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Direct Response Marketing

Field Reports

10 Jul, 2010 By: Thomas Haire, Jacqueline Renfrow Response

Groupon Goes Viral
By Jacqueline Renfrow

When online shopping site Groupon launched in November 2008, the idea was to offer big discounts to a large amount of people, based on personal interest. Now available in 42 markets, the local shopping hub features one deal each day for customers to see, eat, do or buy in each participating city across the United States (the company plans to launch in Canada and Europe soon).

Offers on Groupon include deals for restaurants, sporting events, theater tickets, spas, etc. — and with discounts up to 90 percent off the original price. The way Groupon attracts both customers and retail partners is the collective buying aspect. Most obvious are the large discounts handed directly to the consumer, but only if enough consumers in that particular market sign up for the deal. Once a customer signs up, the retailer is also given the great opportunity to use the lead to collect names and information on a customer for future database use.

“It’s an amazing amount of enthusiasm that our deals generate, and it’s of the viral nature,” says Mark Desky, vice president of marketing, Groupon. “They’re so powerful that they become viral quickly. People Tweet them, Facebook them, share them with friends.” Response sat down with Desky to learn more about how the young company is capitalizing on direct response.

Q: How did the idea of Groupon come about?

A: Founder Andrew Mason first started another Web site called The Point, which was about affecting social change through groups. It focused on establishing campaigns to build a park in a community or something along those lines. This was in 2007. People were able to build their own campaigns on the site and, at one point — as an experiment — a business was featured on the site. It soon morphed into the Groupon we have today. So it was born of The Point, but also the people working at Groupon believed there are so many option of things to do, eat, see and buy in a city that we wanted to offer a place that told you about all these things and offered a compelling discount at the same time.

Q: How does Groupon work from the consumers’ and retailers’ points of view?

A: We prepare our merchants for the day of the deal because we know their Web sites will get unprecedented traffic. That’s part of the reason we don’t make our Groupons valid the day of the feature because trafficking questions about the deal is a priority that day — making sure people interested fully understand it. So once a customer commits, assuming the deal tips, a PDF voucher is E-mailed to the customer and it’s good to use the next business day. Also, we have an iPhone app, so you can redeem it through the app, which also tells you where businesses are located and which are closest to you.

Q: What makes Groupon a unique DR marketing strategy?

A: I think it leverages social media tools that weren’t available several years ago. The timing is right for ideas like this. People are more interested in a deal, and merchants need a way to attract new customers. As an alternative to traditional advertising, it will thrive in any economy. We have 3.3 million subscribers across the country, and more than 2.6 million Groupons have been redeemed. We’ve saved customers $130 million through coupons. We also have a Flickr stream with people using Groupons. We see photos from being on a whale watch to being on a trapeze to being at a wax museum. People are taking pictures at all these places, and I love to go and see how much happiness it’s generating. We hear all the time, “If it wasn’t for Groupon, I wouldn’t have tried it.”

Q: How does Groupon generate leads for retailers?

A: We do not give merchants the E-mail addresses of those who buy Groupon. We don’t share the list. It’s up to them to capture the information at the point of redemption or to make contact. Our goal is for our customers to become our merchants’ customers. So it’s a launch pad for DR programs, and if they’re smart, that’s how they use this experience. It’s a huge advantage to market at the initial redemption experience to make lifelong customers.

Q: Do you work at all with online retailers?

A: Yes, we have online deals. We’ve actually run deals for ScanDigital in more than 20 markets. It’s a deal to spend $40 and get a $100 credit. We’ve sold more than 6,000 of those, and that’s across 27 campaigns. Since working with Groupon, ScanDigital has more than doubled its base and increased its amount of repeat buyers by 35 to 40 percent. They really used Groupon to build a list and generate repeat business. Since it was online, we provided a code and captured the information without people going anywhere.

Q: Which deals seem to be the most popular?

A: Baked goods are popular. Also, the Chicago Fire professional soccer team sells really well. They’ve used the site to offer Groupons for tickets to their Miller Light Party Deck and had promotions at these events offering signed jerseys and soccer balls and stuff. It’s to get people at games to provide E-mail addresses. Restaurants are very popular, and so are spas. We’ve tried different things, and some are more challenging than others. We don’t want to keep doing the same thing. The best of the city means variety. One thing that’s exciting is that it offers a lot of promotion for a local business. They get really incredible marketing horsepower and it’s a launching pad for future efforts.

Q: What’s the most challenging part of the business?

A: Keeping it fun. We consider ourselves cool. This isn’t your mother’s coupon; this is something our customers are enthusiastic about. And the focus during the past year has been rolling out to so many new markets. But really, it’s a win-win for merchants and customers, at no risk for the merchants. If it doesn’t reach a tipping point, it’s no cost to the merchant but they’ve gotten exposure. We collect the money and send it on to the merchant, so there are no upfront costs either.

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