
Groupon Value Proposition
Recently on my Social Media Facebook page (follow Contiguity.co here) a follower posted a question about the value of Groupon to the consumer. I did a little research to see what the value proposition Groupon poses to the client as well as the inherent value they provide to the business. The end result for the consumer and the end result for the business are diametrically opposed, or are they? Since I have finished up my MBA Financial Management Module at Robert Kennedy College, the administrators for the University of Cumbria in England, I will do an assessment of the business proposition.
First, we need to understand Groupon’s business plan. The plan is fairly simple. The Value proposition from Groupon is to contract with a local business to offer a discounted deal, advertise the offer to the public, collect the money from the public, cut a check to the business for their portion and let business begin. The offering to the public is a limited time offering with an expiration date.
Customer Perspective: The perceived return on investment from the client is high. Groupon expects each business to offer a 50% off deal to the consumer who will purchase the certificate. The value of the money spent provides a perceived high Net Present Value. I have actually purchased one such certificate to a local restaurant, I will tell you my perspective later.
Business Perspective: The 50% off Groupon encourages the business to sponsor is only a small part of the sacrifice each business makes to contract with Groupon. Of the remaining revenue of 50%, the business only receives 50% of the revenue. Example if the certificate’s face value is $100, the certificate is sold to the customer at $50. Groupon receives $25 for their services and the business receives $25 of revenue for a sacrifice of $100. A financial loss in this situation is completely inevitable, the hope is for the loss to remain isolated and the customer will thoroughly enjoy the services and will return as loyal customers paying full price.
Results: The financial results
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