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.