Babbling B’s Blog

Grouping Customers Key to Groupon’s Success

Posted on: July 28, 2011

This post was written for my customer segmentation class at Northwestern. I welcome your comments below, and hope to integrate your feedback into our class discussion!

Since its launch in 2008, Groupon has been celebrated, imitated, and criticized. Daily deals were already popular (think Woot.com daily deals and the popularity with technogeeks). However, Groupon created a niche and set the stage for local daily deals that could appeal to the city masses. It was so different that Groupon’s daily deal offering has been labeled a disruptive business model. Many lookalike sites like LivingSocialGoogle Offers, and BuyWithMe have emerged creating a competitive market. Even so, Groupon and LivingSocial command about 90% of the daily deal market share.

To stay ahead of the competition, Groupon has evolved from simply offering one local daily deal to offering multiple deals in cities big and small. Now, it’s going to take more than simple, city-based segmentation to engage the Groupon customer base. Below you’ll find my top 3 ways Groupon can capitalize on customer segmentation to drive business.

1. Drive customers to personalize their deals. Did you know you could fill out your profile on Groupon so you can personalize the deals that are sent to you? No? Neither did I. Turns out Groupon began personalizing deals in 2010. Surprisingly, they don’t heavily push their existing or new customers to complete their profile in its entirety. If Groupon wants to build database information for segmentation, they’re going to need to drive their customers to provide this information. They need to guide registrants to fully fill out their profile – and possibly offer further segmentation opportunities through progressive profiling.

2. Customers love to give feedback, so ask for it. When you love a deal, you buy it. But what about when the customer doesn’t like the deal? Couldn’t Groupon collect information in order to understand why an individual doesn’t want a deal? A real-time feedback mechanism could help Groupon source new offerings AND begin to personalize an individual’s experience. By offering ways for individuals to actively ‘skip’ or ‘vote down’ a deal and provide feedback, Groupon could begin omitting irrelevant offers based on past feedback.

3. Don’t just ask customers what they want. Sometimes a customer doesn’t know what they want. Groupon could mine the purchasing data to start to understand the individual’s preferences, offering similar categories, offers, and discount levels. They could even incorporate email open and click rates to understand what offers are resonating with that particular customer.

Groupon has been wildly successful since its launch, but in order to continue to lead this competitive local daily deals market, they will need to become data-driven and drive the effectiveness of their offers. After all, the founding principal was all about group activity; doesn’t it make sense that Groupon’s success could come through the effective grouping of their customers?

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