Greg T. Spielberg

In the battle from grouponomic supremacy, go upmarket

In Grouponomics on May 22, 2010 at 4:44 pm

I purchased a $55 dental clean through Groupon, and, in awe, I wrote about the “temporary brute strength” that grouponomics provides. I didn’t realize that Groupon takes 50% of a business’ revenue as part of the deal. That fact floored me, and I thank Bundle Managing Editor Janet Paskin for the details. She did some great reporting on the emotional pull of grouponomics in her story “Inside the Cult of Groupon.” Steven Carpenter broke down Groupon on Tech Crunch earlier this month, too. I have two takeaways from my experience and their articles and two next steps:

1) From the customer end, there’s not much brand differentiation. I am equally happy about Groupon’s $55 dental clean and kgb’s $4 movie tickets. Both provide me with 65% savings off the typical retail price. As Carpenter writes, “buyers don’t care where they buy so long as the deals are good.”

2) The giddiness of participating in a timed, tipping-point-based sale will wear off for customers. For me, it never existed. As Carpenter shows, the average savings provided by Groupon deals in the five US cities he looks at climbed from $43.79 to $78.37 between Q4 ’09 and Q1 ’10. My guess is that this 79 percent growth in savings is the catch, rather than the emotional attachment. (Not a mind-bending conclusion, I know, but it makes design and branding elements seem fairly irrelevant.)

Next steps
1) Upmarket competitors. Carpenter found that “Boston residents love laser hair removal,” “St. Louis residents love their plants and garden supplies,” “San Diegans are into Pole Dancing,” “Denver loves them some Cold Stone Creamery,” “Atlanta is into NASCAR,” and Chicagoans enjoy the “Tall Ships.” With the exception of the Tall Ships — sailing on old-school ships, essentially — we’re looking at deals on low-market experience and products. My $55 dental clean stuck out because it’s a high-quality product, and I purchased it right away (I go next week). While Groupon, Living Social, kgb and the rest slug it out to provide Denver with ice cream deals, who’s going to jump in on more meaningful products and services?

2) International shipments. Right now, grouponomics is city-based. What if it become nationally based? For instance: A startup company in Greece creates a brand-new electric bicycle that’s not drawing VC money, no family money, no government money, nothing. Grouponomics 2.0 offers the electric bicycle to the entire United States and puts the tipping point at 3 million people or 15 million or 20 million. Grouponomics 2.0 acts as a public VC firm that helps offer the brute strength of economies of scale to a startup. I feel that this is inevitably next after up-market grouponomics 1.0

To read the short synopsis of Paskin + Carpenter, go next door to my story on Bundle.
For a good-looking story about Groupon by U. Chicago Ph.D. student Evan Miller, go down the road to his blog. I haven’t read it yet, but look forward to.


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