I’m having a tough time with this whole Groupon phenomenon. Every time someone mentions them as a great example of a new business, it makes me nuts. Now, I have respect for anyone who can launch and idea into a business, but I feel like the service is missing a bigger point. The idea of group buying isn’t new; consumers have been consolidating their buying power for better deals for a long time, but Groupon isn’t a function of consumer buying power. It’s an exercise in heavy-handed, value-driven marketing that put’s Groupon in the center of the universe, not the consumer. Harsh words I know, let me explain.
The way the service works is that businesses contact Groupon about a partnership and together they create a bargain that will run in over a period of time – could be a one day blitz, could be a longer-term cupon. (This deal includes Groupon earning around 50% of the coupon price for its service.) Since the business is deciding what to push and Groupon serves as the delivery channel, that’s not actually consumer buying power. It’s not driven by consumer demand, the Groupon community isn’t polling it’s users to figure out where they would like deal; Groupon makes the call. Groupon’s main customer is the business offering the bargain, the Groupon community is a means to an end. The service isn’t even a platform that allows consumers to connect with each other and organize for buying power – it’s a pop-up, loss-leader service that businesses can rent by the day to drive consumers through their doors.
So, say you’re a small business, Groupon sounds like a pretty great idea, right? All of a sudden you can help people learn about your services and it’s cheaper than buying expensive advertising, right? Well, maybe. Groupon reports that about 22% of the people attracted by their make return purchases. Growth can be good, but what about the customer experience?
Let’s say you just opened an ice cream store and the first time a new customer walks into your shop it’s jammed with people looking for a $1 ice cream cone (that usually costs $3). It’s hectic, everyone’s very transactional because they came for the deal, and it’s very hard to engage with the ice cream store because all of the electricity in the air. People are pushy, lines are long. The extra sales are great for the buiness, but you aren’t building any new relationships, you’re just ringing up (discounted) sales. It seems like if you want that atmosphere maybe you should open Crazy Eddie’s Bargain Basement, buy lots of sales advertising and run that game every day. (The WSJ ran a story yesterday with some small business owners with similar sentiments.)
I’m frustrated because I know the experience could be designed with the end customer in mind. Groupon could connect people, look for shared interests, and source a mix of deals tailored for their community. Groupon could encourage people to share reviews that would help the businesses they serve so they can improve (right now, all discussions are about ‘the deal’). Groupon could really would be help businesses grow on their own merits. I feel like Groupon could be about more than just blatant consumerism. I’m sure it will be a big business, I think it’s a big idea, I just wish it had a little higher purpose.