Building a Better Groupon | Hacker News Reader

Building a Better Groupon

zacharyadamcohen.com

31 pointsdanilocampos19 comments

These critiques seem to fundamentally misunderstand the point of Groupon. For businesses, Groupon is a promotional expense. It's not an engine to make shopping more efficient. It's not a dating service that matches the best possible customers with their ideal vendors. It is, instead, a better way to spend money on local advertising than plowing it into radio commercials and newspaper ads.

From everything I've read of small business experiences with Groupon, the overwhelming majority of complaints seem to come from the quality of the leads Groupon generates. These complaints, too, miss some of the point. Groupon converts like online ad impressions convert. This isn't a tragedy: online ads are brilliant for businesses that can harness them, and the promise of Groupon is to do the same for local business.

"I’ve long believed that Groupon was basically a Ponzi scheme, enriching itself while acting like a parasite on the businesses it used to deliver its daily deals."

I'm not sure I understand this comparison. Am I missing something here or did the author simply make a poor analogy?

Groupon's users aren't investing their money, unless you view a 50% off coupon as a guaranteed 100% return investment. Even so, the performances of this "investment" isn't paid off by subsequent investors.

"Am I missing something here or did the author simply make a poor analogy?"

I'm not sure I understand your reading comprehension problem. The author not only explicitly stated his analogy about the similarities of Groupon and a Ponzi scheme but also defined and limited the scope of that similarity in the same sentence--not to mention the tediously long paragraphs that followed that were spent expounding on his thesis.

The truth is that people who use Groupon-type deals are the last kind of customer your business wants.

I'd really like to see a study that proves this, because unless this is true then the entire article is bunk. Almost every form of advertising is based on some sort of incentive, and the concept of "mention this ad" to gain a benefit is not new. From the perspective of a small business owner, Groupon not only makes people aware of your restaurant/store/whatever, but also gets people in the door, which is something traditional advertising doesn't do.

I would postulate that just because they're coupon chasers doesn't make them bad customers. It just gives the business owner more reason to provide exceptional service and get people to come back even without an Groupon.

Myself, and my circle of friends, use Groupon and none of us could be accurately described as "coupon chasers". Frankly, articles like this come off sounding angry, jealous, and ignorant.

But within your experience, has the loss leader been justified in the restaurants/services you used Groupon for? Did you see yourself going again, possibly several times, for the business to recoup its loss?

Absolutely, more often than not.

I do sometimes buy Groupons to things I know I will probably not go to again. For instance there was one for a new vegan restaurant and as I'm not a vegan I have a limited tolerance for pizza with weird fake cheese stuff on it.

It's certainly an exaggeration but I don't think it has no merit.

I think this post has a very smart idea in it. In essence, the author proposes that Groupon readers design 'deal templates' and businesses fulfill them. This way, Groupon is creating true customers, not deal chasers.

The idea of 'demand-driven' Groupon is an instance of a larger trend: demand-driven marketplaces. Before the Web almost all markets were supply-driven. Suppliers bring the products and customers can only choose from the list. With technologies like Google AdWords and Alibaba, customers get more power and pull the right products/content from producers. Idea of demand-driven marketplace can be applied to any market.

The real question is how much share demand-driven approach can get? Many customers still prefer the supply-centric world.

The real question is, who does a demand-driven approach serve? Businesses spend money on Groupon to get a reliable boost in awareness for a specific period of time that they budgeted for. They don't do it to make Groupon work better for its users.

Businesses that use Groupon as a demand side solution are the ones beating themselves up. Businesses that use Groupon as a supply side solution reap the rewards. Groupons are great for getting rid of excess inventory, but its terrible for recruiting loyal customers, for the reasons mentioned in the article.

Groupon using businesses just need to understand how to effectively fit Groupon in there own business model. Using Groupon as a catch all marketing scheme is not the way to go.

Groupon should work with small businesses and help them understand this instead of marketing them self as the perfect solution for marketing your product/service.

The title on the post has been changed to "Building a Better Groupon", which is much less linkbaity and more in-line with the story.

Thanks, good catch. I have updated the submission.

Worse, it treats already loyal customers like shit. Oh great there's a Groupon for my gym. Wish I could take advantage somehow; look how cheap it is! Hmm, look at all these Groupon people overcrowding my machines and classes.

You realize that your Gym, not Groupon, decided to issue too many coupons that resulted in the hypothetical crowding situation? That is your Gym's fault.

I actually don't know if that's true or not - do businesses set the number of Groupons available by themselves? I doubt it.

My understanding is that Groupon allows them to set a limit.

Yes, I've read that businesses can set a limit. However, a low limit might discourage Groupon from running their deal.

The author basically described priceline...didn't he?

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