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Some thoughts on this: A. Spending on customer acquisition is building real barriers to entry. I tend to agree with DHH that the barriers to entry will never

Some thoughts on this: A. Spending on customer acquisition is building real barriers to entry. I tend to agree with DHH that the barriers to entry will never be high enough in the daily deal area. Also, as Groupon seeks to stay ahead of daily deal competitors, it cannibalizes its own business model – namely, the artificial scarcity and urgency of daily bargains reverts to more and more on-demand variety. We see this already. B. Spending on direct sales is building a valuable collection of local merchants. Others have built directories of local businesses before. The Yellow Pages, Yahoo are examples. Yelp, etc. are more modern examples. Can Groupon unlock a profitable business model from their collection? C. Spending on marketing is building enough public goodwill to transcend value propositions altogether. Groupon is a great brand name, so far. Public goodwill is damn fickle, though. I'd like to think that consumers require a real value proposition from their favorite brands, but I'm not sure that they always do. When it comes to daily deals, I doubt consumers will chose Groupon over a better deal, just because of the Groupon name.

SwellJoe 15y ago
When it comes to daily deals, I doubt consumers will chose Groupon over a better deal, just because of the Groupon name. On this count, it's worth remembering that extreme bargain hunters have very low loyalty to vendors. It's what allows them to take advantage of the best deals. Which is why I think a lot of businesses have been disappointed in the results from Groupon deals, and why the moat around Groupon is pretty shallow, given how much they've spent.
- tptacek 15y ago
  Eh. How much Groupon disappointment do you think comes instead from brick & mortar small businesses being utterly unacquainted with the high-volume low-conversion sales model of the web? Because that seems like the thesis behind Groupon: give local biz a taste of how customer acquisition is tuned and scaled on the web. I'm a loyal customer of several well-known, well-regarded small businesses in Chicago, and none of them have the marketing savvy of the least-successful successful web startup we can think of. So in that regard, I think the people who worry about the disloyal deal hunters miss the point a bit. That's the flip side of the 5-10% conversion rate: the 90% who bounce. Web people don't flip out about this. Local biz does. Remember, the most popular current alternative to Groupon is advertising. The only reason local biz people don't flip out over advertising effectiveness is that nobody knows how to figure it out.

SwellJoe 15y ago

When it comes to daily deals, I doubt consumers will chose Groupon over a better deal, just because of the Groupon name. On this count, it's worth remembering that extreme bargain hunters have very low loyalty to vendors. It's what allows them to take advantage of the best deals. Which is why I think a lot of businesses have been disappointed in the results from Groupon deals, and why the moat around Groupon is pretty shallow, given how much they've spent.

tptacek 15y ago
Eh. How much Groupon disappointment do you think comes instead from brick & mortar small businesses being utterly unacquainted with the high-volume low-conversion sales model of the web? Because that seems like the thesis behind Groupon: give local biz a taste of how customer acquisition is tuned and scaled on the web. I'm a loyal customer of several well-known, well-regarded small businesses in Chicago, and none of them have the marketing savvy of the least-successful successful web startup we can think of. So in that regard, I think the people who worry about the disloyal deal hunters miss the point a bit. That's the flip side of the 5-10% conversion rate: the 90% who bounce. Web people don't flip out about this. Local biz does. Remember, the most popular current alternative to Groupon is advertising. The only reason local biz people don't flip out over advertising effectiveness is that nobody knows how to figure it out.