The Real Deal: A Critical View of Groupon

Millions of customers flock to the online discount provider each day hunting for that amazing find.  Price cuts from 50-90% are not uncommon, and the public is aware.  In just two short years, the company has grown to become a giant, often benefiting more from their endorsements than the advertising companies themselves.  This calls into question whether or not Groupon is a viable business model, or beyond that, a sustainable one.  I must say that the company has been successful in fulfilling the basic role of the business, maximizing profits.  However, while it seems that Groupon has been incredibly successful in growing their company and profits these past two years, their ability to continue this is doubtful for two major reasons: competition and dissatisfaction.

First, seeing the growth of this tremendous business opportunity, many competitors have joined the market.  LivingSocial as well as many others have begun to implement similar concepts as Groupon with continually increasing success.  The population of online deal hunters is unlikely to grow at a rate to match the rise of this new competition. 

Second, dissatisfaction among advertisers of Groupon is overwhelming.  As can be seen in this article, over forty percent of companies that have used the Groupon service do not choose to return to the online deal distributor.  They have found that between the remarkable price cuts and the large commision that Groupon charges, the offers prove to be less than profitable to the companies.  Beyond this, many companies have found that the service does not yield return customers, the service's main appeal.  For this reason, returning advertisers are limited, thus limiting Groupon's supply of deals.  As Groupon begins to fight with its rising competition over the lessened number of advertisers, its power may be minimized. 

Therefore, I feel that Groupon's strength maybe diminishing.  For this reason, I believe that Groupon should sell to Google or partner with the media giant while the company is still a dominating force.  The $5-6 billion reportedly offered by Google while Amazon offered a mere $175 million for LivingSocial displays the brand's current market position.  While the company is clearly far ahead of its competition and may possibly have a window of opportunity to sell, the company clearly faces a downward struggle if it seeks to continue at the top of the game despite resistance from competition and advertisers.

Where's the Catch? The Costs of Social Media Marketing

My parents always instructed that nothing was free, and their wisdom came to fruition over and over again throughout my life.  I remember coming home from elementary school with the "best basketball in the whole school."  How had I obtained it?  I traded my brand-new ball for it.  Little did my young self know that I could shoot the "best" ball better just because it was worn out and consequently lighter.  While that scenario failed to traumatize me, it taught a good lesson...if you want something, you probably have to sacrifice for it and the costs may not always be apparent. 

Marketing on social networking sites has proven to be an incredible source of publicity and company-consumer relationships.  With so much to be gained, the cost is called into question.  In the case of marketing on social networking sites, the cost is not monetary.  However, there is most definitely a cost involved.  From what I have gathered, the greatest challenges incurred by marketers in this environment are the costs of time and vulnerability.  Both the Brooger Business Blog and another article on social networking marketing reinforce this stance. 

Let us first assume, as it is quite a small assumption, that the advantages of this form of marketing are too great to be ignored; we also assume that the organization views publicity and market development as a priority.  If this is true, we must look toward the challenges that small businesses are facing in terms of marketing on sites such as Facebook and Twitter.  The sites provide "free" publicity; however, failure to actively maintain and nurture the pages can lead to both lack of consumer activity and even negative activity.  The first of the two great challenges we will address today is the cost of time.  Maintaining these pages requires constant supervision as well as company involvement.  Therefore, the sites must be an integral part of the marketing plan and consistent with the company's marketing efforts.  In addition, it is requisite that the marketing staff prioritizes the sites as they would any other form of public relations.  This is largely brand image and must be handled as such.  Prior to initiating the utilization of the sites, the purpose of the usage must be highlighted.  Is this marketing strategy supposed to increase consumer base, handle customer relations, or both?  The extent to which the page will be used must be highlighted and the time necessary for such involvement should be estimated by an experienced user and planned for prior to initiation. 

Secondly, the cost of vulnerability is a tremendous obstacle faced by small businesses on the net.  While the ability to "friend" customers and follow their every move exists, companies must retain the focus of the initial marketing strategy.  Failure to maintain such focus will also increase the aforementioned cost of time.  If the purpose was to handle customer relations, customer activity should be stimulated by frequent page development and appreciation of consumer involvement.  However, no personal interaction is necessary.  Social networking marketing is an extension of the company.  It is a reflection of the company to all who see the efforts.  For this reason, the company should be represented on the net in a manner that is coherent with the nature of the company.  If the organization values a personal touch, the online face of the organization should remain as personal as it is face to face.

Overall, two of the main challenges faced by small businesses with regards to marketing on social networking sites are the costs of time and vulnerability.  However, strict adherence to a previously developed marketing plan and dedication to the culture of the organization can greatly alleviate these pressures.  Lastly, the efficacy of a social networking marketing effort is greatly dependent on the investment placed therein.  The potential are truly costly, but the costs can be managed in an efficient way if predicted and planned for.