companies in order to establish
sustainable online coupon distribution and risk free online coupon shopping/redemption for its
consumers.
This research attempts to address the following questions:
a. Is online discount coupon based marketing positive or Negative to the businesses?
b. What are some of the key positive and negative impacts of online discount coupon industry
and how those impacts are affecting the businesses, consumers and coupon companies?
c. Who is benefiting most and who has been negatively impacted most by online coupon based
marketing?
3
Literature Review
Overview of Online Coupon Industry
Did you know that the first online coupon deal in North America is believed to be “Mercata” (by
Microsoft) that didn’t go well? (Sam1933, 2014). This example indicates that online couponbased marketing has been a significant tool of the 21 century’s marketing strategies, however,
not all deals seem to provide expected marketing benefits to all organizations. This idea will be
further discussed throughout this research paper.
Consumers have always looked for discounted deals in order to save money and feel good about
being a savvy shopper. Therefore businesses have offered various types of discounts using a
variety of marketing and advertising tools and techniques. According to Sam1933 (2014) group
buying, also known as collective buying, originated from China and was initially named
“tuangou”, or “team buy” as we would say. It provided wholesale pricing to a group of
individual buyers. Later, this collective bargaining became a popular marketing tool that offered
pre-bargained discounted deals over the Internet to mass consumers. Until the early-mid 2000,
discounts were offered mostly using traditional tools such as print media, stores flyers or via
emails, which limited the business’s ability to reach out the masses. In traditional paper based
marketing, it appears that customers did not have the choice to opt out from a flyer distribution
and had to receive marketing material against their interest. Thus, such marketing efforts did not
provide the desired results to businesses. With the penetration of internet access in North
America, group buying was digitalized by online coupon companies in which a web site
publishes a heavily discounted service/product that is pre-negotiated with the local/remote
businesses and offered through their web site to purchase by anyone who has registered to their
web site. Once purchased, a coupon of this third party can be redeemed at a business in exchange
for a service or product within a stipulated time frame (or it loses its value). Online coupon based
marketing provided customers to opt-in and opt-out from deal companies, and only receive
materials in which they have interest in. This method helped increasing the acceptability and
usability of discounted coupons to a great extent, which can be considered to be one of the many
reasons for the revolution of the online coupons.
As per Sam1933 (2014) worldwide group buying started to rise in popularity between 2009 and
2010 especially within North America. Group buying web sites in China grew from 100 in
March 2010, to 1215 by August 2010. This new marketing approach provided ground breaking
success to many online coupon companies who created new business models enabling businesses
to quickly boost their sales, gain numerous marketing advantages and provided huge cost saving
to consumers in general. Since online coupon based marketing was able to reach the mass,
massive volumes of coupons are sold online, every day. As the online coupon industry grew in
North America and worldwide, it also produced a number of negative and positive impacts on
businesses, consumers and on the coupon companies itself.
Although Appendix B provides a list top 15 online coupon companies, here is a list of the key
players of the online coupon industry that have made a great marketing impact around the world
in the recent years:
4
•
•
•
•
•
•
GroupOn.com
RetailMeNot
Livingsocial.com
Zilly
Dealfind.com
Teambuy.com
In Appendix A savings.com’ Infographic (2013) claims to have the online coupon data sourced
from wsj.com, nytimes.com, Coupons Inc., Emarketers.co and many other web sites. Its timeline
graphical presentation nicely captures the business side of the online coupon industry. It also
portrays how the online coupon industry is trending towards heavy usage year by year and have
become very much Smartphone driven in this modern “instant marketing” world.
The highlights of Appendix A’s infographic reveal that:
•
In general, the majority of consumers enjoy heavy discounts and coupons.
•
Food (28% of the pie chart) is the most popular item for which discounts are offered. Health care
(18%), household (14%) and personal care (14%) are next in line.
•
Between 2007 and 2009, only about 1% of coupons were redeemed according to the survey
presented in Appendix A. The redemption of online coupons has grown by nearly 360% over
past 7 years.
•
The number of mobile coupon redemptions was expected to grow from 200,000 M units
(coupons) in 2009 to 66,900,000 M units in 2013 – a significant jump that this industry was set
to realize, according to savings.com.
5
Table 1: Positive and negative impacts of online coupon industry
(Source: Author)
The following table provides an overview of positive and negative impacts of the online coupon
industry that are discussed by various authors in Literature Review section of this research paper.
Please note that negative and/or positive impacts are not generalized and do not apply to all
stakeholders (businesses, customers) in the real world. The impacts may vary from stakeholder
to stakeholder.
Stakeholders
Online Coupon
Companies
Positive Impacts
• Growing revenues year-by-year
• Low risk business – every deal
generates revenue
• No large capital investment
required
Negative Impacts
• Growing competition for new
entrants
• Some coupon businesses in
Canada declared bankruptcy in
2014
• Declining profit sharing
• Recurring net losses for some
companies
• Declining number of subscribers
Businesses
Potential for quick revenue boost • Loss of revenues on many deals
Bring new clients to the door and
due to “deep discount”
sell other additional
• Low ROI and expensive
services/products
marketing tools for many business
Support to long term marketing
• Very low percentage of retained
strategy
clients
• Reputation/brand damage by
unsatisfied/angry clients due to
negative reviews published online
• Dealing with client’s frustration
• Additional cost required for postdeal reputation management
Consumers
Potential for huge savings on
•
services and products
Variety of online coupon
companies to choose everyday
•
Deal for virtually everything and in
every city of North America and
may other parts of the world
Convenience of redeeming coupon
via smartphone; less chances of
missing the expiry date
Loss of expired coupon’s value, if
not redeemed within validity
period
Compromised/substandard
services/product quality by some
businesses
6
This section discusses each individual references and information that is collected in support of
the research questions and for the purpose of the analysis, which is to understand the impact of
the online coupon industry on businesses today within North America.
Negative of Online Coupons
“GroupOn Review: Worst Marketing For Your Local Business- Case Study”
(Phibbs, 2010)
“As a business model for GroupOn, it is a great way to get 50% of the revenue off a website
while providing none of the fulfillment.” This is how Bob Phibbs, the author of” “GroupOn:
Why Deep Discounts are Bad for Business”, defines the business model of online coupon
companies and in particular, of GroupOn.
Bob Phibbs’s article highlights how conceited online coupon companies are known to be, and
how rushing they can be to get an inappropriate coupon deal that puts the business in jeopardy
and may make them lose their creditability to their own existing and potential customers. In one
of the opening examples, author elaborates how a deal was executed:
- Phibbs meets Kim; the owner of a parent-teacher store who has been in trouble making profit
out of this business after buying it from a previous owner. After learning all sorts of stories
about GroupOn, Kim rolled a deal through GroupOn in hopes of boosting sales in a very short
period in addition to the reputation and brand building. Originally Kim targeted to sell about
150 coupons, each at $20 for-$40 worth items.
- The deal went online with 50 sold by 7 am on the opening day; 100 were sold 20 minutes
later. “GroupOn put wrong “fine print” that will allow buyer to purchase 1 coupon as new
customer, and 4 additional for other family members instead of limited one per house hold in
a typical deal, and one or two gifts for non-family members. By the time Kim talked to
GroupOn to fix the wrong fine print the way she wanted from the beginning, almost 400
coupons were sold under the wrong terms and GroupOn said Kim had to honor them.
- “Luckily they agreed to change the fine print, but still made it that you could buy 2 as gifts. At
this time I asked them to cut it off at 500 and they wouldn't.”, Kim told. “By the end of the
promotion we sold 1158.
- That's $46,320 at retail or roughly $23,160 at cost...of that I get around $10,000 because of
course I only get 50% of the deal minus credit card fees (ugh!) GroupOn gets their 50%.”
Phibbs explains that Kim didn’t really make any money out this deal and in fact, jumped on this
“online coupon bandwagon” in anticipation of making some additional revenue and spread the
name of the business around.
The author then went on to share Kim’s experience:
“Redemption is a nightmare! We have a huge binder filled with over 1000 names and so many
people bought multiples. They get so nasty when you ask for ID and when we tried to enforce
the 1 per household/person rule they made a scene...so we ended up taking it anyway.”
7
According to the author:
•
•
•
Kim will gift her customers $46,320 worth of merchandise
GroupOn will receive about $11,530
Kim will receive net around $10,000
“On top, GroupOn doesn’t send the deal money after the closing of the deal but they send in 3
part.”
In this excerpted article, Phibbs effectively summarizes that GroupOn drives a deal,
expands/alter fine print without business owner’s knowledge, uses wrong fine prints, keeps 50%
of profits, and makes net 50% with no fulfillment or commitment, all by managing an
ecommerce web site. The author also warns readers that Kim didn’t make any profit, but rather
lost money on the deal and had no exposure to new customers because customers who bought
Kim’s products were looking for other new deals at GroupOn and were one-time users.
“Why Online Coupons and Deep Discounts May Be Bad For Business?” (iStockAalyst,
2011)
This article by iStockAnalyst (2011) discusses “why online discount coupon industry may be bad
for many businesses” and also highlights some key thoughts that a business should consider
while debating all pros and cons of online couponing, prior to venturing in to it.
In the following article, the author highlights three major issues of online coupon industry:
-
“It destroys profitability”: Setting a discount level too high, such as 50% or higher, lowers
down the price point for that specific service/product in the market not only for that
particular business itself, which destroys the profitability for everyone else in that
industry/service/product category.
-
“Discounts affect service levels and customer satisfaction”: Web sites identify a link
between quality of service and profitability, which seem to be directly proportionate to
each other. According to istockanalyst.com, too much discount reduces the profitability
and thus it affects the quality of service and customer satisfaction, resulting loss of
customers including existing clients.
-
“Customer loyalty is affected”: iStockAnalyst (2011) web site brings an interesting
point that the “Usage of coupons can easily be copied by others”, therefore this does not
provide any sort of differentiation to a business, rather it becomes a price war and this
approach destroys the customer loyalty to greater extent.
To summarize iStockAnalyst’s article, online coupons often destroy business’s profitability,
damage customer’s loyalty and negatively impact quality of service.
iStockAnalyst then raises the following questions to businesses in order to make them more
aware of some of the key considerations prior to moving to online coupon based marketing.
8
•
•
•
“Does the true cost of the coupon campaign fit into our advertising budget?”
“Do we have the extra products and staff to handle a sudden influx of new customers all at
once?”
“Do we have a way to turn one-time coupon buyers into regular customers?”
“The proof that GroupOn damages your business’s reputation”
(Fabretti, 2011)
“The research, carried out by John Byers and Gerogia Zervas from Boston University and
Micahel Mitzenmacher from Harvard University who studied over 16,000 GroupOn deals in 20
US cities between January 2011 and July 2011. They monitored each deal every ten minutes or
so to determine how sales varied from time and also counted the number of Facebook likes that
each deal generated. At the same time, they collected Yelp’s rating, around 56,000 of them from
2,332 merchants who ran 2,496 deals – examining how merchant reputations changed before and
after a GroupOn deal. Interestingly, their methodology looks to be sound as they were able to
arrive at more or less the same value of sales through their period of analysis as GroupOn
announced in their corresponding period figures.”
This article highlights a very interesting yet a negative/mixed impact of the online deals,
especially those that are run by GroupOn. Based on a study from Harvard University the author,
Fabretti (2011), outlines that when GroupOn deals are used, Yelp reviews surge as well which
are mostly negative. This, in turn, affects the reputation of a company, which is difficult to
recover in years to come. Based on the research conducted, this article summarizes that
GroupOn deals have resulted in no boost in sales of a business after a deal went online, and in
many case it impacted the reputation of the company negatively.
The article also discusses how aggressive the GroupOn sales team has been with businesses in
pushing out their style of running deals, by ignoring individual business’ requirements and
limitations.
“GroupOn in Retrospect”
(Groupon in Retrospect, 2011)
This is an excerpt from the blog of Posies Bakery and Cafe (NY), whose owner shared her
personal experience of running a GroupOn deal, triggered by a loyal customer who did not want
to return to their door after being denied for redemption of an expired coupon’s.
The owner begins with: “The decision to run a GroupOn campaign was my own decision, and
one I regret. Lesson learned.”
Posies Café decided to begin a GroupOn deal in January 2010: a $16 worth product for $6, out of
which GroupOn will keep 50% of profits. Posies Café ended up selling nearly 1000 coupon at
GroupOn and there comes the crowd. What was quite astonishing was that the owner of the
restaurant initially expected to give a 5-10% discount off of her products; however GroupOn
forced her to go beyond 50% off.
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The owner goes on to exclaim that “Over the six months that the GroupOn is valid, we met
many, many wonderful new customers, and were so happy to have them join the Posies family.
At the same time we met many, many terrible GroupOn customers… customers that didn’t
follow the GroupOn rules and used multiple GroupOns for single transactions, and argued with
you about it with disgusted looks on their faces…”.
As noticed that this is a very consistent experience by many others (as outlined in the very first
literature review of this research) that coupon customers become impolite, irrational and in many
cases desperate, and would start misbehaving when they find that a deal is different than their
“expectation/assumption”. In this case, owners share that most customers often ignore the fine
print and expiry date with GroupOn deals. The owner goes on to share that the business had to
take $8,000 out of their personal savings to cover payroll and rent for that month. She also
added, “After all of this, I find myself not even willing to buy GroupOn because I know how it
could hurt a business (side note: service industry businesses do quite well with features like this
because it is just the cost of time – you are not paying for a product for resale. Resale, in my
opinion, gets hit the hardest).”
Positive Impacts of Online Coupons
“Online Coupons 101: How and Why to Use Online Coupons to Grow Your Local
Business”
(Sumner, 2012)
This article emphasises using an local online coupon based marketing strategy, discusses how to
use it effectively, highlights the challenges and advantages of coupon based online marketing.
“Online Coupons Make Customers Happy … Science Proves It“
There is no doubt that online coupons attract new and existing customers, and bring more
revenues (in most cases). This is what the author of the following article is trying to prove by
referring to a recent study. “Recent research has correlated coupons directly with brain chemistry
linked to the happiness. People who receive $10 coupons have 38% higher Oxytocin levels,
32% calmer breathing rates, 5% slower heart rates, and 20x less sweaty palms. You can’t make
this stuff up.”
Trevor Sumner says that “Coupons should be the part of your local online marketing
strategy…They can drastically impact the effectiveness of existing marketing efforts by
increasing the number of people who convert off your website, emails, social media accounts and
more.”
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Sumner (2012) also suggests choosing right coupons for online coupon based marketing. He
poses the question, “What would you be willing to pay to get a new paying customer to walk
through the door right now?”
As suggested by the author, there are many companies other than GroupOn and LivingSocial that
a business can opt in for its online marketing. But what is more important to understand is the
cost of services/products that should be subtracted from the earning attained from coupon deals.
It would be the businesses that decide how much they plan budget for on online marketing. Often
misunderstood and also not mentioned by the author, online marketing is not entirely about
boosting sales by selling coupons.
Sumner also cautions about the challenges of distribution in online coupon based marketing
because of available accessibility to huge customer bases, but also counter-argues this by
suggesting staying focused on local businesses for more controlled distribution from a
manageability perspective.
At the end of the article, the author strongly recommends using geo-tagged mobile-based
marketing to target people within a specific postal/zip code, and those who subscribe their email
address to receive deal/coupons voluntarily.
“5 Groupon Success Stories And Discount-to-Loyalty Strategies”
(TJ McCue, 2011)
This article captured 5 success stories of GroupOn, therefore it supports this research paper in a
positive way.
“There are two big Groupon benefits for business owners that I see: One, that you dramatically
increase your visibility. Two, you have no out-of-pocket advertising expense. Okay, you may
have to spend on materials or product, but if you do it right, you can at least break even and
generate new business.”, said TJ McCue. It appears to be true for any type of marketing. If
marketing strategy is not built upon solid foundation and a good understanding of the outcome
VS expenditure is not established, it may not produce the desired results. McCue (2011) shared
the following 5 success stories in this article:
A Fitness club: “…the company invented a new product from a semi-successful free product and
tested it in a big way via Groupon.” According to the author, GroupOn sounded a great way of
trying out a new product for which the market is not ready. This approach would provide
feedback on the performance/outcome of product without spending too much on advertisement
and free sampling of products via trade shows, etc.
Paige Lewis from Hairs: The owner of Hairs Paige Lewis “decided that her deal would be $50
worth of services for only $25. Her company sold 92 Groupons, but only 77 redeemed (they still
received the money on the others, though). Of the 77 clients they saw, seven became regular
clients, bringing with them family members and friends. Her advice? Don’t give away something
for nothing. Her other bit of advice: Really think about the expiration date. She said a full year is
too long.” (McCue, 2011). In this case the merchant made little extra money from the customer
11
who did not redeem their coupon and also retained about 9-10% of loyal client form this
GroupOn deal.
CanvasPop is a service that helps you transform your photos onto a canvas. “The company ran a
Groupon, but made sure to follow one major rule: capture e-mails. As an online service,
CanvasPop captured each e-mail when people signed up to redeem the Groupon on their site.
They also offered a $30 gift certificate with each order. Then, to make it even more valuable, the
company included a 15-percent off card that the Groupon customers could “share with a friend”
to further expand the “word-of mouth-effect.” (McCue, 2011). This is another positive side of
GroupOn in which CanvasPro collected valuable marketing assets that could not otherwise be
feasible to attain.
Elkhorn Inn in Eckman, West Virginia: “The last success story comes from the Elkhorn Inn in
Eckman, West Virginia. What I learned from their experience is that business should flexible
with Groupon offers. The inn sold a total of 82 packages, 99 percent of which went to new
clients.” (McCue, 2011). This story tells another positive side of GroupOn but the author did not
provide further insight to the outcome as to what percentage of 82 clients turned loyal! But
surely it seemed very positive to the business owner according to the author.
“7 Reasons to Use GroupOn for Your Small Business”
(Thammineni, 2010)
Thammineni (2010), the author of this article says “GroupOn sounds like a pretty good deal,
especially since businesses only pay for sales made, but is it right for your business?”
Thammineni highlights the benefits of GroupOn deals to business owners and provide advice in
which situations GroupOn deals should be exercised:
- Excess Inventory: If you have a lot of surplus product inventory sitting around.
- Repeat Sales: If you feel that discounted sales will result in customers returning for more at
full price (this seems unreal because most of the article writers in this literature review have
mentioned that the vast majority of GroupOn customers are not loyal to the businesses, but
are rather loyal to GroupOn. Thammineni added that this can be a way to give customers a
taste of what you offer in hopes that they come back for more.
- Additional Sales: Thammineni added that additional sales are a great potential in GroupOn
deals when customers arrive to redeem a coupon. For example, if you offer two-for-one
sandwiches at your restaurant through GroupOn, the customer might also buy a drink or snack
at the standard price.
- Excess Capacity: A good example that author provides here it a tourist service business, such
as a cruise around the harbour that can utilize online coupons to fill the off-season excess
capacity at a discounted price.
- Keeping the Lights On: “GroupOn could be just the short-term infusion you need to stay
afloat during these tough economic times”
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- Attracting a Young Demographic: The author identifies GroupOn as a potential tool to
expose products/services to a specific young age demographic because “Most GroupOn users
are young (68 percent are aged 18 to 34). Therefore, GroupOn is ideal for products and
services targeting this demographic.”
- Generate Buzz: This really sounds interesting and true because GroupOn does create a buzz
on the Internet and generally also in public. Thammineni explains that for a new or relocated
business in particular, GroupOn can be the perfect way to familiarize a large group of
customers with your product. This is especially true because often people share a deal with
their friends to demonstrate how much of a savvy shopper they are or just to help friends save
some money.
Because great GroupOn deals often bring masses to the door, the author also cautions businesses
when not to choose GroupOn:
•
•
When business is “unprepared for Large Influxes”
“When You Never Have Repeat Sales”: Deep discount businesses should have the ability to
sell more at the time of coupon redemption to recover the lost money.
As most authors suggested, Thammineni seems to indicate that GroupOn is not for making
money rather it is for branding, exposure and creating buzz in the consumer’s world by
introducing new products/services. According to the author, situations in which GroupOn could
be used can be beneficial (or detrimental) to a business. Businesses need to make a decision as to
if GroupOn deal is right for them or not, and also what type of deal is right for a particular
business.
Mixed Impact of Online Coupons
“Wise for Some Restaurants, Coupons Are a Drain at Others”
(Collins, 2011)
To start off with, the following quote is what one of the restaurant owner expresses: “Our life
changed after GroupOn — we would do it again,” said Michele Casadei Massari, 35, the coowner of two Piccolo Cafes in Manhattan NY, USA. GroupOn sells its online coupons for half of
their food value, and then GroupOn takes an additional 50 percent off of the discount sales. On
March 1, in a timed deal, “Piccolo Cafe sold 1,142 coupons for $14 worth of food in 24 hours.”
The owners expressed that they didn’t really make money on this deal but they evened out.
This appears to be a pure long term marketing strategy, which helped Massari gain many new
customers (friends of people who purchased coupon), and in building a reputation/branding at
the same time. In addition to those benefits, the owner revealed that about 80% customers
returned without coupons. It finally turned out to be a worthy marketing initiative at a much
cheaper cost, which is not in the reach of a small business. Owners also acknowledged that
13
“…GroupOn gave us a massive marketing campaign that a small business like ours would never
be able to afford.”
The author brings yet another reference to another Brooklyn restaurant whose owner felt the
opposite. Monica Byrne, the partner of Dal-Site-Free Brooklyn café in Red Hook (USA) believes
that good food deserves good value which they already offer and do not see any value in coupon
based marketing. She also believes that “the discount bubble must collapse when enough
coupon-scarred restaurants refuse to do web deals.”
According to Collins (2011) the online coupon bubble has already busted as he refers to “Posies
Bakery and Café” (lost $8,000 in GroupOn deal) and “Ed’s Chowderhouse in Manhattan”
experience whose owner did not gain the same experience as Piccolo Cafes in Manhattan.
In a nut shell, this article points out the real world’s good and bad experiences that businesses
have experienced from online deals and cautions that business must do their due diligence prior
to trying out an online deal.
“Will GroupOn Really Boost Your Local Business?”
(Dewing, 2011)
Yet another interesting article which discusses the advantages and disadvantages of GroupOn
based marketing within the perspective of what to expect from GroupOn. Although more
influenced by the negative outcome of a GroupOn based “advertisement” or “sales” attempts,
this article does provide both positive and negative aspects, and interesting views on the positive
side of the coupon base mass-marketing.
Author Carla Dewing starts with “GroupOn has been hailed as the new miracle advertising tool.
It has also been accused of being a ruthless corporate giant, preying on the ignorance of small
businesses.”
The article provides an overview of how GroupOn and their client work makes money on a deal
in which product/services are offered on GroupOn.com for 50% off, or a higher discounted price;
GroupOn keeps 30-60% of revenues generated from the deal and the rest goes to the client
(business). In this setup client (businesses) do not make much money, but rather they gain
visibility via web site visit, social media likes/dislikes, online reviews etc. but not necessarily
making profit on every deal. Author also shares a little secret “GroupOn is not for everyone”.
“Like any decision in business, it’s easy to get swept away by trends and promises of future
earnings”, Carla mentioned. Hence, it is imperative to make right decisions and choices when
venturing into the online discount industry. GroupOn and similar online coupon based
marketing/advertisements may or may not be not beneficial to a business where as it could be
quite beneficial for others. Dewing warns her readers that they must not be willing to trade their
loyal customer with “GroupOn loyal customer” that are known as “one time buyer” of your
product/service according to the author.
14
Carla also acknowledges that there are some advantages of an excellent GroupOn promotion, but
there are no real long-term returns for many businesses.
The article also points out GroupOn’s claim that “many people don’t claim their purchased
coupon, which leaves more profit for the business owner.” Let me correct this because it has
changed since the article was written. This is no longer an advantage to businesses because the
“value of coupon” never expires now. GroupOn has posted that “The amount paid WILL
NEVER EXPIRE and must continue to be honored by the merchant after the promotional value
expires.” (2015, September 8).
Retrieved from https://www.GroupOn.com/pages/universal-fine-print. Customers can always go
back to the business and ask for non-discounted services/products equivalent to expired deal’s
amount.
What one can summarize from this interesting article is that GroupOn is a good
marketing/advertisement tool but should be used wisely by select businesses. It is not ideal for
business seeking a short term sales boost.
“5 Trends in Coupon Marketing for 2013”
(Bellamkonda, 2012)
Similar to other authors that are referenced in this research paper, the article written by
Bellamkonda (2012) reiterates that coupon based marketing is not new. “It has existed as long as
business has existed as a marketing tool for business owners to attract new customers and
sometimes to retain existing customers.” However, companies like Groupon have pioneered the
trend in which they appear to manage “how many coupons to distribute” and “where and when to
distribute those coupons”. Factors that are driving the online coupon trends identified by the
author are as follows:
•
•
•
•
•
The deal itself
Number of deals offered
Location
Market specifics
Time period of when they could be used
The author also provided some anticipated trends for 2013 and talked about how the digital
coupon industry is expected to shape, and will contribute to support businesses, especially the ecommerce industry. This is noticeable (various GroupOn charts, as shown in Appendix C) over
the past few years as an unprecedented growth of the online coupon industry.
While the author highlights a positive side of the online coupon industry by arguing that “Under
ideal conditions, coupon offers should have given businesses access to new markets and
customers and a way to fill capacity during lean periods.”, he also cautions about some pitfalls of
the online coupon industry: “The speed of the industry growth lead to several bumps both for the
coupon companies and the business that used the coupons.“ Some of the pitfalls Bellamkonda
mentioned in his article are:
15
•
•
•
•
Staff dissatisfied when patrons using restaurant coupons were not calculating the tips at
the full price
More existing customers using the offers and businesses not getting exposure to new
customers
Businesses not setting a logical limit to the number of coupons sold and opening
themselves to operational nightmares
Sometimes no clear understanding of timeline and merchant payment terms
As the main focus of this article, Bellamkonda goes on to discuss five trends that he had shared
in this article:
Expanded Localized Deals: The author expected some challenges in expanding the end user
base for online coupon which seemed like a dream come true based on the number of online deal
customers back then, but that does not appear to be an issue if we look at the active user’s growth
Chart 7 in Appendix B. As the author expected, the number local merchant targeting more local
customers increased significantly as per Figure 3 (Local deal offerings in Ottawa).
Focus on Increased Online Commerce: As the author anticipated in 2012, the coupon industry
contributed significantly to the growth of the self-serve coupon selling via ecommerce platforms
in which Groupon “increased procuring goods directly from producers to the customers”.
Increased Resources and Tools for Merchants: As the coupon industry was expected to grow
author expected to see new tools and techniques that will augment the coupon industry in order
to support and sustain the ongoing growth. The author explained that the online coupon
industry’s leaders have taken the lead and have developed some online tools to help merchant
managing and tracking online deals, such as “GrouponWorks”, and also to help customer buying
and ordering merchandise online, such as those offered by Living Social for restaurant taking
online order from their coupon customers.
Consumer Flexibility in Customizing Deals: Here, the author expected flexible coupon
redemption options and tools in years to come, and expected to see the use of TXT and Tweet to
offer discounts when business is less busy.
More Options in the Revenue Models with Merchants: Not many merchants were happy with
the revenue split model of GroupOn and similar coupon companies; the author expected to see
change in 2013 so that merchant were paid “fair share”. The author expected innovative methods
in this category.
Having developed a positive view of online coupon based marketing; Bellamkonda advised that
“As a business owner when you make a decision about your marketing in 2013 definitely
consider adding the group-buying to your marketing mix with careful consideration on avoiding
the pitfalls I have mentioned above.” Bellamkonda went on to point out that although there are
many negative views about the online industry, many are not true. In a Forsee study
commissioned by Groupon: “Groupon’s overall merchant satisfaction was a very strong 79. The
average satisfaction score for a B2B company in ForeSee’s benchmark is 64”, Bellamkonda
added.
16
“The Pros and Cons of Offering Coupons: A Retailer’s Dilemma”
(Stainton, 2018)
This article discusses both the positive and negative sides of the GroupOn world. The Author
looked at both aspects of coupon based marketing, in particular using GroupOn. One of biggest
disadvantage that author has mentioned in this article is that the “Coupon reduces the value of
the order that could have been purchased at full prices”. The author asked why should there be a
discount offered on essential items that a customer is willing to buy at regular price anyway? By
doing so it reduces value of the order. Paul (2015) also mentioned that online coupon based
marketing “reduces margins, therefore, it is a direct hit to the bottom line profitability of that
sale.” (Stainton, 2015). Stainton advised business owners in his article to ask question prior to
venturing in to online coupon based marketing if it is better to make a little less money off that
sale or is it better to let that sale go to another company?” No one can answer that except a
business owner, Stainton (2015) added.
Stainton (2015) outlined in this article that percentage of coupon savvy clients is growing hence
there is a greater need that businesses provide some discount deals to bring new clients or to stay
in touch with the existing clients otherwise businesses will left behind. Stainton brings set of
other interesting data in this article:
•
•
•
96% shoppers have used coupon in last 3 month (as of February 19, 2015)
Many, many consumers simply expect there to be coupons or deals available from a
retail store. It’s become so engrained in their purchase behavior that 96% of shoppers
have used a coupon in the last 3 months
In 2014, more than 100 million US adults will use digital coupon”. : “56% of shoppers
state that they have used coupons to try a product for the first time
Overall this article highlighted the unseen growth that the coupon industry has yet to see. The
author appeared to be suggesting that businesses need to make informed decisions and review
their marketing strategy to find out if coupon based marketing fits within their
corporate/marketing strategy or not. Inadvertently, it appears that the author is suggesting that
businesses can offer initial incentives to coupon buyers when they show up to redeem the first
coupon such as offering another service/product at a reasonably discounted price and
encouraging customers to retain for longer term, rather than missing the opportunity, if this make
financial and marketing sense to a business.
At the end, the author poses the question “Will coupons generate more value to your business
than their total cost?” which will be discussed in the following sections of this research paper.
Stainton (2015) also sought another advantaged that he had shared in this article that “One way
to increase the overall value of coupon offerings is to make the coupon available via email only,
for which the customer must sign up for your email list in order to receive their coupon. This
provides additional value to you as a business because – even if the customer doesn’t end up
buying right away – you now have their contact information (and necessary permission) to email
market to that customer and attempt to gain their business in the future.” Since permission based
email marketing has stricter law in most of the countries worldwide especially in Canada (CASL
17
- Canada's anti-spam legislation that came into effect July 1, 2014: Source
http://fightspam.gc.ca/eic/site/030.nsf/eng/home) it has becomes tougher for businesses to
mass mail electronic coupons and other promotional material that they had been able to deliver
in the past without much restriction and against customer’s will. According to the author,
GroupOn and other similar online coupon tools have emerged as an alternative for collecting
various marketing data and credentials that were otherwise not possible in the newly anti-spam
legislated North America.
Doing the Math on a Groupon Deal
(Goltz, 2010)
I found this article to be the most interesting among all of the articles that I have included in this
literature review section because this discusses every aspect in terms of “numbers”, which a
business would really like to see when preparing for a deal. At the end of the day, it is all about
numbers (financials) – profit and loss and the ability to run a business successfully.
“The members who buy the coupon get 50 to 70 percent off on a product or service, and
Groupon splits the proceeds with the retailer — usually leaving the retailer with about 20 to 25
cents on the dollar of retail value." (Goltz, 2010). Author here intended to highlight the cost of
running a GroupOn deal in which a retailer may make profit, lose money or merely retain the
cost of good/service.
Goltz refers below some of the concerns that various businesses (retailers) who have experienced
GroupOn first hand:
•
•
•
“It is for desperate businesses.”
“The financials just can’t work out.”
“Groupon is the worst marketing ever.”
“We did Groupon. It was O.K. It brought in new customers — we kept most of them. But the
margins are a killer.”
Realizing the need to develop a better picture and be able to project earnings/losses from a
coupon deal, Goltz had put together some very interesting calculations and demonstrated how to
estimate if GroupOn is “Best marketing ever?” or “Worst marketing ever?” (Goltz, 2010). “It all
depends on a few little numbers. Here is the big difference between traditional advertising and
Groupon: Traditional advertising requires spending some money and knowing that it can be lost
if the ad doesn’t work. With Groupon, you spend no money up front but you mess with your
formula for making money. You can win big and you can lose big.” Goltz (2010) concluded in
this article. Goltz also mentioned in this article that GroupOn based online coupon can be the
worst and best marketing ever and probably both, but one thing is sure: Groupon is a beast.
(Goltz, 2010). Goltz said that the reason this uncertainty exists is because there’s a lot of
misinformation out there such the real numbers that can provide some guidance to a business
owners prior to signing an online coupon deal. This is why it is critical to do the math onset.
“Math is cold and unemotional — and eye-opening”, Goltz added in his article.
18
There are eight key calculations you need to consider in determining whether this is a better
advertising vehicle than something else you may already be doing. (Goltz, 2010). In the
following example Goltz demonstrated how his math works for a restaurant:
Suppose you sell 3,000 coupons with a face value of $75 for $35. Given this, let’s assume the
following:
1.
2.
3.
4.
5.
6.
7.
8.
40 percent incremental costs (mostly food).
$85 average ticket ($10 more than the coupon).
85 percent redeemed.
40 percent used by existing customers.
Two bought per customer.
10 percent come back again — or send friends.
$1,000 advertising value.
$125 typical cost to get a new customer through other advertising methods.
Now, let’s do the math:
Number redeemed: 3,000 x 85 percent = 2,550.
Revenue:
3,000 x $35 x 50 percent = $52,500 (Groupon sends a check).
2,550 x additional $10 = $25,500 (additional money spent by each customer).
total revenue = $78,000 (plus, you also get the $1,000 advertising value of having all those
people introduced to your product or service).
(Goltz, 2010)
Expense:
2,550 x $85 (average retail value) x 40 percent incremental cost = $86,700. (Goltz, 2010)
“In this example, the restaurant took in $78,000 at a cost of $86,700, which means it cost $8,700
to run the deal. The key question is how many return customers the restaurant will get for that
expense. If you divide the 2,550 total coupons by two (the average number of coupons bought by
each customer), you get 1,275 customers. Multiply by 60 percent (to exclude existing customers)
and you get 765. Multiply again by 10 percent (the percentage of new customers who return),
and you get 76 new repeat customers.” (Goltz, 2010)
“Divide the $8,700 cost by 76 new customers, and the restaurant paid $114 for each new regular,
which in this example is roughly what we assumed it would cost with conventional advertising.
The question the restaurant has to answer is whether it was worth the trouble to get 76 customers
— especially given that it probably annoyed some of its existing regulars. On the other hand,
maybe it kept some of its employees busy when they otherwise would have had short hours.”
(Goltz, 2010)
19
Goltz (2010) cautioned to keep this in mind: because of the huge volume, if you change any of
the variables, you can get very different results. For example, when a customer’s average
spending will reduce from $95 to $85 and even below, there will be a significant increase in the
expenses (up to $24,000 @ $75 spending per customer) then such deal may be an option for the
business.
The best part of this article is that a businesses can play around the its numbers and will be able
to see a better picture in terms of the real benefit or loss behind an online coupon deal, and thus
adjust numbers to fit in to their marketing strategy and make an informed decision.
TEAL (Ottawa): A seasoned business for online coupon
www.tealwellness.com
TEAL is a leading holistic spa and wellness clinic in the east end of Ottawa, Ontario (Canada),
operating since October 2011 at their new location. After moving to its new location at Montreal
Road in October 2011, TEAL initially relied on paper based, store-front and road side
advertisements to get noticed and to attract new clients. This strategy did not succeed as and
failed to generate expected and required revenue, therefore in 2012, TEAL’s management
decided to try out online coupon deals to introduce new services that were not offered at the
previous location, and signed up with dealfind.com and livingsocial.com. “The response was
okay but it was all very existing to see few hundred of customers (who purchased our deal) all of
a sudden that were willing to try out our services. Although it was challenging to satisfy every
single of those clients because coupon customers expect much more than the value of the
coupon”, said Seema Kudesia, the founder director of TEAL. “We did everything that we could
and maintained very high level of customer’s satisfaction but despite giving out our best some
customers were left unhappy and wrote negative online reviews against us. Unfortunately not
many happy customers will share their experience online and allows negative review to
overpower the image of the business which is scary part of this online coupon industry”, Seema
added.
“Initially we rolled the deals that offered discount up to 89% (Table 02) which did not make
sense to us but coupon companies were very pushy and dictated their terms & conditions until
2012-2013, and would not consider lower discount deal that was financially appropriate to our
business model. As a result we lost money on most deal and did not get any reasonable
advantage of retaining a handful customer. Only 3-5% customers are retained from deal whether
it is GroupOn or any other company. We also get only 50% of the coupon value so it is not really
a sales boosting tool but more of a marketing tool that I consider using for filling the off season
capacity, for keeping the ball rolling (keeping employee energized and motivated) etc.”, TEAL’s
owner further explained. Seema also shared her experience regarding the attitude of coupon
customers in general, which is really irritating, agitating and sometime abusive, including
offensive reviews that gets posted on GroupOn.com, Facebook, Google+ and Yelp.ca from time
to time. “Customer anger management is a big toll on us in a coupon deal and often it is more
than the cost of actual services that we provide to these coupon customers.”
20
Figure 1: TEAL’s customer satisfaction standing by GroupOn.com
TEAL appears to be a very seasoned business utilizing GroupOn and other online coupon
services. From the owner’s experience it appears that TEAL uses online coupon as part of its
long-term marketing strategy and not for making profits from deals since they do find real
savings in it. TEAL has been utilizing GroupOn, Living Social and Dealfind.com for its online
coupon needs for more than 2 years. “We find coupon business as part of our marketing cost
although return on this cost is low but given the economic condition there nothing better to try
out unless marketing budget is really big – for a small business that is not feasible”, Seema
Kudesia added.
“Most customer will be upfront telling that they have coupon from other place for similar
services and will not return unless business offers the same discount directly”, expressed by
Seema Kudesia (TEAL).
TEAL’s management currently plans to unhook from the online digital coupon based marketing
and focus more on social media based or even offer its own deep discounts in which they do not
have to share the revenue.
Table 2: List of select GroupOn Deals offered by TEAL in past four years
The following table is a list of select GroupOn deals that were offered by TEAL in past four
years.
TEAL’s Active Deals of 2014-2015
One-Hour Therapeutic or Thai Massage with Optional Mud Wrap at TEAL (Up to 47% Off) –
Ongoing for over 10 months
60-Minute Therapeutic Massage or 60-Minute Kalp Full-Body Ubtan Treatment at TEAL
Wellness (Up to 50% Off) – on going for over a year
$59 for Weight-Loss Package with Consultation, Blood Analysis, Nutrition Program, and
Supplements at TEAL ($340 Value) – on going for over a year
21
TEAL’s Expired Deals of 2012-2013
Natural Wellness Package or Cholesterol-Control Package at TEAL (Up to 83% Off)
One-Hour Therapeutic Massage, DiamondTome Microdermabrasion Treatment, or Both at
TEAL (Up to 59% Off)
Naturopathic Wellness-, Hemorrhoid-, or Poly-Cystic Ovarian Treatment Packages at TEAL
(81% Off)
Three or Six Spider-Vein-Removal Treatments at TEAL (Up to 89% Off)
About GroupOn
Most of the articles above have referenced GroupOn as a leading online coupon service provider
or they have only talked about GroupOn therefore it becomes implied to learn little about the
GroupOn company in term of what it offers to its clients; what does its deal bring to a business;
what roles it plays in shaping marketing and/or advertisement need of business around North
America; and what is it financial standing in the business world and what is their future.
GroupOn: One of the most successful online discount coupon company which is also publicly
traded at NYSE.
“GroupOn, Inc. operates online local commerce marketplaces world over that connect merchants
to consumers by offering goods and services at a discount… The Company offers deals on goods
and services in three categories: Local Deals (Local), GroupOn Goods (Goods) and GroupOn
Getaways (Travel). The Company's Local category includes deals with local merchants, national
merchants and local events. The Company's Goods transactions in North America are primarily
direct revenue deals.”
(2015, September 3). Retrieved from
https://www.google.ca/finance?q=NASDAQ%3AGRPN&ei=KHDwVYGXIpL_jAH1h55o.
GroupOn: “Our mission is to be the world's commerce operating system, increasing consumer
buying power while driving more business to merchants through price and discovery.”
GroupOn outlines the following benefits to the businesses when using its online deal program:
“Advertising That Actually Works: Radio, print, TV, billboards - nothing delivers customers
with the speed, reach, and power of a GroupOn advertising campaign. Plus there's no upfront
cost. Try asking for that from your other marketing channels.”
2015, September 9). Retrieved from https://www.GroupOnworks.com/benefits-of-advertisingwith-GroupOn.
22
It appears to be true as per the experience of businesses included in “Positive Impact” section of
Literature Review of this research.
With millions of global and thousands of local subscribers one cannot argue that GroupOn
reaches to highest number of customers.
GroupOn also lists another benefit of its deal based marketing i.e. “Loyal New Customers, Big
Spenders, Influencers” which does not appear to be in line with what some business and article
writers have shared in the previous sections of this literature review. As per literature review
most businesses have expressed that GroupOn is a good long term marketing tool but it does not
provide a loyal customer base because the majority of its customers are ones that are looking for
more savings, and less commitment. Therefore, those clients always find new places that offer
new deals because most deals are offered to first time clients only.
By researching further about GroupOn, it is noticeable that the coupon industry is not doing as
great as it was during 2010-2013.
GroupOn’s life time stock price ranges from US$26.11 to US$2.28 as of opening hours on
September 4, 2015. After recovering from an all-time low of US$2.76 in November 2012, GRPN
maintained a range of US$11-$12 between late 2013 to early 2014. Since then then it has been
declining consistently, which shows a sign of struggle maintaining/growing positive net profits
year by year.
Some financial information of GroupOn (see Appendix C) provides an insight to GroupOn’s
present situation and serves as an outlook to its future:
•
•
•
•
•
Revenues have been growing consistently
Operating profit is decreasing
Number of subscribers are decreasing constantly despite some of its Canadian
counterparts/competitors have gone out of business in the recent years
Share price and EPS (earning per share) is going down consistently since early 2014
Deals are listed for prolonged periods of time as oppose to daily deals when they started the
business which indicates that daily deals does not make enough money
23
Figure 2: GroupOn’s declining share price chart 2012 - September 2015
Source:
https://www.google.ca/finance?q=NASDAQ%3AGRPN&ei=KHDwVYGXIpL_jAH1h55o
Figure 3: Local deal offerings in Ottawa (Canada)
Source: https://www.GroupOn.com, 2015
24
Figure 3 above shows that there were 655 deals available as of September 3, which makes it very
easy for shoppers to find most the common services/products at a highly discounted price any
day, and that too in all major cities of North America.
Out of Business Players
Due to the initial success of the online coupon industry, also it has also gotten to grow to the
extent that markets got saturated and online deal companies did not make sufficient revenues to
run their business. The following companies have been out of business since 2012:
•
•
•
Dealfind.com
Teamsave.com
GoSango.com
Bankruptcy of these coupon companies incurred losses to businesses, who owed money to them
as coupon companies do not pay deals’ money in a single installment. Also, customers lost the
value of the coupons that they purchased from these companies just before going out of business
because their coupons were dishonored by the businesses who offered the discounted online
deals in the first place.
Small businesses get burned as TeamBuy.ca and DealFind.com face bankruptcy.
(2014, September 14)
Retrieved from http://www.bnn.ca/News/2014/9/17/Small-businesses-get-burned-asTeamBuyca-and-DealFindcom-face-bankruptcy.aspx
GoSango - Online coupon seller goes out of business. (2012, September)
Retrieved from http://www.cbc.ca/news/canada/british-columbia/online-coupon-seller-goes-outof-business-1.1281962
Summary of Literature Review
The literature review provides reasonable support to all of the research questions. It provides
supporting information on the Negative, positive and mixed impacts of online coupon industry
on today’s businesses in North America.
Businesses seem to have benefitted in general and suffered from this new marketing tool, and
also experienced mixed outcome from online coupon deals, as experienced by some of the
businesses.
The literature review section provide details on each of the web documents and individual
business’s experiences in light of the research questions and provides ground work to the
analysis part of the research that will be conducted in the following sections.
25
Research Design and Data Collection
The design of this research is based on the APRJ-699 textbook (Leedy & Ormrod, 2012, p. 74)
and APRJ-699 course study guide’s recommendations:
A process flow chart below depicts the sequence and approach of this research design:
A. Pick a
research topic
F. Results
F. Conduct
analysis
B. Define
problem and
goal of research
E. Review
literature
G. Recommendations
C. Divide
problem in to
sub problems
D. Identify 5-10
academic
sources
H. Conclusion
(statement of results)
Figure 4: Research Design Process
As part of the research paper planning, goal definition is an essential task that was conducted in
the very beginning of this research. The following goals of this research were achieved:
•
Select a research topic in context of the marketing management branch of business
administration.
Topic was chosen based on the current issues and something that is affecting both
local/small businesses and consumers, but also provides substantial benefits to both.
•
Gather meaningful information that is publicly available (internet, Athabasca
University’s Library) on online discount coupon sites and learn about how it operates,
and its advantages and disadvantages to the local businesses and to individual
consumers.
Keywords and key phrases used for Internet searches: “online coupon based marketing”,
“benefits of online coupon”, “daily online deals”, “impact of online coupon based marketing
on small businesses”, “negative impact online coupon daily deals”, “success story online
deals coupon”
•
Identified problems and key issues of the online discount coupon industry and its impact on
businesses and consumers, and divided them in to sub-problems in order to review each
issue/question in detail and be able to assess the impact of each of those to form
recommendations and draw conclusions.
26
•
Conducted a thorough review of literature collected within a 10-year timeframe in order to
establish an understanding of key issues and benefits of online coupon based marketing.
•
Collected and described results of findings from literatures review and references
•
Completed literature reviews, which included several articles and posts from the Internet
that highlight the characteristics of the online discount coupon world, pros and cons of
online deals, benefits to the small/local businesses in terms of marketing and boosting
revenues and branding/exposure products/services to new clients.
•
Conducted analysis of the material collected and discussed this analysis in the literature
review sections within the perspective of positive and Negative impacts of online discount
coupon based marketing/sales strategies.
•
Developed and documented recommendations.
•
Developed and documented a conclusion.
27
Results
Rapid coupon distribution for masses: Traditional and paper based discount offering was
considered slow and limited in terms of getting timely return from it in the fast-paced business
world of 21st century. The online discount coupon industry has served as a great rapid marketing
tool and whole new sales channel to the businesses around the world. Businesses are now able to
take advantage of online coupon distribution platforms that is able to reach out to millions of
consumers worldwide and thousands of consumers for local deals. Businesses are using online
coupons for various purposes such as to fill unused resources within the organization due to
either off season or slow market conditions; to get rid of obsolete or extra merchandise; to gain
long term marketing exposure or brand building, and/or to rapidly boost sales.
Low cost try out: Online discount coupons are a great way of reaching consumers in a timely
manner to offer discounted services/product for sales or marketing gain. Consumers find online
coupons as a handy shopping tool and a smart way to try out new services and products at a
much lower price than at regular price, as outlined by the business owners in the literature
review.
Online coupons that are issued by coupon companies are valid for a limited period of 6-12
months form the date of issue. After the expiry of the coupon, customers are able to redeem the
value of the coupon in lieu of non-discounted services.
Online deals are now available every day in all major cities and consumers have been taking
advantages on “as and when needed” basis rather than advance purchases, which has slowed
down the pace at which online deals were sold.
Impacting price point: During the initial years, online deals were offered daily and expired
within a day or two, regardless of number of coupons sold. Due to the huge success of online
deals, most deals now remain open for months and even for years in the background after the
first couple of days of the deal when it appears on the main page of the coupon’s hosting web
site. Therefore, consumers can find discount deals on the vast majority of local
merchandise/services anytime and do not have to rush. This makes discount a permanent feature
and sets the very low price point for many industries such as spas, restaurants and entertainment,
in which business owners are struggling to manage their bottom line. Seema (TEAL) explains
that the laser hair removal business has been completely taken over by online deals (see a List of
active Laser Hair Removal Deals at GroupOn.com in Appendix D) and customers are not willing
to pay regular prices because there are other cheaper deals available for most common services
and merchandise. In my opinion, it appears that the online coupon platform has become a whole
new dedicated discounted sales channel, where deal seekers can find highly discounted
services/goods without haggling. For businesses as well, this channel provides a platform to get
rid of obsolete or extra inventory or simply to utilize unused/underutilized capacity such as
physical space, human resources.
Revenue sharing A high percentage of revenue (60-50%) is retained by online coupon
companies which makes a deal very unprofitable for business as outlined by Seema, the owner of
TEAL, and Bob Phibbs of retaildoc.com in his GroupOn business model. This income split
28
model provided a great source of revenue for many coupon companies including GroupOn and
LivingSocial, but businesses were left with the option to take it or leave it.
Expensive marketing: As mentioned by many business owners and analysts, offering deeply
discounted online deals to masses reduces profit margins to almost zero or sometime ends up in
losses as experienced by Posies Café and TEAL in the literature review. Therefore it is found
that the cost of online coupon based marketing for short-term gain is high, and most deals yield
no profit, but rather end up with incurring financial losses to some businesses. That said, many
business owners still see online coupon as a long term marketing tactic and have been successful
using it for brand building and for filling the unused capacity (human resources, extra/obsolete
inventory of merchandise), or just to keep “lights on” during off season time at no profit no loss
basis.
Customer’s loyalty: The majority of = online customers that are attracted by these online deals
are not loyal as they are constantly look for deals and do not want to pay the regular price for the
services/products that they purchased at a discounted price. Online coupon companies are
leveraging this characteristic change in today’s shoppers. It seems that the new online coupon
business model is established and managed by coupon companies to keep the customers coming
back and stay loyal to them and them only.
Low redemption, business’s gain: Online coupon redemption rate is very low as indicated by
savings.com, therefore business owners are often benefited in many deals. For example, if only
50% of customers redeemed their coupon on a deal, the service provider gets to keep the deal’s
money. This gives bit of relief to the business and sometime evens out the deal. Although rules
have changed and coupon value never expires, customers can come back any time in the future
and ask for regularly priced services/products for the value of the coupon.
Customer’s frustration: It is noticed and reported by many business owners (including TEAL)
that when customers realizes that a coupon has expired and they can no longer obtain a
service/product at a discounted value, customers’ behaviour can become disrespectful and
aggressive towards business owners and/or coupon companies, and often results in posting a
negative review complaining about “poor customer services” received from that business.
Businesses owner do not have any other choice but to endure such behaviour, and can simply
remind customers to read what was offered in a deal and what is not included, generally outlined
in the fine print. Ignorance of customers has caused pain for many business owners especially
when coupon customers argue over the phone or in person when there are other customers
listening in on the conversation.
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Analysis
Prior to making an attempt to analyse the collected data, information and results of this research,
it is required to lay out a framework that will established a structured model for the analysis of
this research paper.
Framework of Analysis
This research paper will use the following framework for conducting the analysis of online
discount coupon industry’s impact on businesses. The framework includes data/information
analysis steps is based on Leedy & Ormrod’s (2010) text book (p.141-142) suggested by
Creswell (2007) and Stake (1995).
•
•
•
•
•
•
•
•
Limitations & assumptions
Categorization of impacts
Identification of patterns
Synthesis and generalizations
Trends of Online Discount Coupon Industry
Deep Discounting: Unreal?
Prolonged discount offering
Summary
Limitations & Assumptions
This analysis uses GroupOn as a model company for the online discount industry without any
prejudice to the company or its business in particular. Being one of the leading online coupon
companies (Appendix B) in North America, this research uses GroupOn as an example.
The analysis of this research papers assumes that:
-
All other online coupon companies operate more or less in similar ways as GroupOn
operates and most online deals provide somewhat same outcomes to the businesses
Online coupons are most commonly used by small businesses within North America
The scope of literature review and data analysis in this research is limited to North American
businesses
Information collected from the internet is not verified and it is assumed to be true for this
research
Categorization of business impacts
The literature review draws three types of impacts of online coupon Industry on local businesses:
- Negative impacts
- Positive impacts
- Mixed impacts
30
Negative Impacts of Online Coupon Industry
Publicly available information on the Internet Collins et al (2011) within in the context of the
online discount coupon industry reveals that various challenges and outcomes of online deals
have “Negative impacts” on businesses.
Key Negative impacts in this section:
- Expensive marketing
- Loss of revenues from online deals
- Large influx – challenge to most businesses
- Reputation damage
- Poor service quality during large influx
Phrase “Negative impact” is defined and has been referred throughout this research paper as an
adverse impact on a business’s profitability, branding and/or reputation caused by an online
coupon deal.
As generally assumed and also discussed in the literature review, any type of discount in general
brings new clients or brings back existing clients to the businesses which will help keeping
revenue growing. But it appears that discount deals do not always mean higher revenues and
higher profit. A discount scheme can sometimes impact the profit margins thus it has a direct
impact on the profitability of a business. Online discount coupons appears to be no different than
any other types of discount in terms of financial return or marketing gain, rather those are much
deeper discounts distributed to masses (attributing to higher losses if the deal didn’t go right). As
noticed in literature reviews (savings.com, 2013) these deals reach thousands of subscribers,
therefore they have serious and larger negative impacts in adverse situations as pointed out by
Posies Café owner and Bob Phibbs. Posies Café, NY lost money, ran in to a debt situation and
ended up borrowing $8,000 after running a restaurant deal in which GroupOn had most control
of the deal, such as the deciding the discount level and the number of coupons to be sold (cut off
point), allowing more than one coupon per family etc. Online coupon’s deals are widely used by
small businesses today as an aggressive marketing strategy because it is considered by many
businesses to be a quick and voluminous tool that can boost revenues overnight and/or provide
long term marketing benefits such as reputation building, introducing new location/products etc.
by offering “deep discounts”. But deep discounts have not proven to be profitable in terms of
sales to most businesses, but rather it damages a business’s reputation (iStockAalyst, 2011).
iStockAnalysts (2011) explains that deep discounts upset existing customers because they feel
left out. Often upset customers of coupon deals will write negative comments that can further
damage the reputation of a business if positive reviews fall below the negative reviews (Seema,
2015).
Many businesses have not been able to handle the sudden influx produced by a coupon deal
which could be due to lack of planning or higher than expected coupon sale as mentioned by
iStockAnalyst (2011). Either way the quality of service can be compromised, thus providing an
opportunity to coupon customers to aggravate and write negative reviews, and causing Negative
impacts on a business.
31
Generally it is claimed by companies like GroupOn that coupon deals will bring great numbers
of loyal customer as indicated in “e. About GroupOn” section of this research but it appears to be
untrue based on the experiences of the businesses and authors of many articles that are referred
in this research; Phibbs et al (2010). In my opinion, why would a customer become loyal to
business if he cannot get the same highly discounted deal over and over again, particularly when
a similar deal (service/merchandise) is offered by another business? A customer shows a stack of
online coupon to Seema (TEAL) that were purchased from various coupon sites, explaining why
she would not buy a regular price services from TEAL if she can purchase 6 deals for laser hair
removal treatment from 6 different clinics. “Where is the loyalty? Can GroupOn explain this!”,
Seema (2015) wondered.
Positive Impacts of Online Coupon Industry
Practically, we all know that “one size does not fit all”, similarly online deals can be bad or good
to the businesses depending on timing, discount level, terms and condition, volume sold,
preparedness of a business etc. The positive impact section looks at the positive side of the
online coupon industry and analyse how online deals can provide whole new tools to support
marketing strategy of many businesses today.
Key impacts in this section:
-
Rapid reach to masses
High volume sale, quick revenue boost
Long term brand/image building
New customers, customer rotation
“Keep the lights on”
Better utilization of unused capacity
Inventory rotation
Needless to reiterate, online coupons attract new and existing customers (Sumner, T. 2012, 12
28), and online coupons just made it very simple: simply search, buy and use. There are plenty of
coupons are available every day to purchase. GroupOn alone has hundreds of deals (Chart 08:
Appendix C). The availability of online coupons for a prolonged period enables customers save
hundreds and thousands of dollars. Businesses also benefit from longer-term deals because this
will become a source of recurring sales/revenues without having to work on new deals every few
months.
Technology, in particular the I Internet’s availability and smartphone revolution, seems to be a
great contributor to the growth the online coupon industry which benefitted businesses and
consumers in many different ways. The implementation of mobile web sites, availability of
cellular network, enhanced speed of cellular data and relaxed roaming charges all have
contributed to growth in the volume of coupon sold per year (Chart 08: Appendix C). It truly
demonstrates the popularity and the increasing usage of discount -based services/products,
encouraging average shopper to shop more and more. Businesses can now multiply the revenues
overnight by throwing out a discount deal and bring hundreds of new and existing customers
back to their door. Sumner (2013) says that local online marketing can drastically impact the
32
effectiveness of existing marketing efforts by increasing the number of people who convert off
your website, emails, social media accounts and more.
Another key positive impact of online deals that this research has observed is the volume of the
“new customers”. Regardless of expected loyalty, coupon deals do bring new clients to the door
that can be leveraged by business owners. In many deals it is up to the businesses to prepare to
handle the influx of new customers, learn to patiently deal with the customer and provide the
best possible experience to new customers. Thammineni (2010) cautions businesses to avoid
choosing online coupons if they are not unprepared for large Influxes.
Online deals such as those managed by GroupOn also provide opportunities for customers to
provide their feedback, which builds a great portfolio for businesses that successfully delivered
quality services/products to their coupon client such as maintained by TEAL (Figure 5). For a
new business it could take years to build such a useful feedback chart. Interestingly, these
customer’s ratings are available to the public at GroupOn’s site which provide an extra mileage
to a business in terms of providing positive views to its potential clients.
Figure 5: TEAL’s Customer Satisfaction Chart
Source: https://www.GroupOn.com/biz/ottawa/teal-wellness. 2015
Identification of Patterns
This section attempts to identify patterns that have been observed within online coupon industry.
It is important to understand these patterns that support the analysis section to better analyse how
online coupon industry has been shaped, how it could impact the future of business and has
changed the face of the marketing within North America.
Growing Demand for Online Coupons
Although many Canadian coupon companies were gone out of business in over the past couple
of years such as dealfind.com, teamsave.com, the demand for online discount coupons is
constantly increasing as indicated by savings.com infographic in Appendix A and Chart 08
(Appendix C).
Revenue Generation, Brand Building
Where some business have lost money on deals, there are many businesses which have been
successful registering financial gain as well as gained brand recognition by selling online coupon
(Thammineni, 2010). Four years ago when TEAL moved to its new location, apart from local
33
foot traffic, customers around the city did not notice the presence of this business until it started
to offer online coupons. Online coupons contributed to gaining popularity for many of its new
services that allowed new clients to try out services at a very low price, and helped in spreading
the word around, in addition to help building GroupOn reviews database.
Recurring Net Losses
As noticed, GroupOn (Chart 01 – Appendix C) has been successful in managing revenue growth
year-by-year, despite rising average coupon sales (Chart 2 - Appendix C). Its net profit chart
(Chart 5 – Appendix C) still shows recurring net losses, although losses have been reduced in
2014 when comparing to the losses recorded in the past few years.
Looking ahead at the upbeat trends (consistently narrowing net losses), one can expect to see
(positive) net profit by GroupOn.
Growing Redemption
The most interesting aspect of Appendix A is that the “online coupons have a much higher
redemption rate of 13%, compared to 1% redemption rates from newspaper coupons”. It is also
a general observation by TEAL’s owner Seema that most of its customers now carry a
smartphone and are capable to storing the online discount coupons for a handy redemption,
whenever and wherever needed. In the past, many consumers who were expected to carry a
printed copy of the coupon have missed to redeem the coupon before its expiry date, resulting
the loss of discounted/entire value of the coupon. This problem is now improving as less and less
customers let their coupon expire.
Synthesis and Generalizations
Not a sales generation tool
Based on some part of the literature review, the online coupon industry has been Negative for
some businesses and has been very useful for many other businesses. Many smart and strategic
business owners have turned online deals in to profitable gesture whereas restaurants like Posies
Café incurred losses and lost quite a bit of its reputation as a result of customers’ frustration.
Some businesses such as TEAL have mixed experiences but have been utilizing GroupOn deal
on a regular basis, although there has been no new deal since 2014.
Low Customer Retention Rate
Business owners that are engaged in selling services/products via online coupon agree that the
retention rate of online coupon customer is as low as 3% and most customer are loyal to coupon
companies but not to the service provider or merchant itself. Phibbs et al (2010). TEAL’s owner
acknowledges that their customer retention from GroupOn clients is not merely 5%.
Derek Johnson (a commenter on Phibbs (2010) article) says that “the problem is retention of
those customers once they purchase something at your business. GroupOn says that only 22% of
34
their customers ever come back to a business they redeemed a GroupOn. That's horrible ROI for
that kind of ad spend as you can realize. What I tell local businesses is that they must be setup to
collect mobile phone numbers or emails of those GroupOn customers before the deal starts. This
way they can encourage those customers to come back in the future.” (Phibbs, 2010).
Customer’s Frustration
Online coupon have made many customers happy and they feel proud of being savvy shoppers,
however at the same time several customers are found frustrated especially when they discover
their coupon has expired or they forgot to read fine print and service/product is not the same as
they expected (Phibbs, 2010). As a result a number of negative reviews are posted online which
are irreversible and often damage the reputation of the business regardless of the quality of their
services.
Deep Discounting
It appears from the success of some individual online coupon companies that businesses are
either confused about their online coupon based marketing, and are trapped in the “online
coupon” war or are getting too desperate to “get big sales too quickly”, all perhaps in hopes to
give a quick jump to the sales. Although online coupons are also considered a good marketing
tool by some analysts, this research highlights and analyzes the challenges that small businesses
face today in offering “uncomfortable” deep and extra-large discounts such as 80-89% discount
offered by TEAL in 2012-2013.
Prolong Discount Offering
During the initial phase of online discount coupon aggression, the deals were only published for
a day or two but for past few years deals run in the background forever or until it reaches a
maximum point that is often determined by the vendor. This approach makes online discounts a
permanent feature, with a large number of similar businesses offering 50-90% off. This trend
could also set a very low price point for each industry and may support in fostering a shopping
culture in which consumers only look for discounted services or postpone purchases until a
discount becomes available for a non-urgent service/merchandise. As a result of “omnipresent
discount”, TEAL noticed that buyers are disappearing from the regular priced market and do not
turn back to a non-discounted service.
Today, online discount coupons are easily accessible and are available on virtually everything
within any North American city, which does not sound healthy from a business perspective in
my opinion, although it provides a huge benefit for consumers by making coupons available
anytime anywhere.
35
Recommendations
a. This research showed that some companies have been successful in generating leads and
significant sales using online coupon strategy, therefore it is recommended that businesses
design their own online coupon based marketing strategy that fits within in their business
model and meets their objective. For example, the level of discount should be determined by
the business owners and not be imposed by the coupon companies. Other general terms and
conditions should also be aligned with the business’s own marketing strategy rather than
adopting the standard terms and fine prints offered/pushed by online coupon companies. This
approach will empower local businesses to formulate and manage their own customized
marketing strategy. Businesses should be cognisant of online coupon companies that target to
maximize their own margin and maximize the sale of coupons by offering the highest
possible discount.
b. Businesses that are interested in marketing their services through online coupons should look
out to engage with companies such as http://www.coupontank.com which is based on the
SaaS (Software as a Service) concept. Local business can design, create their own digital
coupon and publish in minutes to deliver coupons through various social media sites.
Offering GroupOn types of discount to existing and new customer directly through
business’s own web site, social media and other media would be a great saving for small
businesses in which they do not have to share the revenue with a coupon company.
c. It is recommended that business associations get together to create some standard policies,
and terms and conditions for the online coupon world to which online coupon industry will
abide by, providing better control and management of local businesses how a deal should
run. This approach will also provide the ability to use flexible levels of discount that will fit
within the marketing strategies of an individual business and not that of an online coupon
company. This will also help in establishing long term relations between businesses and
online coupon companies, which will ultimately help sustain online coupon companies.
d. GroupOn and other coupon companies should also reconsider not leaving a deal open for a
prolonged period. Daily deals (limited period) created a buzz and energy among consumers
in early days of online coupon industry growth which is now vanished. Permanent discount
deals create a world (what?) discounted services/merchandise. It is harmful to other
businesses that would not participate in deep discount based marketing. Businesses offering
long term discount on an individual service/products can be considered low quality or slow
moving and will not be able to sell at full price in future. Businesses need to consider their
marketing strategy prior to signing up a long term online deal. It can be harmful to the image
of brand.
e. GroupOn and other coupon companies that are engaged in selling online deals should stop
publishing “Fine Print” section. All terms and condition specially “first time clients only”
and expiry date and other key limitation should be published in bold letters. In fact, key
features and limitation should be popped up in bold/bigger letters in separate window for
coupon buyers to review and accept prior to the payment. This change can possibly minimize
or reduce confusion created among consumers and service provider and ignite frustration.
36
The term fine print is often considered a deliberate attempt to hide vital information about a
services/product that is being purchased. Publishing “fine print” in “bold print “will reduce
number of issues that exist in today coupon industry.
f. Businesses should refrain from offering straight discount when distributing coupon via online
medium. Discounts can be best when they are combined with a qualifying purchase such as
“Buy one and get 50% off on next item”. This will help businesses in securing higher
revenues and be able to bring customers that are not after discount only but are also looking
for quality products and are willing to pay fair value. This strategy will also help retaining
higher percentage of loyal clients.
37
Conclusion
Online coupons are now part of everyday life, especially for deal surfers. Online coupons are a
great way of reaching large groups of consumers particularly when introducing new products or
services, or opening a new business location. Many businesses have taken advantage of this new
marketing tool as part of their marketing strategy and have been successful bringing hundreds
and thousands of new clients to their door, and increased revenues in the short and long term. On
other hand, there are businesses that have lost money on deals that lead them in to debts. A
balance is yet to strike in which coupon companies, businesses and consumers all benefit
equally.
GroupOn and other online coupon companies have been successful in maintaining large
databases of subscribers by offering deep discounts, and have therefore have been successful
selling billions of coupons every year and passing millions of dollar saving to consumers.
Businesses around the world have been taking advantage of such a large subscriber’s base and
will continue to cherish the online coupon based rapid marketing tool in years to come.
Many businesses feel that this is very expensive marketing tool and deals do not make money.
Businesses need to review their marketing and sales need and choose appropriate marketing tool
that will provide desired outcome. It is also realized that online coupon or discount in general are
not for every business/service/product. It is the business’s responsibility to choose effective
marketing tools and not hop on the bandwagon. Depending on the product value/quality or brand
reputation, appropriate discount levels should be determined by the businesses for which online
coupon many not be necessary. If businesses do not want to sell to masses and are not desperate
to sell in large volumes, alternate marketing tools should be adopted instead of getting burned by
inappropriate online deals that can cause serious financial losses.
Deep discounts and higher income splits between businesses and coupon companies seem to be
the main reason for losses in deals which needs to be adjusted by both parties to a point where
both benefit from online deals. Some corrections are required in deep discount strategies adopted
by coupon companies before it is too late, and businesses pull out of the online coupon industry
that may cause further losses such as realized by out of business dealfind.com and
teamsave.com.
It also observed that many deals such as those offered through GroupOn are listed for over a
year. This tactics makes businesses worrisome because it set the price point of a service or
product to very low which is hard for other businesses to compete, creating unhealthy
competition. Deep discount deals should be offered within a limited time to benefit everyone.
This tactics is not helping small businesses to complete in a healthy environment rather it has
created a kind of do-or-die situation for many businesses such as the spa industry, in which
hundreds of deals are readily available.
Online coupons based marketing seems to provide quicker results and provide a platform for
small businesses to reach larger audience. It is an excellent marketing tool for businesses to
introduce new services, products, location change etc., however can be altered to better benefit
both parties participating in their deals.
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savings.com. (2013). Infographic: The Coupon Industry. Retrieved from
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Appendix A – Infographic: The Coupon Industry
(2015, August 1) Retrieved fromhttp://www.savings.com/blog/post/infographic-the-couponindustry.html
Part 1
Part 2
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Appendix B – “Top 15 Most Popular Coupon Websites”
(2015, August) Retrieved from http://www.ebizmba.com/articles/coupon-websites
Following are the top 15 Most Popular Coupon Sites as derived from our eBizMBA Rank which
is a continually updated average of each website's Alexa Global Traffic Rank, and U.S. Traffic
Rank from both Compete and Quantcast."*#*" Denotes an estimate for sites with limited data.
1 | GroupOn
261 - eBizMBA Rank | 30,000,000 - Estimated Unique
Monthly Visitors | 98 - Compete Rank | *292* - Quantcast
Rank | 393 - Alexa Rank
2 | RetailMeNot
319 - eBizMBA Rank | 24,000,000 - Estimated Unique
Monthly Visitors | 239 - Compete Rank | 301 - Quantcast
Rank | 418 - Alexa Rank
3 | Zulily
556 - eBizMBA Rank | 20,000,000 - Estimated Unique
Monthly Visitors | 123 - Compete Rank | 641 - Quantcast
Rank | 904 - Alexa Rank
4 | Coupons
5 | ShopAtHome
706 - eBizMBA Rank | 18,250,000 - Estimated Unique
Monthly Visitors | 160 - Compete Rank | 1,280 - Quantcast
Rank | 678 - Alexa Rank
763 - eBizMBA Rank | 18,000,000 - Estimated Unique
Monthly Visitors | 104 - Compete
42
6 | SlickDeals
7 | LivingSocial
781 - eBizMBA Rank | 17,000,000 - Estimated Unique
Monthly Visitors | 889 - Compete Rank | NA - Quantcast
Rank | 673 - Alexa Rank | Last Updated: August 1, 2015.
835 - eBizMBA Rank | 12,000,000 - Estimated Unique
Monthly Visitors | 202 - Compete Rank | NA - Quantcast
Rank | 1,468 - Alexa Rank | Last Updated: August 1, 2015.
8 | Woot
1,419 - eBizMBA Rank | 10,000,000 - Estimated Unique
Monthly Visitors | 1,606 - Compete Rank | *1,500* Quantcast Rank | 1,152 - Alexa Rank | Last Updated: August
1, 2015.
9 | eBates
1,851 - eBizMBA Rank | 7,500,000 - Estimated Unique
Monthly Visitors | 922 - Compete Rank | 2,382 - Quantcast
Rank | 2,250 - Alexa Rank | Last Updated: August 1, 2015.
10 | FatWallet
2,058 - eBizMBA Rank | 6,000,000 - Estimated Unique
Monthly Visitors | 2,653 - Compete Rank | *2,143* Quantcast Rank | 1,379 - Alexa Rank | Last Updated: August
1, 2015.
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11 | Gilt
2,184 - eBizMBA Rank | 5,900,000 - Estimated Unique
Monthly Visitors | 1,671 - Compete Rank | 2,034 - Quantcast
Rank | 2,847 - Alexa Rank | Last Updated: August 1, 2015.
12 | DealsPlus
2,918 - eBizMBA Rank | 5,500,000 - Estimated Unique
Monthly Visitors | 1,678 - Compete Rank | 2,549 - Quantcast
Rank | 4,527 - Alexa Rank | Last Updated: August 1, 2015.
13 | BradsDeals
3,074 - eBizMBA Rank | 5,000,000 - Estimated Unique
Monthly Visitors | 1,815 - Compete Rank | 1,884 - Quantcast
Rank | 5,522 - Alexa Rank | Last Updated: August 1, 2015.
14 | Savings
15 | DealCatcher
4,064 - eBizMBA Rank | 4,500,000 - Estimated Unique
Monthly Visitors | 1,897 - Compete Rank | NA - Quantcast
Rank | 6,231 - Alexa Rank | Last Updated: August 1, 2015.
4,240 - eBizMBA Rank | 3,500,000 - Estimated Unique
Monthly Visitors | 2,508 - Compete Rank | 2,884 - Quantcast
Rank | 7,327 - Alexa Rank | Last Updated: August 1, 2015.
44
Appendix C – GroupOn’s Performance Charts
This appendix includes some charts that do not belong to GroupOn, such as Chart 2.
Chart 1: Income Statement 2010-2014
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Chart 2: Average price per deal on coupon website in U.S. Q1 2011 – Q4 2011
Retrieved from http://www.statista.com/statistics/267142/average-price-per-deal-on-coupon-websites-in-the-us/
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Chart 3: GroupOn’s revenue in North America from 2009-2014
Retrieved from http://www.statista.com/statistics/221878/annual-GroupOn-revenue-in-north-america
47
Chart 4: Global revenue of GroupOn from 2009 to 2014
Retrieved from http://www.statista.com/statistics/273251/GroupOns-annual-global-revenue
48
Chart 5: Annual net loss of GroupOn from 2009 to 2014
Retrieved from http://www.statista.com/statistics/273252/GroupOn-annual-net-income-and-loss/
49
Chart 6: Number of Unique U.S. visitors of GroupOn.com from July 2011 to July 2015
Retrieved from http://www.statista.com/statistics/241984/range-of-GroupOncom-based-on-unique-visitors
50
Chart 7: Number of GroupOn’s active customers from Q2 2009 to Q2 2015
Retrieved from http://www.statista.com/statistics/273245/cumulative-active-customers-of-GroupOn
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Chart 8: Number of deals sold by GroupOn from Q2 2009 to Q3 2011
Retrieved from http://www.statista.com/statistics/273247/number-of-deals-sold-by-GroupOn-between-2009-and2011/
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Appendix D – List of active laser hair removal deals at GroupOn.com
Google results for 'laser hair removal' using a compute located
in the city of Ottawa, ON Canada:
(2015, September 16) Retrieved from
https://www.GroupOn.com/browse/ottawa?lat=45.421528&lng=75.69719&administrative_area=ON&locality=Ottawa&address=Ottawa%2C+ON&query=laser+
hair+removal&locale=en_US
1. Up to 92% Off Laser Hair Removal
Esthetics By Rosa
Licensed professional employs laser to target follicles, thereby reducing the growth of
unwanted hair
Centertown - Downtown (0.4 miles)
C$650 C$99
2. Up to 60% Off Laser Hair Removal
Dr. Laser Ottawa
Ottawa (9.8 miles)
C$250 C$99
3. Up to 94% Off Laser Hair Removal
Above & Beyond Medi, Wellness, and Beauty Spa
Multiple Locations (30.7 miles)
C$3,576 C$199
4. Up to 89% Off Laser Hair Removal at La Viva Salon and Spa
La Viva Salon and Spa
Ottawa (4.5 miles)
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C$1,782 C$279
5. Up to 94% Off Laser Hair Removal
Above & Beyond Medi, Wellness and Beauty Spa
Multiple Locations (30.7 miles)
C$3,576 C$199
6. Up to 74% Off Evropa Holistic Studio Spa
Evropa Holistic Studio Spa
(0.7 miles)
C$360 C$99
7. Up to 93% Off Laser Hair Removal
Sirena's Day Spa
Billings Bridge Plaza (2.6 miles)
C$1,800 C$199
8. Up to 83% Off Laser Hair-Removal
H&W Medical Spa
(3.6 miles)
C$1,200 C$199
9. Up to 72% Off Laser Hair-Removal
HealthMedica Canada
Meadowlands - Merivale (5.2 miles)
Sale Ends 9/17
C$445.50 C$135
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10. Up to 84% Off Laser Hair Removal
Ottawa Beauty Spa
Ottawa Riverside South (9.9 miles)
C$297 C$49
11. Up to 75% Off Laser Hair Removal at Estasilk Laser Hair...
Estasilk Laser Hair removal & Esthetics
Ottawa (3.5 miles)
C$240 C$119
12. Up to 80% Off Laser Hair Removal
Accent Image & Laser Center
Kanata (12.4 miles)
C$504 C$99
13. Up to 68% Off Laser Hair Removal
Centre de Santé et Beauté d'Aylmer
Gatineau (7.5 miles)
C$354 C$119
14. Up to 75% Off Laser Hair Removal in Gatineau
Aqua Spa
Gatineau (3.5 miles)
C$414 C$129
15. 50% Off One Brazilian Wax at Princess W
Princess W
Ottawa (2.5 miles)
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C$40 C$20
16. Up to 52% Off at Gus Hair Design and Spa
Gus Hair Design and Spa
(3.8 miles)
C$48 C$24
17. Up to 77% Off i-Lipo Treatments at St. Mary Health Centre
St. Mary Health Centre
Avalon - Notting Gate - Fallingbrook - Gardenway... (12.3 miles)
C$400 C$99