Groupon’s Daily Discount Drivers
By Tom Ryan
Groupon.com is a growing daily-deal website built around “collective buying
power.” The twist versus other coupon websites is that a certain number
of people need to sign up for the steep discount or nobody gets it, encouraging
consumers to share with friends.
In practice, Groupon emails “deals” — typically 50 percent
off local restaurants, retailers, spas, etc. — to its members every day.
Consumers get a short time to agree to purchase the coupon online. If enough
members sign up for the deal, the consumer is charged and receives an e-mail
with a link to view and print a coupon, called a ‘groupon.’ Groupon keeps
half the revenue that consumers pay online, leaving the restaurant with about
For businesses, the word-of-mouth nature of groupon.com helps quickly reach
new consumers who can be turned into repeat customers.
“When you see the deal, in order to get it you have to share it with your
friends on Facebook, your friends on Twitter, forward it to people via email,” Andrew
Mason, Groupon, founder & CEO, tells todayshfv.com. “It gives
the merchant what they want, which is a huge number of new customers, and
of course the customer gets what they want, which is a really great price
on something cool to do.”
Still, Groupon admits that the initial groupon doesn’t yield much. For
instance, restaurants in Minneapolis offered a $50 dinner for $25. After Groupon’s
cut, each restaurant received $12.50 per $50 meal.
“You may barely break even on Groupon customers the first time,” David
Rangel, Groupon’s director of merchant services, told the Minneapolis Star
Tribune. “But if you bring them back once or twice, you’ll get
a terrific return.”
One critic was Lenny Russo, chef and co-owner of Heartland Restaurant in St.
Paul, who believes such deals only bring in short-term revenue and pushes down
“They know the restaurant industry is on the ropes, and they are offering
people a quick fix,” said Mr. Russo. “They are preying on people’s
Questions: What do you think of groupon.com and other daily-deal traffic-driving
websites? What are the pros and cons of retailers using such websites?
‘Net discounts gain loyal diners? – Minneapolis Star
- Fun online tools for coupons to help you save money – todaysthv.com
- How groupons work – Minneapolis Star Tribune