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Groupon's core problem is that the lifetime values of their stakeholders, both the merchants and the customers, decline quickly. If you compare the customer ac

by qq66 14y ago

Groupon's core problem is that the lifetime values of their stakeholders, both the merchants and the customers, decline quickly. If you compare the customer acquisition cost to the current lifetime value of a customer, it seems profitable since the company is growing so fast that most of its customers are new to Groupon and are still high-value. However, research on the earliest cohorts of users shows that the older the customer is, the less profitable they are, indicating that once the growth is tapped out the customer base will rapidly decline in value. There's lots of analysis out there that use the numbers directly from the S-1 to highlight this fact. The crux of the problem is that Groupon needs to find a SUSTAINABLE way to deliver value to businesses and individuals and this doesn't seem to be the case right now.

uptown 14y ago
I think one of Groupon's big mistakes is how they price everything. Based on what I've read they require businesses to cut the price of whatever they're selling by 50%, and then Groupon takes 50% of the purchase price. That's an absurd price cut for the businesses for what's really an email campaign ... something a business could technically do for free or cheap if they can convince their existing customers to sign up for deals, and leverage social channels to grow beyond existing customers. Obviously, part of what Groupon pitches is that they'll bring you new customers with the goal of converting them to recurring customers, but I think the pricing is all wrong. Retailers should be allowed to cut their product by a less severe percentage, and Groupon's cut should be a fraction of what they take today. Maybe 10-15%.
- Steko 14y ago
  "That's an absurd price cut" Groupon is advertising and needs to be evaluated as advertising not as a price cut. "for the businesses for what's really an email campaign ... something a business could technically do for free or cheap" No that's not a real option that is either free or cheap anymore then you can replace traditional advertising by having the owner's family pass out fliers and/or stand around with a sandwich board.

by qq66 14y ago

uptown 14y ago

I think one of Groupon's big mistakes is how they price everything. Based on what I've read they require businesses to cut the price of whatever they're selling by 50%, and then Groupon takes 50% of the purchase price. That's an absurd price cut for the businesses for what's really an email campaign ... something a business could technically do for free or cheap if they can convince their existing customers to sign up for deals, and leverage social channels to grow beyond existing customers. Obviously, part of what Groupon pitches is that they'll bring you new customers with the goal of converting them to recurring customers, but I think the pricing is all wrong. Retailers should be allowed to cut their product by a less severe percentage, and Groupon's cut should be a fraction of what they take today. Maybe 10-15%.

Steko 14y ago
"That's an absurd price cut" Groupon is advertising and needs to be evaluated as advertising not as a price cut. "for the businesses for what's really an email campaign ... something a business could technically do for free or cheap" No that's not a real option that is either free or cheap anymore then you can replace traditional advertising by having the owner's family pass out fliers and/or stand around with a sandwich board.