Groupon gets commissions from the product and service providers. The providers are able to promote their products and gain benefits from the large quantity of orders. It is a model that can satisfy all the people: the customers, product sellers and the Groupon company. However, this business model is easy to imitate. It does not required high technology or unique skills to set up the business. Many internet companies, such as Google and Amazon, have stepped in this market. They have established similar business services.
Those competitors are attempting to grab market share from the leader, Groupon. For example, Google has set up its own online group buying websites, Google offer, and released more attractive offers by lowering the price than the similar products or services on Groupon. Therefore, customers have more choices of online group buying providers. Customers are able to find better products from Groupon’s competitors. With intensive competition, Groupon needs to consider how to maintain its market share and how to improve its services to attract more return customers in the short run.
In the long run, the company needs to think about how to improve the business model to make it more competitive. Alternatives Groupon could start a customer loyalty program to cultivate a high loyalty customer group. The company could build an award system for the program. The customers could earn certain points when they purchase the products. If they have achieved enough points, they could redeem those points to purchase new deals. The customers would spend more using this incentive because the customers could get more benefit if they shop more.
The company could encourage its customer to keep shopping on its website and maintain the market share. But the reward system is easy to copy. Finally, the company has to choose whether to give more rewards than its competitors. Groupon could lose profits by giving away more benefits to the customers. Groupon could differentiate its service by sending customized offers. The company could require its customers to fill out preference information when they sign up for the website. The customers could get the customized deals regularly by emails.
This strategy could periodically provide the customers with discounted services and products that they are interested in. But the process for the personal information may make the customers uncomfortable with it. Plan of action The company should choose the second alternative. By collecting the personal information, the company is able to analysis its customers’ needs in a more precise way. The company can build huge customer data base to find right products for the customers. The company could give special discount if the customer s can submit their preference information.