Groupon Struggles to Stay Afloat

Groupon Struggles to Stay Afloat

Here on the CEM blog, other writers and I have posted about companies like Facebook who have faced a rough adjustment to being traded on Wall Street. Of course, simply being on Wall Street isn’t the full problem, it’s also about earnings and future plans for these companies. A few weeks ago, I wrote about Facebook and its excellent earnings followed by some great plans moving forward. There’s one company who needs an even bigger surprise to survive: Groupon.

Groupon was one of the dolls of the numerous tech start-ups that came after the big players like Twitter and Facebook. Its innovative group-based daily deals model drove its early success. But things aren’t looking so great for Groupon and its flagship business model.

Groupon’s Stock is Way Down

Groupon’s early success and popularity enabled the company to go public last year at $20 per share. Today, as Nivedita Bhattacharjee and Alexei Oreskovic for Reuters inform us that, “dissappointing earnings … [sent Groupon’s] stock down 30 percent to an all-time low of $2.76.” That is a near 90% drop in value in one year.

What makes matters even worse is that Groupon’s rival, LivingSocial is also “piling up losses.” This means that it’s very likely that there’s something wrong with the reliance and effectiveness of both companies’ signature business models.

When Groupon came out, the group discounts it offered were extremely popular. But now that customers and businesses have had a year to see how effective they are, disappointment is growing. Many businesses that offered discounts and deals have noticed less of a return than they would have liked when it comes to repeat customers.

Why Aren’t Group Deals Working?

Rex Crum at MarketWatch relates from Scott Devitt, a Morgan Stanley employee, that “Groupon is suffering from what he called ‘deal fatigue’ due to so many companies now offering consumers a multitude of options” when it comes to their products and services.

The lack of stellar success by Groupon’s main offering has really took the spark out of its business, and even its competitor, Living Social. They won’t have to shut the doors yet, but both companies need to make some serious changes.

What Will They Do?

Groupon is in a sense a marketing company. They sell the idea that their group discounts bring business and bring customers that otherwise would not come. It can – and does – work, but if you run a business or have clients you do work for, you know that it’s always important to diversify and have a broad strategy when it comes to marketing.

Groupon is now adapting by doing just that. They’ve recently started offering more than just one service, something that they might have wanted to think about earlier on. Better late then never, I suppose. Groupon is hoping to leverage the connections and relationships it has made with thousands of businesses to successfully integrate its other services that are just starting. Groupon Goods is a great example of how the company is trying to adapt and wean off of its reliance on its original Daily Deals model.

Importance of Diversity on the Web

Whether you run a business or do work for clients, it’s important to recognize that we’re in a very dynamic and unique advertising/marketing climate today. Like many things in life, we don’t want all of our eggs in one basket. Groupon’s deal system can be a good way to improve business, but it is not the way to do so.

It’s vital to be taking advantage of all strategies available to you like content marketing, marketing through social media, traditional advertising, and so on.

Groupon is racing to embrace other strategies to survive, are you?

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Patrick currently lives in Somerville, Massachusetts, where he is studying for a Master's Degree in Intercultural Relations. Upon graduation from Penn State in 2008, he spent two years overseas in Kyrgyzstan with the U.S. Peace Corps. While writing is currently his chosen way to put food on the table, he loves fitness and exercise, which he believes makes up for his avid computer gaming habit.

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