Groupon | Collective Buying & Social Marketing

content I. Groupon Profile

• Background

• Business Model and Operation

• Additional Marketing Methods

• API

II. Study the business model of

Collective Buying

• A Six Forces Analysis

Tuán Gòu 团购

Collective buying

Store mobbing

GROUPON COMPANY PROFILE

Company Profile：

• Funding： Total $173M

Angel, 1/07 Eric Lefkofsky Brad Keywell $1M

Series A, 1/08 New Enterprise Associates $6.8M

Series B, 12/09 Accel Partners New Enterprise Associates $30M

Series C, 4/10 Digital Sky Technologies Battery Ventures Accel Partners New Enterprise Associates

$135M

• Established：10/08

• Industry：Advertising and Marketing

• Employees：225 （from LinkedIn）

• Operation：

– Subscribers 4,400,000+

– Total Groupons bought 4,600,000+

• Media exposure：

Business and Operation

Business Model：a form of Re-intermediation

② Sell groupons, charge commission

Consumers suppliers/ retailers

① looking for good deals, find/ share shopping experience

③ gain stable sales, increase awareness

• Groupon negotiate with suppliers/ retailers to offer deals；

• Groupon promote deals and gather customers via its marketing channels；

• Groupon sells coupons to customers and charge commission from suppliers.

A brief review

Features：

• Consumer pays before purchasing: ensure the deals get done；accelerate the cash flow

• Large discount for collective buying in limited time and items：create a phenomenon of Bargaining& Panic Buying，encourage customer wowing the deals by word of mouth (via Social Web)；

• One deal per day, consumer don’t need to make the choose；

• Achieve a Three-Win

Product line（from official web site）

~ Consumer Packaged Goods ~ Accessories ~ Automotive ~ Beauty ~ Beer, Wine, and Spirits ~ Diet and Fitness

~ Electronics ~ Entertainment ~ Fashion ~ Health & Pharmaceutical ~ Financial ~ Travel

The place of AD banner

Current sales：an analysis of 108 featured deals

• Main deals are services, such as restaurant & café, hair salon/ SPA, training. • Unit prices are low averaged $68，Groupon cost $22；discounts are high

averaged 56% • Need no logistic distribution center

Categories Sold Items Bought Groupons sold cost

Count % Mean Minimum Maximum Mean Minimum Maximum

Restaurant & Cafe 39 36% 3609 1995 7207 16 4 35

Food 14 13% 4091 2078 9746 9 3 20

Salon , Makeup & SPA 13 12% 3350 2028 4724 44 22 99

Ticket 12 11% 3669 1962 14670 10 4 25

Fitness 8 7% 2982 2050 3995 36 5 55

Tour 7 6% 6686 2487 19872 18 10 30

Grocery 6 6% 5114 2679 9995 17 15 20

Lesson 5 5% 2409 1998 2600 34 20 69

Membership 3 3% 3814 2355 4913 37 30 40

Car Wash 1 1% 2358 2358 2358 5 5 5

Total 108 100% average sales= 3822 average cost= 21.76

Value Discount

Mean Minimum Maximum Mean Minimum Maximum

33 10 75 53% 47% 60%

21 8 40 54% 50% 67%

220 45 805 61% 50% 88%

21 8 50 50% 45% 53%

136 15 480 62% 50% 95%

40 20 80 52% 42% 63%

37 30 40 55% 50% 63%

135 40 290 66% 50% 91%

93 75 110 61% 58% 64%

12 12 12 58% 58% 58%

average value= 67.84 average discount= 56%

Business Model

One deal per day

High discount

Time limit

Buyers must exceed the floor level to get the deal open

Business Model

Additional deals

Encourage virus-spreading via social application Facebook | Twitter

A virus marketing– Leverage the influence with the social applications

• Integrated with Facebook Connect; no bother to register

• Location-based operation, every city has an independent twitter/ face book account, which is aimed to talk and communicate with customers

• A $10 bonus for friend recommendation

• Email subscription/ share of deals

• RSS subscription of deals

• API, open the deals information

Leverage the influence with the social applications • A two-degree networking relationship analysis of 100

randomly-chosen Twitter followers of Groupon L.A – 100 users generated 4000+relationship（including Follow、Mention &

Reply）

• Feature： – Leverage the marketing info/ influence

– Do not to CONTORL but to INFLUENCE

Additional marketing methods

• Company blog，to talk with customer / suppliers

• Live Off/ Groupon Says，make the topics and earn eyeballs, encourage wowing

• Make the service personal, let customer know the people behind the screen to increase the trust and intimacy（decrease the emotional distance & barrier）

Business Suggestion: let customer vote from whom want buy

Launch a rewards program

• The currency, G’s, are awarded for viewing deals and buying deals. And if you buy a deal early (a minimum number of buyers have to go for a deal or else no one gets it), you get even more G’s.

Why Social Marketing?

Key conversion point

Those behaviors happening on

Social web

The differences of traditional/ social marketing： • Traditional：focus on customer awareness, educating customer（product

function, feature or brand image etc） • Social：focus on equal, transparent communication，let customer know

the benefit of buying a specific product to make a smart purchase

The main focus of traditional marketing

Groupon recruitment • Expand its business development team in US market； • Web/ Internet product development, User experience

Operation Area

Cover 60+ cities in US Subscribers 4,500,000+ Sales：

Groupon sold 4,500,000+

Web Traffic：Unique Visitors (compared with Newgg.com)

Data source：

Demographics of web visitors

Data source：

API

Open its deals（not function as a platform instead） http://www.groupon.com/pages/api

API case – Android APP

Groupon makes its deals as a news media

Widget

Future Operation & Direction

Luxury product aimed at high-class consumers

Put strict requirement for membership • The tax-income document needed

M&A: Mob.ly

• Going mobile!!!

• Mob.ly is a mobile application service The company, which works with clients to create mobile applications from top to bottom (from conception to design and testing), has built apps for clients like Comedy Central, NBC, Digg and Yahoo!

• Mob.ly is led by former Yahoo! Senior Director of Product Management Mihir Shah and Yishai Lerner, former Director of Engineering at Carrier IQ.

A Review

• Simple and clean profit model

• Simple and satisfying shopping experience

• Lower entry barrier

• Not too many products

• Consumers don’t have many options

• Issues of after-sales and warranty

AN ANALYSIS OF COLLECTIVE-BUYING MODEL

A Five-force industry analysis

For Supplier： • Large customer base, ability

to increase awareness • Supplier lack ability of

backward integration（do it themselves）

For Customers： • Lots of supplier

resources • Get enough discount

for appealing • Wide business

operation

For New Entrants： • pioneer advantage （Brand

awareness/scale economics） • Funding advantage • Business developing ability

For Substitutes： • How to compete by

differentiation

For Competitors： • Lower entry barrier（technology and capital) • The size and growth of industry

The sixth force：manipulating the development and open of social web, leveraging the marketing efforts

Groupon’s european competitor ：Groupola — a complete clone

Global collective buying websites: a phenomenon

Many Chinese copycats more than 50s

The 1st Goupon clone in China mainlad

The No.1 C2C in China

Deals Statistics: the latest 102 deals from Chinese Groupon-alike websites

Category Items

Count %

Orginal price Discount % Cost Saved

Mean Minimum Maximum Mean Minimum Maximum Mean Minimum Maximum Mean Minimum Maximum

Restaurant, Pub & Cafe 26 25% 187 10 466 29.69 10.00 50.37 64 4 198 123 6 292

Hair salon/ Makeup/

Massage

18

18%

559 128 1876 20.87 4.69 45.38 96 10 188 463 100 1788

Cosmetics 17 17% 203 50 650 43.40 9.09 64.32 69 18 138 134 21 585

Membership/ Ticket 15 15% 592 25 5218 28.12 4.22 60.00 91 5 348 501 20 4998

Training/ Class 6 6% 368 50 600 18.25 10.82 30.00 66 15 120 302 35 480

Photography 5 5% 1048 108 3000 18.78 6.98 30.15 260 9 880 788 98 2120

Coupon 4 4% 94 20 300 29.54 3.33 54.81 9 3 15 85 10 290

Medical / Dental

examination

4

4%

576 426 879 35.84 15.70 49.60 186 138 248 391 228 741

Flower/ Gift 3 3% 195 128 258 35.26 26.31 53.13 63 52 68 132 60 190

Appliances 1 1% 139 139 139 41.73 41.73 41.73 58 58 58 81 81 81

Designed Tee shirt 1 1% 178 178 178 16.29 16.29 16.29 29 29 29 149 149 149

Karaoke 1 1% 28 28 28 3.57 3.57 3.57 1 1 1 27 27 27

Wine 1 1% 398 398 398 34.92 34.92 34.92 139 139 139 259 259 259

• Main deals are Restaurant/ Pub & Café, Hair Salon/ Spa; Cosmetics; Tickets, accounting for 75% in total.

• Cosmetics deals have highest average dicount.

Source: http://tuan123.net/pastTuan.php 04/28/2010 – 05/11/2010

The chart of Chinese Groupon-alike websites

Website Lunched Date

Existing Days

Groupon Sold Daily average Coupon Sold

Daily cost saved

Cost Saved

美团 2010-3-4 69 29,962 434 69501.97 4,795,636 F团 2010-3-15 58 29,794 514 41533.53 2,408,945 满座 2010-1-6 126 29,421 234 15941.60 2,008,642 拉手 2010-3-18 55 19,207 349 31956.35 1,757,599

优享团 2010-1-23 109 18,553 170 7471.72 814,417 团宝 2010-3-26 47 15,297 325 74599.64 3,506,183

团美网 2010-3-23 50 12,436 249 18509.96 925,498 窝窝团 2010-3-14 59 10,850 184 60040.78 3,542,406 24券 2010-4-6 36 6,813 189 11790.00 424,440

爱帮团 2010-4-22 20 3,091 155 12013.90 240,278 来客团 2010-3-26 47 1,566 33 3529.94 165,907 爱爱团 2010-4-5 37 1,549 42 1346.81 49,832 赶团网 2010-4-14 28 1,024 37 1652.46 46,269 酷团网 2010-3-28 45 821 18 6041.87 271,884 17团团 2010-4-26 16 623 39 4011.56 64,185

千折百扣 2010-3-2 71 458 6 1465303.96 104,036,581 丁狗 2010-3-15 58 435 8 718.59 41,678

火团网 2010-4-10 32 284 9 465.81 14,906 粉皮儿团 2010-4-20 22 79 4 362.68 7,979

団客 2010-3-23 50 38 1 48.84 2,442 阿拉团购 2010-4-10 32 26 1 64.34 2,059

团拍 2010-3-4 69 0 0 0.00 0 围团 2010-4-16 26 0 0 0.00 0 Masa Maso

2010-3-17 56 0 0 0.00 0

Source: http://tuan123.net/history.php 04/12/2010 – 05/11/2010 • Most website are new startup and have been operating less than 3 months;

• Daily sales are relatively small, general less than 500 coupon per day. • The operating areas are limited: Meituan.com 美团 only covers 3 cities so far: 北京、上海和武汉

Taiwan

• Launched since 04/12/2010

• Operating in 台北，桃園 ，新竹，台中，台南和高雄

• Saved： NT$1,970,669 ， daily average NT$65,689

• 17P customers who purchased：4，802 daily average 160 persons

To date 12/05/2010

Collectively Buying E-commerce platform Open source & commercial

A substitute —— Adidas www.freestripes.com

A substitute—— DELL Swarm

THANKS