In recent weeks, I've read several editorials writing off Groupon's ability to drive real value for retailers. To me, the value proposition is simple: expose businesses to an audience who may not have become customers otherwise. To create this value, Groupon has taken advantage of proven direct marketing tactics and leveraged the growth of social media in unique and impactful ways.
As a direct marketer, I'm impressed by the creative ways Groupon has enhanced the basic concept of discounting. Each day's deal requires a certain number of buyers - if not enough people sign up, the deal doesn't happen. By associating a counter with each offer, you can see how many others have taken advantage of the deal. The deal also includes a timer that shows how much longer the discount will be available. This practice effectively creates a sense of urgency because once the daily deal is over, you've missed out.
The way Groupon has capitalized on social spaces such as Facebook and Twitter has also contributed to its success. Each deal can easily be passed along to your entire social network. If you have a friend who may be interested, or a deal you want that doesn't have enough buyers, simply invite your Facebook friends and Twitter followers to get the deal. With 13 million subscribers, this practice has given Groupon tremendous potential reach due to virtual word of mouth alone. It's a simple tactic that's been proven effective by the sale of over 11 million Groupons, saving deal-seekers around $3.5 million.
By offering a discount, consumers will visit businesses they have never tried or, in some cases, even knew existed. By providing a great experience to the Groupon buyers, retailers may just find a new group of loyal customers. It's a value proposition that can - and does - work. Let's face it: this wouldn't be the fastest growing web company of all time (according to Forbes Magazine) if retailers supporting the organization weren't seeing results.