Groupon, a recipe for disaster?

It appears that the cause of Groupon’s overall struggle is its inadequate executive management team, who has led the company with little focus and direction to make irrational decisions. Primarily, Groupon is recognized as a way that consumers may obtain promotions. The company had already conducted research showing that the largest variety of businesses using the groupon feature were services, an area in which deals for products were uncommon. Additionally, for services, a Groupon success was a curse for regular patrons as restaurants easily became understaffed and under stocked. Moreover, the firm’s customer base tended to be young, well-educated consumers that did not only value money saved, but also its convenience and variety.

Furthermore, Groupon prides itself on the ability to supply new customers to its vendors. Although this is the case, the company’s marketing strategy had no direction and frequently backfired. Groupon initially utilized a word-of-mouth plan. It then created a program for bloggers and websites to earn commission on referred traffic. In addition, the firm used Facebook and Twitter to create awareness as well as implemented odd contests to promote the brand. Perhaps what was more troubling was the use of the company’s paid advertising campaign with a Super Bowl ad, communicating an offensive message to consumers.

In order to ensure Groupon’s success of its vendors, consumers need to use the voucher. Many buyers bought daily deals and found they did not have time to use them, lowering the value of the purchase t both the customer and merchant. An estimated 30% of vouchers were not redeemed and although many state law stipulations implied the coupons could be used after expiration, Groupon did not communicate this to consumers. Furthermore, this led to mixed vendor reviews proclaiming that many Groupon customers did not follow rules, using multiple coupons for single transactions and leaving non-existent tips. To add to the confusion, Groupon was expanding rapidly at a time when vendors and consumers expressed mixed emotions about the product offerings in the original U.S. cities.

What is more puzzling is the company’s inability to adequately train and integrate new hires, a situation that contributed to service failures, resulting in the need to refund or credit customers. Furthermore, due to the rapidly growing success of competitors, Groupon was developing a variety of innovations, such as, Groupon Stores and Groupon Now. In addition to all these complications, Groupon’s pricing model was greatly flawed as some merchants bargained for increased share of revenues.

The company must specifically define and carefully implement an effective business strategy to attract and retain customers and vendors for its U.S. cities before even considering foreign territories. One way in which the company may turn itself around is by focusing on offering only services close to full price with an unlimited time to redeem the offer. This would allow consumers additional time to use the service, increasing convenience as well as bringing repeat and new customers to a venue over a longer period of time. Additionally, this option will not only increase the opportunity for additional spending and conversion from discount buyers to regular customers, but will also even out redemptions, enabling merchants to sufficiently service regular patrons. The company needs to focus its efforts on one strategy, not many at one time. As the company is successful, it may expand its service offerings and territories. 

The future of Netflix- Qwickster?

The decision for Netflix to divide its streaming service from its DVD service, Qwickster, is one that seems necessary for the company to differentiate product offerings as the future of the DVD business dwindles and focuses on live streaming. Besides the obvious advantages for Netflix to switch from DVD to streaming live content, it is vital for future corporate growth. This situation appeared ultimately inevitable and largely stemmed from Netflix’s ill-perceived strategy of recently increased prices, offering the two products separately with no discount for combining the two, in an effort to encourage online viewing.

In order for Netflix to dominate the media industry, it must remain innovative, as competitors, such as Disney Co. and Dish Network Corp., are heavily developing streaming services. A main way for the company to compete and ensure an ultimately successful move into the online market is by developing its live streaming business separately from the DVD business. Furthermore, this strategy could potentially lengthen the life of its DVD operation, as management can concentrate on specific needs for each market. The likely issue that will develop for Netflix, in this complex process, is the inherent need to communicate the value of this decision to its devoted customer base in order to retain consumers and avoid a negative network effect.       

                                                                                                     

Netflix must create value for customers by developing and conveying a large online content base that is depicts convenience. Currently, only 20,000 titles are offered online compared to over 100,000 DVD titles. The firm could partner with licensors to lower costs by offering invaluable data collected on customer’s consumer behavior. In addition, the company must utilize its recommendation system in addition to promoting older, less distinguished films to further lower costs and to “lock-in” customers. Another option is to maintain the current pricing system for online viewing or even to slightly lower it for loyal consumers, guaranteeing a high retention rate and a switch to the new feature. Ultimately, customer acquisition costs are extremely high for Netflix. Therefore, the company must devise a well thought-out plan, not only to keep customers, but also to encourage the utilization of the online feature, as it concentrates on the future of the media industry, the video-on-demand business.

What is the best way for Yelp to monetize generated reviews/content in the future?

Yelp was founded by two former employees of PayPal who noticed a lack of online information of consumer experiences with local businesses. Although the site’s popularity grew, providing millions of reviews of local establishments to both individual consumers and businesses, the company was unprofitable with an estimated $2- $6 million in revenues due to poor monetization skills amidst a recent decline in advertising spending. Due to the large success of building a community of reviewers, Yelp should focus its attention on developing its “Elite Squad” program to enhance trustworthy, reliable, and entertaining reviews, allowing the firm to update its monetization model by charging advertising and data fees to companies that seek invaluable consumer assessments of its venue and competitors.                                   

By 2008, Yelp had exceeded 20 million readers, many of whom were not contributing to the site. In order to capitalize on its competitive advantage, the firm must attract and maintain quality reviewers by rewarding the “Elite Squad,” therefore attracting loyal consumers and increasing its consumer base. This will entice businesses to take interest in the information learned from the site, increasing the willingness of companies to pay a premium to obtain invaluable information that will successfully assist in creating a competitive edge in its chosen neighborhood or industry. Additionally, if Yelp establishes itself as a reliable information source, companies will be willing to pay for advertising to target profitable readers, further increasing the profitability of Yelp. 

In doing so, Yelp must create pricing versions tailored to meet the unique needs of businesses by offering both high-quality versions of the site and subsequently lower quality versions. Furthermore, the firm plans to build large sales forces on both the east and west coasts. Its ability to form effective sales teams to support premium customers is crucial to increase profitability and enhance customer loyalty. Yelp clearly has the opportunity and skills to obtain substantial revenues and become a leading online information provider. Although it will be a challenge, the company must focus on its competitive advantage, quality information, and devise an effective business model to attract and maintain profitable customers.

Why did Webvan fail so spectacularly?

The failure of Webvan was largely due to the absence of an articulate, functioning business model and management’s inability to successfully change the model and redefine the business as deemed necessary. From inception, the company’s rationale of creating, delivering, and capturing value was incomplete, lacked focus, and was insufficiently researched. Webvan’s plan to primarily establish a large, critical mass by offering groceries online in hopes of eventual expansion into other categories on a global level as well as its mission “to deliver the last mile of e-commerce,” lacked the acknowledgment and action of vital steps necessary to achieve these goals in a new and evolving market.

The company immediately focused its attention on developing a web store, constructing distribution centers and creating information systems, continually ignoring the need to implement a marketing strategy to successfully attract profitable customers to an unfamiliar market as well as create awareness to promote the business. In addition, Webvan never defined profitable target customer segments and overlooked the urgency to determine consumer demand and the ability to meet customer needs. Webvan had the opportunity to be a highly successful organization, but the lack of pertinent research used to define its value proposition, target market, and most profitable revenue streams while repeatedly implementing ineffective cost-saving initiatives and compounding operations forced the company to abruptly close its doors.