the optimization of groupon by: kaysee fitzpatrick
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statement of purpose I don’t use “deal-sites” often, but whenever I go out with my deal-savvy friends, the “wait, maybe I can find a Groupon for this” is inevitable. But what if this “finding” process was different? What if, rather than searching for deals at the last minute, those deals found you? And what if those deals focused more on your specific interests, allowing you to find those “hidden gems” that would offer you unique experiences that you’d actually enjoy? From initial research, it’s become apparent that online dealsites like Groupon and LivingSocial have recently been struggling to keep their consumer base. Their stock values have dropped exponentially ever since the companies went public in early 2012. A big reason for that drop is that their business model is flawed. Both sites are failing to recognize the needs of their subscribers, bombarding them constantly with irrelevant emails, and then not delivering what they promise. The resulting marketing strategy is often hit-ormiss for the businesses that advertise with them. For my senior project, I attempted to solve that problem. I used my research of “deal-of-the-day” companies to design* a new and improved location-based deal system, ideal for Smartphones and GPS-systems, and then created an outline for how the new system would be ideally marketed. *Because I am not yet programming-savvy, the app I propose is not yet functional; the idea, strategy, and design are the focus of my project.
description Using Adobe InDesign, PowerPoint, Word, and Google, I strategized and created the look of a theoretical Smartphone and GPS app that illustrates just how location-based deal advertisements would operate. I focused on how the app’s design would function to support local companies’ marketing efforts and provide deals that are specific and relatable for its audience, increasing conversion for businesses and decreasing spam for consumers. This involved not only marketing research, but also design and editorial skills that I would like to further develop and use in the future. Along with the app, I researched the effectiveness of “deal-of-the-day” companies and brainstormed how my design and strategy would actually capitalize on an opportunity that companies like Groupon and LivingSocial have not yet explored.
significance My project is heavily based on a combination of my knowledge and experiences in advertising, marketing, and digital communication classes here at DePaul, and truly represents the culmination of my studies in Communication and Media. My professors have taught me that defining and knowing your target audience is key in a campaignâ€™s success, so I want to utilize those theories and practices in creating my own marketing and advertising strategy in the growing digital and mobile landscape. Technology is making so many advances in the way businesses speak to their audiences, and I think expanding on how those new capabilities affect the greater population would help me to understand more fully how effective advertising and marketing campaigns can make a difference in the consumption habits of myself and those around me.
strengths One of the main strengths of the ideal model of daily-deal sites and subscription services, is its obvious appeal to consumers. Shoppers love to see their favorite four-letter word adorn commercials, print ads, and emails. Savvy consumers will look for ways to save on whatever they need, or don’t need and bargain prices can be very convincing. (We’ve all seen Extreme Couponing, right?) Another advantage, especially for companies, is reach. “Rath“Millions know that daily-deal er than sell one by one and sites collect emails and pitch customer to customer and do50% off local sky diving lessons ing the marketing effort one or 40% off aromatherapy by onne, it is really allowing sessions if enough people businesses to be able to sell sign up. So LivingSocial and a significant amount of volume Groupon were smack dab in with more of it being chanthe center of three hot trends: neled through one customer” social, mobile, and local.” (Reibstein, 2011). Merchants are saving money in their market– Kessler, 2012 ing budgets by advertising their deal to Groupon’s already massive existing customer base. The email deals of Groupon reach thousands upon thousands of people each day – much more than small businesses can afford in direct marketing if they were to try to take on the task themselves. Lastly, Groupon was really at the forefront of the daily-deal boom. The company holds 80 percent of market share and is the top player in the daily-deal market. The company utilizes already utilizes many aspects of digital technology to its advantage, but the opportunity lies in how Groupon can further specialize its wide range of deals being offered.
weaknesses Groupon’s business model is aimed at the first-time buyer. They want to reach as many people as they can with their emails, which will increase the likelihood that first-time buyers and daily-deal fans will purchase. They want their customer base to expand as much as possible so that they can market deals to larger audiences. The problem lies in the fact businesses are offering those deep discounts in an effort to attract repeat buyers, but Groupon’s model is not meant to target repeat customers.
“Many of the merchants offer these deep discounts, not with the hope of perpetually offering them, but given that they have excessive inventory right now, it would be nice to let people sample their product or service with the hope that they are going to like it and subsequently will come back and buy it when it is not being offered on Groupon and is at its full retail price. Unfortunately, the people Groupon is attracting are ‘deal prone customers.’ These customers tend not to be the most loyal of customers... Merchants are going to discover that the Groupon customer is not where you build your future business.” – Reibstein, 2011 There is also the experience complaint that many customers cite: “We bought one or two daily deals two years ago and then they started emailing us so much that we couldn’t find our real emails in our inboxes” (PC Magazine, 2012). Customers are more likely to be annoyed and completely ignore the deals that Groupon is trying to send out, based on the amount of emails they receive and the irrelevant content contained in them. This weakness can be remedied in a number of ways, including an increase in relevancy or breaking away from the email model altogether in favor of another digital communication strategy.
opportunities Despite the complaints from the consumer and merchant sides of Groupon’s business model, the company is looking at many creative ways to solve these problems, expand its audience, and raise stock prices. Some are simple fixes, like allowing merchants to cap the number of deals they want to sell, eliminating the chances of becoming overwhelmed with the number of customers coming in and losing revenue (Reibstein, 2011). The other opportunity requires a bit more creativity. “It is still unclear if daily-deal customers can be reliably converted into repeat customers paying full price... The daily deal is more about promotion than changing the nature and productivity of online retailing” (Kessler, 2012).s But if consumers are not being coaxed into repeat business by the promotion alone, then Groupon needs to find a way to “attract customers who were not at all part of the existing database” (Reibstein, 2011). But even then, these new consumers pouring through Groupon’s system would be benefiting Groupon itself, rather than the businesses who choose to advertise with them. Eventually, if merchants cannot see a benefit to their marketing, they will pull out of the business model altogether. The one enhancement that Groupon could make would be to transcend that superficial “deal-of-the-day” feel to become more engrained in culture or individual preferences. “It would make sense to get down to individual information and be able to know that John likes pizzas and we’re going to offer that to John. Or that John bought a new sweater and maybe a blue shirt to go with that sweater. If they start customizing offers individually, it will be all the more powerful” (Reibstein, 2011). Rather than focusing on reaching a huge mass audience, personalization would allow merchants to reach exactly who they are looking for, increasing their return on their marketing investment.
The very quick expansion of deal-sites not only poses threats to the way Groupon manages itself. Without the strong managerial and financial skills required to take the company to the next level, its expansion across the nation and also overseas can lead to huge financial problems. Another threat is the threat of competition. Although Groupon holds 80 percent of the market, competitors like LivingSocial and Google Offers are gaining popularity among consumers. “Groupon’s grand plan is to become the ‘operating system for local commerce. But it faces intensifying pressure from Google, LivingSocial, and others because its business model is easy to replicate. That has forced Groupon to expand into new categories, such as goods and customer-loyalty programs in a bid to become the Amazon.com of local commerce” (Swartz, 2012). They are looking to expand into different markets and solidify their presence as the top deal-provider in the nation. And although a thriving economy is good for consumers, it does present a threat for deal-sites. “There’s no question that during the recession, consumers were looking for bargains... If the economy were to recover, then just looking for the bargain becomes not as much of a selling point” (Reibstein, 2011). Groupon will need to establish itself as more valuable than just a deal-site to survive.
works cited Kessler, A. (2012, October 31). Get Your Daily-Deal Stocks – 75% Off! The Wall Street Journal: A15. Retrieved from Academic Search Complete. Knowledge@Wharton (Interviewer) & Reibstein, D. (Interviewee). (2011, May 25). How Sustainable Is Groupon’s Business Model? (Interview transcript). Retrieved from Knowledge@Wharton, University of Pennsylvania Website: http://knowledge.wharton.upenn.edu/article. cfm?articleid=2784 McDonald, D. (2012, June 23). Review – Books: The High Value of Discount Prices. The Wall Street Journal: C9. Retreived from Academic Search Complete. Swartz, J. (2012, September 20). Groupon dives into credit card-swiping business. USA Today: Money. Retreived from Academic Search Complete.
strategystrategy & design
narrow target audience mo re spo on the nta neo lookou us t for “ hidden gems” open to exploration and new experiences vation o n n i ultural c f o ure t l fond u c p o p of d hea a n ofte
s” m e n g e d id h “ for t u oko o l ledge w o he n t k local on d n a o exp t t n a w
considered “experts” in a cultural area likely to crit ique & ofte share n c experi rea ences te p op cult ure
use location to increase relevancy Groupon sometimes overestimates how far people will travel for deals, sending email after email for places that are quite a trek to get to. This is where localife thrives. Whenever users walk within a specified radius of a business with an offer that matches those usersâ€™ specific interests, the app will notify them.
This increases the ratio of potential consumers to subscribers who really arenâ€™t interested, while increasing the likelihood that a person will actually stop in to see what that business has to offer. Less marketing dollars are wasted on the business side and there is less spam on the consumer side. Everyone wins.
offer extreme personalization You have the app.
gluten free brownies
vintage record shops affogato seafood artisan cupcakes pourover coffee american lager secondhand bookshops LAMBIC BEERS handcrafted jewelry dance dive bars old-style diners
So, what interests you? When the consumer downloads the app onto their phone or GPS-system, they are asked this simple question. Given the main targets, they will no doubt have an answer or two. By allowing the consumer to customize their interests, they are taking control of the app. They can set their preferences so that the deals they receive are tailored to them. This feeling of having more control solves the Groupon complaint of being spammed with irrelevant offers â€“ the offers localife delivers are completely relevant, based on the userâ€™s interests and their proximity to a business that matches their interests. And not only does it give consumers more control, but it gives businesses more control over who receives their offer. It is a plus for both sides, where no impression is wasted.
market as more exclusive How would localife appeal to cultural insiders and specialists? Simply by inviting them to do what they enjoy most: be in the know. Through extreme customization and location technology, localife users would be receiving exactly what they want. Cultural insiders and specialists are always looking for the next place, the next experience, the next unique “gem” they might stumble on, which might be just around the corner. Localife would recruit and attract small businesses who have some unique experience to offer, yet don’t have a large marketing budget. The app would then connect those businesses to not just anyone, but to consumers with the specific interests that match the company’s services. Branching off of Google’s ideal search model, the advertisement would only appear to customers who are looking for that information. It’s creating a dialogue between business and potential consumer, and fostering that dialogue by adding in a little incentive. These are the customers that Groupon has yet to pursue – the consumers who, based on interests, would use the app to discover new places and experiences to try. They are more likely to become loyal customers and to spread their experiences with others through social media and word of mouth because they are looked up to as culture creators.
design Localife would be simple. No daily emails. No entire-screen pop-ups. There would be a simple notification banner that appears as soon as a user walks into the radius of the business with an offer, telling them what the deal is, where they should go to find it, and how it matched their preferences. If customers would like to learn more about the offer, they can simply tap on the notification, which would take them to the localife website, describing the deal in more detail. Or they can simply walk a block, talk to an employee, and ask about it. Itâ€™s designed to be social and to help local businesses and consumers create a lasting and mutually beneficial relationship.
Hey there, Untitled is offering $3 you-call-its today. One block west on W Kinzie Street. (speakeasy)
Hey there, Untitled is offering $3 you-call-its today. One block west on W Kinzie Street. (speakeasy) localife
my name is Kaysee and Iâ€™m...
alis e d i
atic n a f n atio munic
ta a digi
an endlessly curious coffee addict
an am an
rt t rav e
...all rolled into one I found my passion through this project, and Iâ€™m very excited to find out where that passion will take me next...
kaysee fitzpatrick ADVERTISING&MARKETING
contact 1461 Sturgeon Bay Court Schaumburg, IL 60173 847.757.2766 firstname.lastname@example.org
skills Adobe InDesign CS5 Microsoft Word Microsoft PowerPoint Microsoft Excel Pages Keynote Numbers Cision Facebook Twitter Tumblr Pinterest Instagram
education DePaul University, Chicago IL September 2011 – present Bachelor of Arts in Communication and Media, Nov 2012 G. P. A. 3.5/4.0 William Rainey Harper College, Palatine IL January 2011 – June 2011 California Polytechnic State University, San Luis Obispo CA September 2007 – June 2010 Architectural Engineering
experience WSCR 670 The Score Sports Radio (CBS Radio), Chicago IL Marketing & Promotions Intern, May 2012 – August 2012 • Prepared for, set up, and worked as a representative at over thirty promotional events that resulted in increased exposure around the Chicagoland area for the station and its sponsors. Events included: – Two charity golf outings, which hosted 150 players each – The intimate weekly Who Needs Two? Live Broadcast Tour – The Grand Slam Taste Tour, a Chicago sports ticket giveaway event with 50+ in attendance at each venue – The White Sox Throwback Tailgate Party Series, which hosted over 1,000 baseball fans at each of four events at U.S. Cellular Field • Interacted with listeners and fans at all on-site promotions and live broadcasts, encouraging loyalty and bringing in new listeners, while collaborating with Promotion Coordinators to manage operations of events, which included: – Photographing promotional events for station and sponsor recaps to evaluate success and effectiveness – Drafting release forms, contest rules, and signage for use at events and on-air contests – Managing the distribution of prizes to ensure accuracy
Dick’s Sporting Goods, Schaumburg IL Customer Experience Specialist & Sales Associate, October 2010 – present • Helping to increase customer satisfaction ratings by assisting Customer Service Specialist in overseeing front-end operations, increasing efficiency, and decreasing waiting time through exceptional customer service. • Promoting and selling products, loyalty cards, credit cards, and product warranties, keeping an average of 75–90 percent loyalty card transactions daily.
EXACT Sports, Chicago IL Sports Consultancy Intern, January 2012 – May 2012 • Narrowed the company’s target market, resulting in increased effectiveness in the marketing budget and operations by: – Researching success factors in college and professional athletes, and compiling databases of potential college programs and coaches that might benefit from training programs. – Researching college athletics facilities across the country and conducting phone calls and follow-up emails to facilities managers to coordinate potential camp availability and pricing, securing one new account for baseball camps. • Blogged about training, physical and mental preparation, and athletic success at the high school, college, and professional levels to engage the target audience and build brand recognition.
guidance “To be successful, you have to create something that organizes people around an idea that matters.” “Marketing, especially search marketing, is really an art and a science. You have to know what’s going on in the world, what people are talking about, what they care about, and then you have to use that to create a dialogue between your brand and them. You have to answer their questions and give them a clear call-to-action.” “In your job search, people don’t expect you to know how to do everything. They just want you to know what’s going on in the industry and show that you want to learn it.”
AJ Resnick Search Engine Marketing Professor DePaul University
Director of Digital Marketing Starcom MediaVest Group
Specialties include: Digital Strategy Experience Planning Search Engine Marketing/PPC Web/Social Analytics Social Media Marketing
thank you AJ, Lou, and Kyle for your help, advice, and support, and to everyone else whoâ€™s helped and inspired me this quarter... Youâ€™re the very best.