This post is an econ student's way of saying: "It's hard to grow profits by selling to cheap people." I do think there are situations where Groupon makes sens

This post is an econ student's way of saying: "It's hard to grow profits by selling to cheap people." I do think there are situations where Groupon makes sense - primarily where you have a high fixed cost (like rent), high margins on the product (say, liquor) and poor utilization. The only time that's likely is with a new business, because it's not a stable state -- either you grow out of it, or you go out of business. The problem is that Groupon, while attracting customers, also attracts customers who are more price sensitive, less loyal and have lower price expectations for the future. That's not as good as getting the customers the hard way: finding people who value your product enough to pay the normal price, and are happy with it.